Prime Minister of St Vincent and the Grenadines Dr Ralph Gonsalves has written to the World Bank opposing a move to increase its interest rate and shorten loan repayment periods to countries.
In his letter, which was also copied to 193 leaders around the world, Gonsalves is also promising to “fight” the World Bank’s International Development Association, IDA, over the proposed changes.
Speaking on the state-owned NBC Radio, Gonsalves said small island economies, such as St Lucia, Dominica, Grenada and St Vincent and the Grenadines are currently allowed a 10-year grace period and up to 40 years to repay a loan. The loan repayment is set two per cent for years 11 to 20 and four per cent for the remaining years 21 to 40.
However, the World Bank is proposing to reduce the terms to 30 years for maturity and a five-year grace period.
“So, you come down to 35 rather than 50 years. And then the principal payments would range from between 3.3 per cent for the years six to 25 years and 6.8 per cent for the years 26 to 30 years,” he said.
He noted that while some may argue that even with the change, the terms are more favourable than market rates, “you can’t build adaptation and mitigation to climate change on the basis of money which is seven-year money or 10-year money at seven per cent interest,” Gonsalves countered.
“You can’t do it. You need 40-year money, you need 50-year money at interest rates ranging over that period between one and maybe three per cent.”
Gonsalves quoted part of the letter that he wrote to 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, in the Pacific, Asia and Africa,” he quoted from the letter.
He described the plan as mean-spirited and unworthy of an institution that has the protection of vulnerable countries in an age of deleterious climate change as one of its central planks.
The prime minister said he understood that the IDA wanted to “test the waters” but that small island developing states such as St Vincent and the Grenadines had made no contribution to climate change.
He likened the situation to an homeowner having to spend money to repair their property because of damage caused by a neighbour’s wastewater.
“We are not responsible for climate change. We make no contribution to that. That’s like your neighbour having some noxious substance on their land and it coming into your place or your neighbour running their water eroding the foundation of your house,” Gonsalves said.
“That is really what places like the main emitters US and China, and Europe, too, are doing to us; because on Mother Earth, everybody is our neighbour,” he charged.