Number 867 • Friday, June 10, 2011

IMF Says St. Kitts-Nevis has World’s Second Highest National Debt
Staff Reporter
Alfred Schipke, Division Chief, Caribbean Division in the Western Hemisphere Department of the IMF
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According to International Monetary Fund (IMF) officials, St. Kitts-Nevis has the world's second highest gross national debt at EC$3 billion. Only Japan is higher.

Alfred Schipke, Division Chief, Caribbean Division in the Western Hemisphere Department of the IMF informed local media on June 3 that the size of the small country's debt had become unsustainable and threatened to derail economic growth.

"As you know, at 200 percent of GDP or EC$3 billion, St. Kitts and Nevis has one of the highest debt levels in the world. Currently interest payments amount to 20 percent of revenue and the high debt levels undermine the country's growth potential, make the it more vulnerable, and constrain the Government in responding to exogenous shocks," he said.

Mr. Schipke also announced that the IMF staff mission and the Government reached broad agreement on the key elements of an economic program that the IMF could support with a Stand-By Arrangement (SBA) in an amount equivalent to SDR 52.3 million (about US$84 million) over 36 months.

"This is an economic program developed by the Government. We've had consultations throughout and we would support the program. One of the unique elements of the program is that because we have confidence in the strategy overall, we will provide by normal standards, relatively large amounts of funds upfront but that is meant to be an insurance policy to contribute to instilling confidence that is necessary for investors to come in, for consumers to spend and to generate the growth that we are looking for," the IMF official said.

He said miracles did not happen overnight and thus the IMF wanted to be prudent in its economic growth projections for the Federation. While a projection of 1.5 percent was still being sought, he said, a significant improvement was expected in the coming years.

Minister of Finance, Prime Minister The Hon. Dr. Denzil Douglas said while St. Kitts-Nevis was short on cash, the Federation was asset rich, namely the large amounts of land inherited when the Government assumed the liabilities and assets of the closed sugar Industry. He said the Government had subsequently used this asset base to borrow against but was still in possession of the land.

"We may be illiquid at this time but we are very very asset rich," he stated.

The IMF has over the years advised Government to sell lands in order to raise revenue. People's Action Movement leader Lindsay Grant said the selling of public land is a matter for grave concern. He said on Wednesday (June 8) that 15 years of mismanagement by the Dr. Douglas-led Labour administration put the country to the position of having to borrow from the IMF.

"It is important that each and every citizen of this Federation understand the present context of our economic deterioration that has necessitated IMF loans. It is 15 years of recklessness and callousness by Denzil Douglas and not a global financial crisis that has placed St. Kitts-Nevis into this position. In fact, as far back as the 2000 Article IV visit, the IMF gave a warning that the country's finances were becoming unsustainable and that there was need for corrective measures to be put in place," Mr. Grant said.

These warning bells, he said, had been ignored by the Prime Minister. Grant recalled Dr. Douglas' now infamous election campaign declaration "Public debt me ass" in response to the issue of the upwardly spiraling national debt.

"Dr. Douglas has been very reckless and callous in disregarding all the warnings. He has never listened to the advice, or the voices, whether locally, regionally, or internationally and now we are at this stage. Now that he has brought the country to its knees, it is the working class people of this country who now have to bear the brunt of the measures. The sacrifice that the Prime Minister has asked us to bear to recover from this morass should not be placed on the ordinary working class man and woman but rather on those who have been responsible for bringing this country to this sorry state of affairs," Grant told the nation.

Grant, along with his two parliamentarians Hon. Shawn Richards and Hon. Eugene Hamilton, called on the Prime Minister to "come clean" about conditions that came with the IMF $84Million loan.

"In view of the impending IMF conditions, we maintain, as a matter of policy, that government must provide the people of St. Kitts and Nevis with answers."

The question of conditions being attached to the bailout was posed to Schipke who said it was a misnomer and they would simply continue to closely monitor the Government's own financial austerity program.

"The good news is there are not really conditions, I think the term "conditions" is really a misnomer in this particular case. The Government of St. Kitts and Nevis in its own program has set itself targets and what we would do with the government jointly is to review the targets on a regular basis."