Significant reduction in Debt to GDP Ratio by 2016, PSIP for the period 2015-2017 to be published
(CUOPM) – With a recent Debt to GDP ratio of nearly 200 percent, St. Kitts and Nevis is expected to reduce it to 80 percent of GDP by 2016.
This was disclosed Tuesday by St. Kitts and Nevis’ Prime Minister and Minister of Finance, the Right Hon. Dr. Denzil L. Douglas as he delivered the 2014 Budget Address at a Sitting of the National Assembly.
“As indicated in my earlier review of fiscal performance and as independently confirmed by the IMF and the ECCB, the combination of tax reform, expenditure containment efforts and our debt restructuring programme has resulted in the creation of some much needed fiscal space. The very strong performance of the Citizenship by Investment programme has created some additional fiscal space. The debt restructuring agenda is proceeding and we are now confident that, with continued responsible fiscal management, we could bring the debt stock down to less than 80% of GDP by the end of 2016 – even while we meet our debt repayment obligations which are expected to peak between 2014 and 2015,” said Prime Minister Douglas.
“As demonstrated by the comfortable margins by which we have exceeded the targets to which we are committed under the IMF programme, our economic programme is now somewhat ahead of the curve and the economy is we are now well poised to consolidate the recovery effort by focusing more firmly on the growth agenda,” he said.
He told Parliamentarians and the Nation, that the Federation’s major strategic challenge at this juncture is how to use the available fiscal space in a structured and coordinated manner in support of the economic growth targets.
He said that in preparations for this budget presentation, consideration has been given to options and accepted the following guiding principles.
“Firstly, expansion of expenditure must be moderate and measured. This principle applies particularly to recurrent expenditure and, as such, we plan to keep any growth in this area in line with the growth of tax revenues. The second fiscal management principle that we propose to adopt is linked very closely to the first and it is that the use of the surplus resources being generated by the Citizenship by Investment programme will be heavily biased towards investment spending on programmes and projects that are carefully designed to strengthen the country’s productive capacity. The third principle commits us to accelerating the implementation of a number of structural reforms that we have identified as being critical elements of the institutional infrastructure required to support sustainable growth and the enhancement of the economy’s competitiveness. This agenda includes continuation of the public financial management improvement programme, business climate enhancement, pension reform, public sector modernization and the re-engineering of our social service delivery system,” said Prime Minister Douglas.
He also indicated that over the medium term the Government of St. Kitts and Nevis will review the system for administering tax concessions and this will be done in the context of efforts to improve competitiveness and enhance efficiency in terms of resource allocation among different areas of Government’s responsibility and strategic interest. In pursuit of this objective,
“The Ministry of Finance will collaborate with the St. Kitts Investment Promotion Agency (SKIPA), the Customs and Excise Department and the Inland Revenue Department to develop and implement a set of consistent methodologies for the measurement of foregone revenue, mechanisms to promote transparency and accountability of the system for administering concessions. The overall intention is to provide Government and indeed the national community with clear information on the cost of tax concessions and the extent of their contribution to the objective of economic growth, foreign exchange generation and employment creation. This initiative will require some restructuring of the processes for the application, approval and monitoring of tax concessions. In parallel with these administrative improvements, we propose to undertake a complete review of the policy and regulatory framework with a view to embarking on a more comprehensive approach to modernizing our incentive framework,” said the Prime Minister and Minister of Finance.
He disclosed that as part of the 2014 Fiscal Management Strategy, the Ministry of Finance will play a coordinating and lead role in the implementation of the remaining items on the structural reform agenda, continue to strengthen expenditure management systems as well as tax administration and compliance, and modernise systems supporting the preparation and implementation of the Public Sector Investment Programme (PSIP).
Prime Minister Douglas pointed out that the immediate target will be to prepare and publish the PSIP for the period 2015-2017 which will provide the policy context and strategic priorities to inform the choice and sequencing of investment priorities over the next 3 years. It will also provide the baseline information to support the monitoring of Capital Expenditure and a framework for the mobilization of external funding and technical support.