IMF "embellishes" report on the government's economic management in 2022

Three independent economists consulted by Confidencial believethe International Monetary Fund’s (IMF) Executive Directors continue to be accommodating towards the regime of Daniel Ortega and Rosario Murillo.

In mid-November, 2022, a team from the IMF, led by Alina Carare, spent a week in Managua. The team later issued a report full of praise for the Nicaraguan government, noting supposed improvements in transparency and in the “governance and anti-corruption framework.”

In response to that document, Nicaraguan economist Enrique Saenz published a critical analysis in Confidencial, stating: “the text includes flagrant omissions and such obvious misrepresentations and falsifications of reality that any Nicaraguan who is semi-informed ends up asking themselves if these are due to ignorance, naivety, or complicity.”

Revised version now released – what changed?

On January 27, two months after the initial document, the Directive Board of the IMF published a revised version of the original report from the delegation sent to Nicaragua last November. The latest version eliminated some, but not all, of the flattering comments.

“The most indefensible aspects changed, but they retained some of the lies and some of the half-truths,” another of the economists consulted stated.

“The directors welcome the authorities’ commitment to continued prudent policies to strengthen policy buffers, economic growth and resilience,” the Executive Directors state, without any further reference to the deterioration in the business climate or in Nicaragua’s democratic governability.

Even with those changes, the new document can still be considered a “pat on the back” from the Fund, that will translate into support for the Government of Nicaragua to obtain more money, while people continue fleeing the country as an indication of how bad things are,” noted one of the experts.

“The IMF isn’t interested in the elements of democracy, but only in the macroeconomic fundamentals, even if these are obtained at the cost of essentials such as education, social development and an improvement in people’s living conditions,” the specialist added, even though the report does state that staff preparing it “underscored the need for further efforts to improve the business climate, transparency and governance.”

Does the end justify the means?

Proof that what’s important to the IMF is merely the results, with less regard for how they’re obtained, is their decision to encourage the authorities to “strengthen the effectiveness of the framework further, including in the non-profit sector,” given the fact that the country has now been taken off the Financial Action Task Force (FATF) grey list.

Their recommendation ignores the closure of thousands of NGOs in the country. It further passes over the warnings of the private sector and independent professionals regarding the dangers posed by recent reforms to laws regulating the Financial Analysis Unit and guarding against money laundering, financing of terrorism, etc. Such proposals, they fear, can be used to spy on and punish those the government sees as opponents or dissenters.

Analysts also warn that the implementation of these laws has been left in the hands of the army and the police, who have historically abstained from taking any measures when someone close to the regime is sanctioned internationally [for corruption], when the normal procedure would be to initiate an official investigation of that person.

A third economist told Confidencial that if the IMF Executive Board moderated its friendly tone, it was because they were “pressured, although they continue giving him [Ortega] the benefit of the doubt. After the November report, there was discontent among the international community for the IMFs permissiveness with the regime. Hence, they tried to be a little more critical in this version,” the economist explained.

Despite that, the new version of the report states: “Directors welcomed recent steps towards increasing fiscal transparency,” apparently in reference to some measures unknown to the general public that the National Comptroller has taken “to strengthen the supervision of expenses related to the use of public funds.”

“They commended the authorities for publishing their first fiscal risks report and the first external audit of the use of Covid-19 funds.” This IMF commendation ignored the fact that the documents referred to are unknown in Nicaragua.

“Directors noted the steps taken to enhance governance and anticorruption frameworks but stressed the need for further efforts to address remaining shortcomings. They emphasized the need to strengthen the asset declaration regime for public officials,” the document continues.

Despite the comments of independent economists who doubt the reliability of the regime’s statistics, the directors “welcomed the authorities’ commitment to improve the quality and consistency of statistics, building on Fund technical assistance recommendations.” That request has been made over and over again for years, without it ever actually coming to realization.

Looking at the economic expectations for this year, the IMF predicts: “real GDP growth is expected to be 3% in 2023, due mainly to the global slowdown. Inflation – which reached 11.4% in November of 2022, primarily due to import price increases – is projected to decline in 2023 in line with lower growth and an expected significant decline in global inflation.”

Among all this, they warn that these “favorable projections” are “subject to uncertainty and risks on the downside, primarily due to external developments, natural disasters or a decline in the business climate and stricter international sanctions.” The sanctions referred to have been leveled by the United States, the European Union and their western allies, to target the Ortega-Murillo family and close accomplices of the regime, as well as some entities in the public sector.

This article was originally published in Spanish in Confidencial and translated by Havana Times