It has become the norm in this Federation for the politicians in the Labour Government to cast aspersions on the educational and professional competence on any citizen who dares to question the postulations of members of the Government. The Honourable Dr. Timothy Harris has, on the political platform, poured scorn on my competence as an ECONOMIST to question information he has been promoting in the local and international media on the performance of the economy of St. Kitts & Nevis during this severe recessionary period. Dr. Harris should be congratulated for his tenacity in pursuing and obtaining a doctoral qualification in Administration, full-time and part-time over a period not exceeding ten (10) years. Such a course is normally completed in two (2) years full time.
A “Primary Surplus” is merely a cash situation which is comprised of revenue collected by Government and includes any budgetary support grants received from international organisations such as the European Union (EC$49.6 million in June 2009). Government’s expenditure is then deducted and at June 30th 2009 this resulted in a Primary Surplus of $31 million, (Minister of Finance). However Debt service payments amounted to $94 million. This resulted in a DEFICIT of EC$63 million. The deficit has to be financed and it is done by borrowing which again increases the National Debt. The National Debt now stands at EC$3 billion. It is 187% of Gross Domestic Product. This is not prudent fiscal management.
The Prime Minister has been implying that this country is about to receive 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).
Many heavily indebted poor countries accumulated between 1960 and the 1980’s. Considerable and unexpected spikes in oil prices and interest rates during this period coupled with a sharp decline in commodity prices devastated the fragile economies of many developing countries, making foreign debt payment extremely burdensome if not impossible. Poor management of loan funds often led to investment in unsuccessful public projects which generated no long-term social or economic benefits.
This Nation’s national debt can be categorised in two ways: by type of lender and the use 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 Government is now about to borrow a substantial sum to hand over to yet another Bajan firm in a vain attempt to own another golf course. To date schools are without furniture and equipment. DEBT FORGIVENESS IS A FIGMENT OF THE PRIME MINISTER’S IMAGINATION.
