My childhood days are full of many pleasant memories of the numerous characters that lived in the villages. In Christ Church, there lived a mysterious man, called “Jimmy-One-Stick. We were afraid of him, since he was an "obeah-man”. It was rumoured that women who had “big-foot” became that way because they cheated on their boyfriends, who paid Jimmy-One Stick. He then “pulled the devil’s tail” and the women were disfigured.
I listened to the Governor General’s throne speech last Wednesday, which essentially is the Labour Government’s statement of past economic successes and its vision for the future. I was puzzled that according to the ECCB “the total stock of the public sector debt stood at $2,483 million (180.3% of GDP) at the end of 2008”. The Minister of Finance subsequently sought approval from the National Assembly to borrow EC$565 million. EC$50 million was taken from Social Security to build houses; the Basseterre by-pass road has a cost overrun of EC14 million and of course the overdraft at the National Bank which is in the region of EC$179 million. The total indebtedness is approximately EC$3 billion or 190% of GDP. Yet the Nation is being told that the National Debt “has a downward trajectory”.
This means that the total debt has been drastically reduced. However, because of the economic recession and according to the ECCB and CDB the “real GDP is projected to contract in 2009 as the negative impact of the global financial crisis spills over into the real economy of the Federation.” The ECLAC report on Caricom concluded that National Income (GDP) for St. Kitts and Nevis declined by 8% in 2009 and unemployment is in double digit figures. Aggregate demand fell, and Government revenue from import duties fell accordingly and is projected to have contracted by 20% in 2009. The Prime Minister has stated that the economic fallout which has devastated the North America, Europe and Japan with its negative multiplier effect on the Caribbean had no effect on St. Kitts & Nevis. Even Her Majesty the Queen has described 2009 as a year to forget.
Another fallacy that is being foisted on the Nation is that this country had graduated to a middle income country and therefore cannot qualify for “debt forgiveness.” from the Parish Club which is comprised of the seven richest countries in the world. Debt forgiveness, commonly referred to as “debt relief” is the act of excusing heavily indebted developing countries from all or part of their “unsustainable” debts. The World Bank and the IMF consider a country’s debt unsustainable if either (a) the size of the country’s external debt exceeds the value of its export by a ratio of 150% or (b) the ratio of the country’s debt-to-government-revenues ratio is above 250%. These ratios are indicators of a debtor-country’s inability to repay its debt without exposing it to excessive hardship, both social and economic. For example Uganda spends an average of US$3 per person on health care while spending US$15 per person on debt service. St. Kitts & Nevis spends US$1,451.00 per person on debt service and US$271.00 per person on health care. (2009 Budget Estimates)
This Nation’s national debt can be categorised in two ways: by type of lender and the application of the loan funds. The INTERNAL portion of the debt is money this Government owes to Citizens and local financial institutions such as National bank. This amounted to EC$1,668.06 million in 2007 (CDB Report). This debt cannot be forgiven and must be repaid. EXTERNAL debt comes from two sources. The first source is “bilateral debt,” which is money owed by one Government to another. The lenders or creditors are developed countries such as the USA, UK or Canada. Forgiveness of bilateral debt is through the Parish Club. An examination of the National Debt of this Federation reveals very little bilateral debt. The major portion is owed to Commercial Banks such as First Citizens Bank, Unit Trust Corporation, Republic Bank of Trinidad and Tobago. These financial institutions have shareholders to whom they are responsible and cannot entertain debt forgiveness. It must be noted that this Nation’s odious debt has been incurred by this Government and spent on unproductive projects such as Potato Bay Villas, roads to nowhere, and La Vallee Golf course on which EC$116 million has so far been spent without any long-term social or economic benefit.
The continued hype about high end tourism is purely political rhetoric and these projects will not impact this economy in the very near future. Financial services will not generate the revenues which the Government anticipates. The rich countries views this sector of our economy with great distrust and are committed to eliminate it or reduce its revenue generation to these countries to a trickle. The economic reality dictates that the Nation tightens its belt and prioritizes its expenditure. However the Government has committed the country to an additional EC$50,000.00 per month for salaries and emoluments for Ministers and their entourage. The Prime Minister has stated that he intends to reduce the National Debt to 60% of GDP by 2015. Given the economic structure of St. Kitts and Nevis with no productive sector and a declining services sector, I can only conclude that to achieve this level of success the Prime Minister must be an “obeah man.”
