Integrity of IMF report in question given Asgar Ally’s association with PPP/C

- Ram says in letter to Lagarde

Newspaper columnist Christopher Ram has written to Managing Director of the International Monetary Fund (IMF) Christine Lagarde charging that former minister of finance Asgar Ally’s appearance on the PPP/C campaign platform has done harm to the integrity of one of the institution’s latest reports on Guyana.

The report in question is the Guyana – IMF Country Report No. 11/152 published in June 2011. Ally was one of the authors of the report on behalf of the IMF.

Christine Lagarde

The report said, inter alia, that prudent management of the Guyanese economy continued to yield dividends and improvements in the lives of Guyanese people. It also lauded Guyana’s performance in the other crops sector and spoke of significant improvement in the operations of the Guyana Revenue Authority.

Ram said, “This letter was written several months ago, shortly after your appointment as Managing Director. I decided then against forwarding it as I felt that the circumstances surrounding your appointment demanded your full time and attention, unaffected by issues like a report on a small country like Guyana.”

But he said recent events in Guyana where Ally, one of the fund’s senior advisors to Guyana’s executive director appeared on a political platform in hotly contested national elections in Guyana made him rethink his earlier decision.

“Clearly my fears about Mr Ally’s role in Report 11/152 – the subject of my letter – have materialised and the report may have been compromised. While I believe that Mr Asgar Ally’s appearance on a platform of a ruling political party has done serious harm to your institution, I make no request other than that the matter be dealt with under the rules of the IMF,” he said.

Ram expressed the belief that an effective and credible IMF has an important role to play in the world’s financial system and the economies of member countries, even small ones like Guyana’s. But he said such effectiveness and credibility “depend on the integrity of the source data used in specific studies, the robust examination and analysis of those data, the independence of the persons assigned to specific engagements, and ultimately the confidence of the world community in the quality of the fund’s output.”

“…It is with much regret that I have to inform you of my considered opinion that Report 11/152 falls short of the high standards required of an internationally respected financial institution,” Ram’s letter said.

“What I found particularly disturbing was the hagiographical tone and content of the statement of Ms Des Vignes and Messrs Batista and Ally.

In paragraph 2 of their statement they state that ‘prudent management of the economy continued to yield dividends and improvements in the lives of the Guyanese people’ without acknowledging the very limited data on poverty and unemployment, two of the principal factors that drive one of the highest migration rates among countries not at war,” Ram said.

He said assertions made in the report about production of non-traditional crops increasing significantly in response to the ‘Grow More Food Campaign’ “sounds like domestic politics and is absolutely not supported by the official statistics.”

According to Ram’s letter, the range of products which Guyana now imports “indicates a failure any relevant policy with respect to food security and the management of the country’s trade account.”

Ram wrote, “I am sure that your team would have had at its disposal the statistics contained in the appendices showing that over the four-year period 2006 to 2010 the Other Crops sub-sector grew by a mere 4.5 % annually or 19.5% over four years. I might add that having regard to public investment made for the benefit of the sub-sector, it is fair to say that it is significantly actually underperforming.”

Ram noted that the three senior officers of the IMF refer to “a significant improvement [in] the operations of the Guyana Revenue Authorities (sic)” but fail to mention the high level of tax evasion in key sectors of the economy; and that the tax burden “is inequitably borne by the country’s workers and consumers.”

Further, he said, “a handful of companies” contribute the lion’s share of corporate taxes in Guyana.

Regarding the government’s decision to invest in hydroelectricity, Ram said the executive director and his two senior advisors might have relied too heavily “on the inadequate work done by the IMF technical team” on the proposed Amaila Falls Hydroelectric Project (AFHP).

“Not only has the public expenditure on the AFHP been enveloped in questionable deals but it is naive for the IMF to believe that the Essequibo Islands or the hinterland communities will be served by electricity generated by the AFHP,” he said.

He said the latest estimated cost of the project – US$835 million – will make it one of the most expensive hydroelectric plants in the world.

“Indeed the IMF appears to have accepted on nothing else but faith the suggestion that the price for electricity will decline despite the fact that the project is still at the Interim Licence stage, that final costs are yet to be established and that as far as the public is aware, the regulator is yet to be approached about tariffs,” he said.

“I thank you Madame for providing me with the opportunity to bring these matters to your attention. I hope that they lead to a rethink of the process of information gathering and analysis and a higher quality and standard of objectivity in the fund’s work not only in Guyana but across the world,” Ram said as he ended his letter.