PM Douglas seeks Paris Club help to achieve macro-economic targets in transforming the St. Kitts and Nevis economy
|St. Kitts and Nevis’ Prime Minister and Minister of Finance the Rt. Hon. Dr. Denzil L. Douglas (Photo by Erasmus Williams)|
BASSETERRE, ST.KITTS, MAY 24TH 2012 (CUOPM) – St. Kitts and Nevis’ Prime Minister and Minister, the Rt. Hon. Dr. Denzil L. Douglas appealed to the Paris Club Thursday to assist the twin-island Federation in achieving its macro-economic targets in the transformation of the economy.
The debt negotiations are now said to be in crucial third round at the International Debt and Paris Club Secretariat, Directorate of the Treasury, Ministry of The Economy, Finance and Industry, in Paris.
Prime Minister Douglas Thursday morning presented Balanced Proposals to Paris Club Creditors .
About mid-day, the St. Kitts and Nevis delegation received a Counter Proposal Offer from the President and her negotiating team on behalf of the creditors.
Prime Minister Douglas after an engagement on clarification of Terms presented second Proposal to Counter Offer from the Club.
Further face to face discussions took place and then both sides have recessed for further consultations with their delegations.
Discussions are said to be at a very crucial stage with St. Kitts and Nevis insisting that its proposals initially and with supporting second proposals are balanced given the support given by regional commercial and domestic creditors.
“Although we remain vulnerable, we have set ourselves macroeconomic targets that we believe are credible and achievable. I believe that it is no exaggeration to say that we are in the process of transforming our economic and social outlook. To complete this transformation we need your support today,” said Dr. Douglas in an opening statement.
The St. Kitts and Nevis Leader, accompanied by Mrs. Janet Harris, the Financial Secretary at the Ministry of Finance, and two financial advisors from White Oak Advisory told the Paris Club officials the fact that St Kitts and Nevis is approaching its organisation with a request for debt relief almost a year into its comprehensive debt restructuring programme is perhaps a reflection of the extent to which the global financial architecture has evolved.
Last month, St Kitts and Nevis concluded two historic deals with commercial creditors covering just under US$500 million, which is equal to approximately45% of the public debt.
“Once they become effective, these agreements will provide my country with massive, and much needed debt relief, immediately bringing our debt-to-GDP ratio down by more than an third from over 150% to 95%,” said
He pointed out that one of the transactions that will make this possible is a debt exchange offer that was open to holders of our bonds and syndicated bank loans.
He further pointed out that the Government has continued to take clear and determined strides on the fiscal and economic reform and informed the Paris Club that earlier this week the Executive Board of the IMF heard that St. Kitts and Nevis continue to meet its programme targets with comfortable margins as it considered the second successful review under the Stand-By Arrangement.
Dr. Douglas said the primary surplus for 2011 was the highest not only in the region, but also amongst all countries currently in Stand-By Arrangements or Extended Fund Facilities with the IMF.
“The outstanding results achieved so far make it difficult to discern the fact that the process has not been an easy one for us. Our discussions with our commercial creditors, in particular, were very tough at times, not only because of the levels of debt relief that we found ourselves having to seek, but also because our very difficult financing situation forced us to start accumulating arrears almost across the board from mid-2011 onwards. Because much of our debt is owed to domestic creditors often holding the same instruments as those held by foreign creditors, we have had to tread very carefully to ensure that we do not destabilise the domestic financial system,” said Prime Minister Douglas.
He told the Paris Club that although the obligations to the Paris Club are small, and that the terms on which they are restructured will not by themselves determine the financial outlook for St. Kitts and Nevis, much is still at stake.
“Firstly, it is a fact that the terms that we settle on today will to a large extent set the parameters of the deals that we are able to strike with our non-Paris Club official bilateral creditors. This is a creditor category that continues to hold material claims – many of them in arrears – on my country. To ensure that we are able to close the residual financing gaps that we face going forward, we need meaningful restructuring deals with these creditors, some of whom are likely to argue that their original financing was already extended on soft terms. We need your support to achieve this objective,” said the Prime Minister.
“Secondly, we put the strong results of our debt restructuring programme so far down to our success on three key fronts: making a strong case for debt relief, satisfying creditors that we are following an appropriate macroeconomic course, and reassuring all stakeholders that we are basing our approach on the principles of openness, fairness, and inter-creditor equity,” said the Prime Minister.
He added that because many eyes will be focused on the outcome of today’s negotiations, “it is very important for me that we agree on terms that sit comfortably – if not in detail than at least in spirit – within the approach that we have taken with our debt restructuring to date. Given the Paris Club’s prominent role in discussions about crisis resolution, the Evian Approach’s focus on debt sustainability, and because it is widely known that St Kitts and Nevis is one of the most highly indebted countries in the world, I would like to think that this point will be important to you also.”
He said that the terms of the request reflect what is an adequate balance between a very real need to secure further debt relief and to preserve the integrity of the approach, and the limitations that Paris Club has to contend with.
“Whilst I must stress that we firmly believe that every measure points to the fact that St. Kitts and Nevis requires outright debt reduction, it is in recognition of the constraints faced by some of our Paris Club creditors that today we are requesting at the multilateral level a long-term rescheduling of the stock of debt outstanding as of 1 May 2012,” said Dr. Douglas.
“When considering our request, I would like to ask you to look beyond your traditional balance-of-payments perspective. Whilst we have no intention of altering a 60-year old practice during today’s negotiations, I must remind you that the balance-of-payments says very little about debt sustainability and capacity to pay in the cases of countries in a monetary union. In our case, as in the case of any other country in a monetary union experiencing debt distress, the ‘serviceability’ of the public debt is a function solely of the state of, and outlook for, the public finances,” said Prime Minister Douglas.
He submitted that despite its small size, St. Kitts and Nevis has not been afraid to confront its problems and take difficult decisions when these are required.
“We have also set out to conduct ourselves on the basis of clear principles that could be of relevance to the way that sovereign debt workouts are handled in the future,” concluded Prime Minister Douglas.