Central Bank Appeals to Foreign Donors

May 30, 2008

MANAGUA – In an appeal for more and continued foreign aid from the traditional donor countries represented by the mostly European members of the so-called Budget Support Group, Central Bank President Antenor Rosales addressed a foreign delegation last week and stressed that Nicaragua is complying with its macroeconomic goals, despite high inflation caused by rising food and oil prices.

The Budget Support Group has pledged $110 million in direct aid for Nicaragua’s 2008-’09 budget. Yet so far, the group has not released any of that funding to the Nicaraguan government, as concerns continue to mount over issues of transparency, democracy, macroeconomic stability, budget efficiency and human rights, especially as they pertain to women’s reproductive rights.

The Budget Support Group has been in meetings for the past two weeks to discuss the situation and determine whether to release the funding, which is considered crucial to Nicaragua’s budget.

Francesca Mosca, the EU’s ambassador to Nicaragua, said the budget group is focusing on three of the six issues upon which the budgetary aid is contingent: macroeconomic stability, transparency with other funding, and an independent judicial system.

The EU representative applauded the government for presenting its rough draft of the National Human Development Plan, a document that is key to the continuance of foreign budgetary aid, but urged the government to allow other sectors of the country to consult on the plan and offer feedback in a democratic manner (NT,May 23).

Mosca also warned the government that “the situation of human rights, especially the situation of women in respect to their sexual and reproductive rights, including therapeutic abortion and domestic violence, are still central issues of concern for this group.”

Nicaragua last year ratified its ban on therapeutic abortion, or medical interventions to save a pregnant mother’s life, making the country one of four in the world to outlaw the procedure, to the horror of rights activists and the European Union.

After hearing the EU’s list of concerns, Rosales offered a power-point presentation that selectively addressed only one of the issues mentioned by the Budget Support Group – that of macroeconomic stability.

Rosales stressed the Nicaragua is, in his opinion, complying with its accord with the International Monetary Fund by maintaining macroeconomic stability in areas such as international reserves and its monetary policy.

He also stressed that in 2008 remittances are up 15 percent, tourism is up 17 percent and exports are up 26 percent with regard to the same period last year.

Rosales boasted that the Sandinista administration is “overcomplying” with its fiscal agreements with the IMF, and he remains positive that Nicaragua will receive a positive revision from the U.S. lending institution when it visits next month to assess the country’s compliance with the terms of the agreement.

Although the European Budget Support Group is separate from the IMF, which has pledged $111 million to Nicaragua over three years, economists say that if the IMF were to pull out of the country, the EU would most likely be close behind.

At stake for this year’s budget is around $140 million between the Budget Support Group and the IMF.

In assuring the EU members that Nicaragua is on the right track, Rosales then asked the donor countries to kindly consider digging a little deeper into their pockets for an additional $20.6 million needed to support Nicaragua’s planting season to help the country increase its crop production to reduce inflation on food costs in the coming months. The appeal for more funding at a time when the donor countries are already showing hesitation over what’s been pledged, due in part to the $520 million in Venezuelan aid that no one can locate, has raised more than a few eyebrows.

Francisco Aguirre, president of the National Assembly’s Economic and Budget Commission, said that the nebulous issue of Venezuelan aid and the elusive Bolivarian Alternative for the Americas (ALBA) are “getting under the skin of the donor community.

They are asking, ‘Why are we being asked to play by certain rules that don’t apply to Venezuela?’”

Both the EU and the IMF have asked the government to explain the inner workings and financing of the ALBA, an all-encompassing umbrella term invented by Venezuela’s Hugo Chávez to streamline bilateral aid.

“ALBA is a mystery enveloped in a cloud of fog wrapped in an enormous enigma,” Aguirre told The Nica Times.“No one knows what it is, except maybe Daniel and (First Lady) Rosario (Murillo).”

Rosales, meanwhile, had only this to tell the EU as means of explaining Venezuelan aid: “No new cooperation is meant to substitute what we have.”

Aguirre, however, said that if the European budget support group gets fed up and pulls the plug on the $110 million, it would be a “coupe de grace” for Nicaragua’s economy (see separate story, page N1).

 

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