|
|
| COMMENTARY By Vernon Harris |
| THE NATIONAL DEBT IS NOT A JOKE |
| |
The nation elects a government and entrusts
it to manage the economy. Included in this activity
are the creation of jobs and the reduction of unemployment.
The provision of essential services such as education,
health, security and social welfare. Poverty reduction
and eventual eradication is a priority. The creation
of an investment climate with fiscal and investment
incentives for nationals in the private sector to invest
in our economy is a priority.
These all contribute to economic growth, progress and
development. In this Federation, the present government
came into office in 1995 with an economy which was growing
at six percent per annum. The national debt was EC$212
million. The debt service ratio was 3.73% of GDP (the
total value of goods and services produced in a country
in a year) and 5% of recurrent revenue. By 2008 the
national debt amounted to EC$3,000 million dollars or
3 billion dollars. Each individual, i.e. man, woman
and child in the Federation owes $62,500.00. The debt
service ratio is 200% of GDP and rising.
St. Kitts and Nevis has the dubious classification as
being the second most heavily indebted nation in the
world. The prime minister at the jamboree which was
held at Warner Park on July 3, 2009 planted a question
on the national debt. His reply to the question sent
a chill over the whole nation. He stated that the people
know his views on the size and composition of the national
debt. This view is embellished with expletives about
his anatomy. He concluded that “We paying it.”
The governor of the Central Bank of Trinidad and Tobago
expressed concern about the size of the national debt
in the Federation. The Caribbean Development Bank in
its Annual Economic Review on St. Kitts & Nevis
2007 states “The high level of public indebtedness
continues to place a significant burden on the budget
in terms of debt servicing obligations. It retards the
growth of the economy”. The debt service obligation
is EC$188 million and rising. This accounts for 45 cents
out of every dollar of revenue collected. Together with
salaries and wages for government employees and ministers
this amounts to 77 cents. Only 23 cents out of every
dollar annually is left to provide for health, education,
security and social services.
The rapid growth and size of the national debt is a
matter for serious concern and is not to be treated
flippantly as though it is of no relevance. It is the
result of poor economic and financial planning. The
government embarked on reckless spending and borrowing
programs. These include the La Vallee Golf Course on
which EC$116.83 million has been spent. The project
was never intended to be completed. The Pubic Works
road program was shelved and replaced by a Barbadian
owned construction company which was given a free hand
to build roads with hundreds of millions of dollars
borrowed at excessive rates of interest from three banks
in Trinidad. The ratio of debt to gross domestic product
(GDP) should have been carefully monitored to ensure
that it did not exceed a sustainable level. (75% of
GDP). Renegotiation of these rates downwards after outcries
from International Development Agencies cost the Federation
EC$500,000.00 (Estimates 2006). Vast sums were spent
on housing programs and budget deficits were accumulated
without examining their long term effects on this economy.
($653 million by 2007: Director of Audit Report). The
economy of this country is not in a healthy condition.
The government has a narrow revenue base. It is based
on import duties. The downturn in national economic
activity will result in a drastic reduction in revenue
accruing to the government. This is estimated to fall
by 20% or $119.2 million in 2009. Projected Government
expenditure will result in a BUDGET DEFICIT of EC$81.4
million. The government has acquired a triple C credit
rating internationally. This means that no reputable
financial institution will lend it any money. Thus in
order to finance this shortfall it will resort to raiding
the Social Security Fund. Servicing the debt will mean
that essential public and social services will have
to delayed or abandoned. In this economic recession,
with looming unemployment the negative economic effects
will reverberate throughout our society.
Poverty and unemployment create crime in every society
St. Kitts and Nevis is no exception. It must be borne
in mind that remittances from abroad have fallen by
an estimated $8 million; the inflows from foreign direct
investment and the minimal contribution to GDP by the
tourism sector have evaporated. The Minister of Finance
in the 2009 Budget Address the Honourable Minister of
Finance stated “The United Nations Human Development
report 2007/2008 ranked St. Kitts & Nevis 54 out
of 177 countries worldwide”. However he neglected
to indicate that in 2000 the Federation ranked 51. In
the 2008/2009 report the Federation now ranks 60. This
reflects a continued decline in the level of human and
social welfare in this Nation.
The Human Development Index (HDI) is an attempt to measure
basic human and social achievement in a country. The
measure can be used to make comparisons between Nations.
HDI indicates whether people lead a long and healthy
life, are educated and knowledgeable and enjoy a decent
standard of living. The HDI examines the average condition
of all people in a country; distributional inequalities
for various groups of society are calculated separately.
In common language this Nation is not doing very well.
The Nation desperately needs leadership with the intellect
and vision to combine the entrepreneurial, professional
and academic talents which are abundant in this Nation.
Dr. Douglas has by his own admission outlined the lack
of ability in the present team under his style of leadership
to achieve this basic but essential objective. |
| |
|
|
|
