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Concerns about the consequences that would cause Nicaragua to fall "off-track" from its economic programme with the International Monetary Fund (IMF), led the Minister of Finance and Public Credit (MHCP), Mario Flores, to make a new call for deputies of the National Assembly to approve two legal reforms that are necessary in order to prevent this from taking place. Economist Adolfo Acevedo explained to us the point of these reforms and of the IMF’s presence in Nicaragua.

At a press conference during which he officially submitted the figures concerning the reform of the 2006 Budget, Flores stated that the reforms to the Tax Code and the General Education Law shall have to be passed over the next few days for the Nicaraguan economic programme to be revised by the IMF Board within this month.

The reform of both laws will allow the disbursement of some $70 million by international institutions over the next few months, and – according to President Enrique Bolaños – the economic programme with the IMF is essential for the new administration to have $1.7 billion available in order to work with ease.

Flores insisted that for the donor community to grant resources to the country, the first requirement is to have an economic programme with the IMF.

IMF pressure

As confirmed by Economist Adolfo Acevedo, the Ministry of Finance and the deputies of the National Assembly have recently held negotiations behind "closed doors", with the supposed participation of the IMF. On such occasion, those taking part in the meeting agreed to leave out Article 91 from the General Education Law, which provided for the allocation of 5 per cent of tax revenues to increasing the Public Non-University Education Budget.

This would have enabled said budget to reach 4.8 per cent of GDP in 2009-2006 (and the Total Budget for Education to stand at 6 per cent of GDP), a similar level to the one achieved by Bolivia in 2003. The Article is now fully "compatible" with IMF conditionality.

In Nicaragua, according to the projections of the "Medium-Term Budget Framework", drafted under the IMF, the budget allocated to the Ministry of Education (MEDC) would be kept ‘frozen’ at 3 per cent of GDP for years to come - the same level reported in 2000, and again in 2003, 2004, 2005 and 2006. In contrast, estimates issued by the Ministry of Education show that, in order to achieve the Millenium Development Goals and the national goals on this area, the Budget allocated to this Ministry should at least reach an annual average equivalent to 4.7 per cent of GDP.

These expenditure projections regarding the "Medium-Term Budget Framework" have serious implications. They indicate that under the current scenario of the IMF programme neither the MDGs nor national goals in the areas of education and health would be fulfilled.

This would confirm the forecast of the "Operative National Development Plan" issued by the Nicaraguan Government itself, regarding the fact that within the framework of the Poverty Reduction and Economic Growth Programme (PRGF) with the IMF "the additional demand for (social) services associated with population growth will hardly be covered, thus increasing the historical shortfall in these areas".

The explanations given by "negotiators" are that the IMF dependence is "overwhelming". They obviously reassert their unconditional and unyielding commitment to the fulfillment of MDGs and national goals on education… but as long as the Education Budget is completely subordinated to the above conditionality. The compliance with the IMF Programme – as regards both the parties controlling the Assembly and the Government – is given priority over any other consideration. If this Programme deprives us – most part of the population, at the least – of any future prospects, what can we do about it? It is...inevitable, and we must yield to it in a resigned and pragmatic way.

Article 91 shall now establish that, IN NOMINAL TERMS, the 2007 Public Non-University Education Budget must NOMINALLY exceed that of 2006 (please note that it would only take a one-peso nominal increase in said Budget for this Article to be complied with, as it is now). ‘Freezing’ the budget allocated to the Ministry of Education at 3 per cent of GDP obviously implies that it grows, nominally speaking, in the same proportion as nominal GDP, so as to remain at 3 per cent of GDP.

However, within this framework, which nowadays ALL actors in the political system are subjected to, said Budget CANNOT, naturally, reach up to the level that would be necessary to fulfill the MDGs and the modest national goals on education. This happens to be incompatible with the sacred IMF conditionality.

In this context, there are absolute priorities to which all allocation of resources is utterly subordinated, such as the massive domestic debt maturities, which especially concentrate on the 2007-2011 period; the same period during which the country should be making a superhuman effort to invest in human capital, in an attempt to win back some basic future prospects.

In order to have an idea of Nicaragua’s miserable investment in education: public spending per secondary school student amounts to barely 4 per cent of per capita GDP, whereas the same spending amounts to 16 per cent of per capita GDP in Bolivia and to 24 per cent in Zimbabwe. The expenditure on education in Bolivia and Honduras, both countries being as poor as Nicaragua, DOUBLE that of Nicaragua – in spite of the fact that none of them shows the level of foreign co-operation registered by Nicaragua.

It is to the continuity of this framework that we are being irreversibly doomed.

Related Information:

-> IMF conditionalities in Nicaragua, by Adolfo Acevedo

-> Nicaragua: The "Millennium Development Goals" (MDGs) and the IMF program, by Adolfo Acevedo

-> Letter to IMF, Response from Intermón Oxfam and Coordinadora Civil (Nicaragua) on conditionalities.

-> One hand gives while the other takes: Nicaragua under IMF conditions, by Bretton Woods Project

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