KINGSTOWN, St. Vincent, CMC—St. Vincent and the Grenadines Prime Minister Dr. Ralph Gonsalves has written to the World Bank opposing a move to increase its interest rate and shorten the repayment period for loans to countries.
In his letter, which was also copied to 193 leaders around the world, Gonsalves promised to “fight” the World Bank’s International Development Association (IDA) to get it to back away from the changes.
Speaking on the state-owned NBC Radio, Gonsalves said Finance Minister Camillo Gonsalves, the Director General of Finance and Planning Edmund Jackson, and Director of Planning Ricardo Frederick attended the Spring Meetings of the Boards of Governors of the International Monetary Fund (IMF) and the World Bank Group (WBG) in Washington.
“And one of the issues which I want to address which is being dealt with is, where there is going to be a specific meeting on, is the question which I had raised before about leading a campaign globally against the reports which we had that the World Bank Group and IDA are initiating this –pitting the most vulnerable countries against the poorest,” Gonsalves told radio listeners.
“So I’ve written every single head of government in the world—193 of them. I’ve written the United Nations Secretary-General, CARICOM (Caribbean Community), and OECS (Organisation of Eastern Caribbean States), and I’ve written the president of the World Bank.”
Gonsalves noted that small island economies (SIEs) such as St. Lucia, Dominica, Grenada, St. Vincent, and the Grenadines have access to IDA financing and currently get a ten-year grace period and up to 40 years to repay a loan. The principal payments are two percent interest for years 11 to 20 and four percent for the period 21 to 40.
However, the World Bank proposes reducing this to a 30-year maturity and a year grace period.
“So, you come down to 35 rather than 50 years. And then the principal payments would range from between 3.3 percent for the years six to 25 years and 6.8% for the years 26 to 30 years,” he said, noting that some people may argue that even with the change, the terms are more favorable than market rates.
“… you can’t build adaptation and mitigation to climate change based on seven-year or 10-year money at seven percent interest,” Gonsalves countered, however.
“You can’t do it. You need 40-year money or 50-year money at interest rates ranging from one to three percent.”
Prime Minister Gonsalves quoted part of his letter to the World Bank, saying that IDA’s purported rationale for the proposed changes was to focus on the poorest countries.
“‘Rather than widening the net to embrace more vulnerable small-island economies, IDA is bent on making life, living, and production more difficult for vulnerable countries, especially those in the Caribbean, the Pacific, Asia, and Africa,’ he quoted from the letter.
“‘Rather than the developed countries in IDA/World Bank enlarging their contributions to IDA and taking greater responsibility for their battery on these vulnerable countries through climate change historically and contemporaneously and otherwise, they seem determined to pit the most vulnerable against the poorest,’ Gonsalves wrote.
“This is an unacceptable species of public immorality writ large globally. It is a mean-spiritedness unworthy of any enabling civilization and of an institution which has as one of its central plants the protection of vulnerable countries in an age of harmful climate change.'”
The prime minister said he understood that IDA wanted to “test the waters with it” but that small island developing states such as St. Vincent and the Grenadines make no contribution to climate change.
He likened the situation to one homeowner having to spend money to repair their property because of damage caused by a neighbor’s wastewater.
“We are not responsible for climate change. We do not contribute to that. That’s like your neighbor having some poisonous substance on their land, and it is coming into your place, or your neighbor running their water and eroding the foundation of your house,” Gonsalves said.
“That is really what places like the main emitters US and China and Europe, too, do to us because, on Mother Earth, everybody is our neighbor.”
He said a homeowner would sue over a toxic substance or damage caused by a neighbor’s wastewater.
“Think about the sea defenses and the river defenses. We have to build a new hospital. You need money, which is long-term money,” Gonsalves said, adding, “Shorter-term money or commercial money can’t build those things.”
He said the problem is that the World Bank’s indices do not take vulnerability into account.
“That’s why we are fighting for a multi-dimensional vulnerability index, the MVI,” he said, noting that regional leaders speak about this at the United Nations and important conferences.
“… per capita GDP—that’s one index, but Antigua, which has a high per capita GDP, can be blown down overnight by one hurricane.
“And all they would have built up gone in the wind, rain, landslides, and everything. We have seen the damage that can happen to us in St. Vincent and the Grenadines,” he said, adding that Grenada and Dominica have had similar experiences.
“One of the problems is that you are, in a sense, penalized for doing very well. If your per capita income rises, the average per capita income increases, like in places like St. Lucia, St . Vincent, and Grenada.
“…certainly ourselves, the way the economy is growing, we could graduate from the category to get IDA. So, this is why I made the point they need to enlarge rather than going in the opposite direction and restricting things; making it more difficult.
“Now what is required is for more money to be put in by the developed countries and emerging economies like, for instance, China to help to take care of what is happening because of the consequences of climate change,” he said, adding that tackling the IDA issues is “a big battle.
“Some of the battles we fight about among ourselves here are trivial compared to these existential questions like the one I’m raising here,” Gonsalves said.
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