IMF: Disorderly sugar revamping will incur major costs

The International Monetary Fund (IMF) has warned that a disorderly restructuring of the sugar sector would have major economic and social costs.

According to a report prepared following an Article IV IMF mission in May, central government’s deficit is projected to widen to 5.4 and 5.1 percent of GDP in 2018 and 2019 due to the cost of restructuring the sugar sector and an increase in infrastructure related capital expenditure.

The report which was prepared for discussion by the IMF Executive Board in June was made public on July 13 and noted that public debt is projected to peak at 57.2 percent of GDP in 2019.

“A publicly guaranteed 5-year syndicated external bond, with a 4.75 percent interest and amounting to 3.7 percent of GDP is being issued by the National Industrial and Commercial Investments Limited (NICIL) to finance the restructuring of the state-owned sugar enterprise (GuySuCo). It will push the total public and publicly-guaranteed debt slightly above 60 percent of GDP in 2018–19. That ratio is projected to decline sharply after 2020, reaching 41.4 percent by 2023,” the report explains.

Support was offered for government’s efforts to reform public enterprises specifically the restructuring of GuySuCo which includes a reduction in its workforce and the establishment of a Special Purposes Unit at NICIL, tasked with divesting some of its assets.

The report notes that while the process involves significant upfront costs it should strengthen the fiscal position in the medium-term by placing a downsized GuySuCo on sustainable financial footing but emphasized the importance of providing a safety net to protect those affected by this process given the economic and social implications, geographic concentration of the displaced workers (which amplifies spillovers to the impacted regions’ economies) and the difficulties sugar workers may face transitioning to other occupations

In response to the IMF observation government noted the on-going restructuring and downsizing of GuySuCo, and recognized the importance of an appropriate safety net for those affected by that process.

“Several programs have been put in place to help displaced workers, including re-employment in the revitalization of sugar estates, and in drainage and irrigation activities. Many former employees have received severance payments, and pay-outs to others who qualify are in progress. Re-training programs are being offered, as well as some assistance to support workers in starting small businesses,” the IMF report said.

The government had been strongly criticised for allowing the severing of close to 5,000 GuySuCo workers without having options in place for them or evaluating the social impact of the job losses on their communities. It had also been pilloried on its unpreparedness to pay severance immediately to all the workers. Of the 4,763 severed workers, 1,851 are from the Skeldon Estate, 1,181 from Rose Hall, 1,480 from the East Demerara Estate and 251 from Wales.

As recently as last Thursday Opposition Parliamentarian Dr. Vindhya Persaud directed a series of questions to Minister of Social Protection Amna Ally on whether or not he government’s Sustainable Livelihood and Entrepreneurial Development (SLED) Initiative made provisions for severed sugar workers.

Persaud asked whether any proposals or initiatives were under consideration for alternative livelihoods for sugar workers but was informed that under the SLED initiative there is no predetermined amount identified for specific communities.

The Minister stressed that a “request of assistance” is a prerequisite for funding of projects under the initiative.  

Around the Web

Comments