Caribbean en garde over Lagarde

In 2007 Lagarde became France’s finance minister and attempted to resolve the issue by ordering a settlement through a private arbitration panel, as opposed to accessing the regular court system. Lagarde’s decision in mid- 2008 to approve and not to appeal the €404m ($429m; ?340m) arbitration award for businessman Tapie led to the massive government payout and angered the French public. Last year, a Paris court ordered Tapie to repay the money. Even after the conviction, it is most surprising that she will face no fine or jail sentence.

It must be noted that Lagarde has denied any wrongdoing. Indeed, it was only on Friday that Lagarde told the trial she had always acted in good faith and the suspicion she had lived under for the past five years had been an “ordeal”. Since the verdict, the IMF board is to meet “shortly” to consider the latest developments. It is noteworthy that the French government has indicated that it still had confidence in the IMF chief who also happens to be a previous Minister of Finance in France.

For many people the issue may be far removed and possibly has no implications for us in the Caribbean. This episode, however, and the continued relevance of Lagarde as IMF chief must be questioned. Indeed, there should be cause for concern as undoubtedly the character and judgement of the IMF chief are being called into question. One must also remember that she is the same IMF chief that has made numerous decisions regarding the Caribbean people. Can we as a Caribbean people trust the clearly poor judgment of the IMF chief or can we assume that there has been the lack of equal treatment and fairness especially in the critical issues of vulnerability and debt overhang that have plagued the Caribbean. While no decision has yet been made regarding the Lagarde’s future at the IMF, the Caribbean should take a united position on the type of leader it wants at that institution and communicate this to its Board.

Lagarde’s poor judgement which is at the heart of the case. It is her judgement that appears to treat close political allies favourably. For many years, the Caribbean has presented a case detailing the vulnerability of these small states with the highest debt/ GDP profile internationally. This vulnerability to extreme events has seen destruction of productive infrastructure and plant and equipment. In many cases these destroyed assets had loans that were still being serviced. The nature of the vulnerability extended to exogenous shocks which affected earnings of the states in the Caribbean. These latest shocks that have seen a major fall in oil prices are a good example of this. It is important to note that these arguments of vulnerability were advanced not only for the Caribbean but for all five groupings of Small Island Developing States (SIDS) comprising some 42 countries that exist globally. One must wonder whether these arguments were given a fair hearing and whether Lagarde truly understood the nuances of these small states.

There are many, including Lagarde, who are yet to be convinced that the Caribbean and all SIDS qualify for being classified as vulnerable. This has implications for the way facilities and programmes at the IMF are made available to us in Trinidad and Tobago and the wider Caribbean. It also impacts the treatment of problems that exist in the region and the need for understanding and an appreciation that our debt profile and vulnerability require a different set of programmes designed to address such unique challenges. The IMF is yet to adjust the criteria for assistance for countries with debt/GDP over 60 percent to 56 percent threshold as put forward by Greenidge et.al. which will have far more meaningful impact on the Caribbean.

It should be admitted that various times the Caribbean have advocated the essential arguments about the Caribbean and SIDS vulnerability. However, the Governor of the Barbados Central Bank was most forceful in his advocacy of the Caribbean problems to the point that he was considered rude by some. It is that clarity and decisiveness that is needed now as the Caribbean should clearly state to the Board of Governors that Lagarde or her replacement must, in an unbiased manner, treat with the issues of vulnerability and debt/GDP overhang. Our future depends not only on presenting arguments but having the right people with the right disposition in place to address our interests. This is not the first time that the IMF itself has shown questionable judgement in its choice of leader. The IMF must choose persons with integrity in personal and public life to lend credibility to the office and consequently in the decisions that the office makes. Indeed, there are well over 40 countries affected by the vulnerability issue. They must be en garde over Lagarde and raise their voices on these matters.