PM Douglas unveils objectives of home-grown economic strategy programme
St. Kitts and Nevis’ Prime Minister and Minister of Finance, Hon. Dr. Denzil Douglas (left) and Chief of the IMF Mission to St. Kitts and Nevis, Mr. Alfred Schipke at the Joint Press Conference (Photo by Erasmus Williams)
BASSETERRE, ST.KITTS, JUNE 4, 2011 (CUOPM) – St. Kitts and Nevis Prime Minister and Minister of Finance, Hon. Dr. Denzil L. Douglas has unveiled a three-fold objective of a new home-grown economic strategy and programme following an announcement by the International Monetary Fund (IMF) of a US$84 million Stand-By Arrangement on Friday.
“Firstly, to create the environment for strong and sustainable growth to occur, secondly, to place debt on a downward trajectory in order to reach a sustainable level of debt and thirdly to maintain the health of the financial system at the same time while we are achieving the first two,” said Prime Minister Douglas in an opening statement at a Joint Press Conference by the St. Kitts and Nevis Ministry of Finance and a visiting IMF Mission Team.
Dr. Douglas told reporters that the global economic and financial crises have brought home very forcefully to the vulnerability of St Kitts and Nevis to external shocks.
“Due mainly to a decrease in tourism receipts and foreign direct investment by roughly 25% each in 2009, GDP is now estimated to have contracted by over 9% in 2009 and by a further 1.5% in 2010. In 2011 and 2012 the economy is forecast to grow by approximately 1.5% per annum,” said Prime Minister Douglas, pointing out that the global recession has severely impacted economic activity in the wider Eastern Caribbean Currency Union (ECCU) region.
He said tourism and Foreign Direct Investment – two of the Federation’s two main pillars of economic growth also deteriorated.
Real regional GDP contracted by about 6.2 percent in 2009, after growing 1.9 percent in 2008.
He recalled that in response to the domestic situation, the Government launched a comprehensive fiscal reform effort.
“In 2009 and 2010, the Government still managed to attain an average primary surplus (overall fiscal balance before interest) of 2.4% of GDP. This is among the highest in the world for non-energy producing countries. Prior to the crisis, the average primary balance was over 4% of GDP per annum,” said Prime Minister Douglas, who also recalled that Value Added Tax (VAT) was introduced in November 2010, the Housing and Social Development Levy was modified, the Unincorporated Business Tax was introduced, the system of fees and taxes for Duty Free stores was adjusted, increments for Civil Servants were frozen, the Electricity Tariff was increased and the corporatization of the Electricity Department has been accelerated.
“These are only some of the measures that have contributed to the enormous fiscal adjustment that was made in order to compensate for the loss in government revenue which resulted from the economic recession,” said Dr. Douglas, disclosing “despite these efforts, the stock of public and publicly guaranteed debt has continued to spiral upwards, in terms of the payment constraints with heavy amortizations scheduled for the years 2011 to 2013 period.”
“Bearing in mind that we do not have access to concessional financing, having been graduated due to our level of per capita income, the Ministry of Finance has concluded that the projected financing gaps are unlikely to be closed through continued fiscal effort alone,” said Dr. Douglas.
Prime Minister Douglas gave an assurance that the programme “has been well thought out and will rebound to the benefit of our country at this very critical time.”
He said the Government will continue to consult with its stakeholders as far as is possible so that “we can all be assured that we move together as one towards a more prosperous future.”