The IMF is changing and the stigma attached to its loans may be fading, Maria Antonieta de Bonilla, president of Guatemala’s central bank has said, as a host of central American nations gear up for support from the lender.
The fund last week reached an agreement on $900 million, 18-month stand-by precautionary arrangement for Guatemala, due to be formally approved by the IMF executive board next month. Costa Rica – the third central American state to have requested an IMF loan as a result of the crisis – may be the next central American country to receive a loan from the fund. Honduras and Nicaragua have been engaged in a special programme since the debt relief five years ago.
This comes on top of an $800 million,14-month stand-by agreement approved in January with El Salvador, where the dollarized economy is under strain.
“I have not seen a negative response from the public to this kind of effort,” Bonilla told Emerging Markets. “It is a matter of how you explain why you think this is convenient to confront this international economic crisis.”
She added: “The IMF also has to do a good job in communication.”
Several Latin American governments have also hailed the new flexible credit lines announced by the IMF this week, which remove many of the strings that are usually attached to the Fund’s programmes.
“This is a signal that the IMF is aware of the impacts of the crisis and they are changing the way they work. They should change,” said Bonilla.
Paulo Bernardo Silva, Brazil’s planning minister, said: “It is good that the IMF has re-emerged. But we want to know what type of relationship the IMF wants to have.
“Obviously, the old fashioned model of dictating rules in other countries is no longer relevant. If they say, ‘we are going to have a different focus, in order to help countries to [find] resources to invest’, it is a positive development.”
Guatemala, like most central American countries, has suffered the impact of the global crisis on remittances, tax revenues and export revenues. Some 10% of the Guatemalan population lives abroad and foreign remittances accounted for 12% of GDP last year.
“We already have a high level of international reserves, and our balance of payment has had a surplus so far”, Bonilla pointed out. “It is a cushion in case this crisis intensifies in the coming months.”
Reserves stand at $5 billion, more than double the amount of external debt, according to government figures.The decline in imports has amounted to 26% in the 12 month period to mid-March, compared to the previous year.