IMF overturns suspension of funds to Antigua

Antigua government will now be able to use IMF funds to pay creditors.

ST JOHN’S, Antigua & Barbuda, Thursday June 14, 2012 – The International Monetary Fund (IMF) has reinitiated its multi-million dollar Standby Arrangement (SBA) with Antigua and Barbuda after suspending it over concern about the use of the funds.

In 2010, the Antigua and Barbuda government entered into a US$110.4 million SBA with the Washington-based financial institution. However, the IMF suspended the programme last July immediately following a move by the Baldwin Spencer administration to join with the Eastern Caribbean Central Bank (ECCB) in the takeover of the struggling Antigua and Barbuda Investment Bank (ABIB).

However, according to news reports coming carried in the Antigua Observer, the intervention into the ABIB’s affairs created a fiscal contingency for the country which was not immediately clear to the government, the ECCB or the IMF.

Finance Minister Harold Lovell was quoted as saying that the government had taken the view that given the “systemic importance” of the ABI Bank not only to the economy of Antigua and Barbuda, but to the economy of the sub-region, it was very important that we did everything possible to protect depositors and to ensure that the jobs at the bank were saved and to make certain that the currency union would not be affected adversely.

“We felt we had a moral and national obligation to do what we had to do, but we do not expect that we will have any more difficulties along this line. Obviously the resolution strategy will include some degree of further assistance by the government, but we will structure that in a way that it will not have an adverse impact on our fiscal situation,” he added.

The IMF’s position was reportedly that the collapse of a major bank in 2011 presented additional challenges to the banking system, and its resolution will add to the public debt.

However, recently the IMF made an about turn and said it would make the funds available to the Antigua and Barbuda government after the financial institution completed a series of reviews under the multi-million dollar 36 month SBA the island has with the fund.

With this assurance, Minister Lovell has said his government will use the US$20.3 million provided by the IMF to meet its financial obligations to creditors.

“It really positions us to meet some of the deferred obligations that would have incurred as a result of the delay. Obviously over the period we would have accumulated some arrears in respect of local business persons, contractors and persons within the local economy in particular,” said Lovell.

“So we want to address those urgently as a matter of policy. It would also be a matter whereby we have the essential government function to ensure that we can carry out our daily obligations”.

Lovell said that the government had to use funds in anticipation of receiving the funds last year, adding “we have had to make do without those funds which have put an enormous strain on us”. Click here to receive free news bulletins via email from Caribbean360. (View sample)