[stop-imf] Eurodad on IMF cap on public wages and healthcare consequences

[robert weissman]

1. Summary of Eurodad report
2. Excerpt from report on Nicaragua dismissal of health workers

REPORT: Eurodad Nicaragua Country Update =96 IMF cap on public wages,
World Bank Water Privatization and Donor concerns over governance

Eurodad has produced a new country update on Nicaragua looking at its
poverty reduction strategies and development finance situation. This
report, amongst other things highlights Nicaragua=92s recent negotiations
with the IMF for a new PRGF and the IMF=92s condition to cap public wages.
It also highlights the World Bank=92s water privatisation conditions in
Nicaragua, donor governance concerns in the country and the impact of
recent G8 debt deal in Nicaragua.

It is election year for Nicaragua, with Presidential and parliamentary
elections scheduled for November 2006.  The challenges faced by the
country are enormous, in political, economic and social terms.  Whilst
there has been some improvement in GDP in recent years, rising to 5.1 %
in 2004, Nicaragua is one of the most unequal countries in the world.
According to the World Bank, 46% of Nicaraguans live in poverty and 25%
in extreme poverty.  2005 saw Nicaragua signing the Central American
Free Trade Agreement (CAFTA) lauded by some as a real opportunity for
the country to improve its economic and social situation.  However many
critics see CAFTA as an opportunity for the economic elite to further
prosper whilst the majority of Nicaraguan=92s are unable to compete.  One
civil society representative argued that in fact CAFTA will exacerbate
the problems of globalisation for Nicaragua where internal production is
ignored and =93business people in Nicaragua are administrators of
franchises rather than production=94.[1]  According to Rodolfo Romero from
IEN, there are far more incentives for the traditional business class to
enter government (because of the relatively high salaries)[2] or to
invest in financial government bonds (because of high interest rates)
rather than investing in productive activities.  At the same time there
is a serious lack of political will to promote equitable economic policies.

Full report: http://www.eurodad.org/articles/default.aspx?id=3D684

--

Excerpt:

IMF reactivates Nicaraguan PRGF , but health workers dismissed

The IMF has reactivated Nicaragua=92s PRGF programme, following a recent
IMF review.  The IMF programme which was suspended in 2005, due to a
political crisis, will now be extended until December 2006.  This
agreement will mean that Nicaragua will receive approximately US$20.1
million.  However, it is the signalling role that the IMF plays for
other international donors which will be more important for Nicaragua in
financing terms.  This IMF approval will mean that Nicaragua will
receive an additional US$230 million from international development
cooperation.   According to the Nicaraguan Central Bank, this money will
be invested in budget support for poverty reduction and to alleviate the
country=92s balance of payments deficit.

IMF approval however does not come free from conditions.  The Nicaragua
government has begun to dismiss the first of some 3,000 doctors who have
been on an all-out strike since Wednesday 18th January.  Under its
agreement with the IMF, Nicaragua has agreed not to increase salaries by
more than 9% whilst doctors and public health workers are demanding
increases of 70 and 15% respectively .  President Bolanos has said that
the country must live up to its commitments or else the IMF funding will
be cut-off.

In addition Nicaragua is expected to make reforms to the taxation system
(Codigo Tributario) in order to increase the powers of the Revenue
board; reach a GDP of between 3.7 and 4% and close the year with
inflation level of no more than 7.3%.