Facts, truth and leadership in government – Part 2

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Earl Huntley is a retired Permanent Secretary, Ministry of Foreign Affairs. Former CARICOM Ambassador to Haiti, and Saint Lucia’s Ambassador to the United Nations.

Sponsored Caribbean News Global fav Facts, truth and leadership in government – Part 2

By Earl Huntley

Saint Lucia’s public debt crisis

The second issue I want to discuss is Saint Lucia’s public debt – a debt level that is increasingly reaching crisis proportions; and the question of who is responsible for it.

On September 17, 2019 prime minister Allen Chastanet, at a media briefing, told reporters:

“One thing you have to pay every month is salaries.  So, we pay $440 million in salaries a year.  The second thing you have to pay is your debt.  Both the interest which is $170 million and then principle which is about $130 to $150 million.  So, the combination of those two things is over $800 million of which your total budget is $1.3 billion.

“Everything that you’re spending over the $1.3 billion you’re borrowing so when the economy starts to contract it means all the other things that you are supposed to be doing gets cut because those are the two things [ debt and interest ] you don’t cut  and when we came into government that’s where this government was. Just covering salaries and interest payments on loans. We’ve got to grow the economy, be much more prudent in how we spend the money and part of that is making this country more competitive and more efficient and requires us to embrace change. 

“I know it’s difficult because people get worried that I have repeatedly said that my administration does not believe that [any] Saint Lucia has to fall on the sword for the state. They cannot pay the price for the mistakes that we’ve have made in the past.

“So, we’re not looking to fire anybody. We continue to treat people fairly but we must make the decisions moving forward to allow us to proceed and the ease of doing business report says we’re still not making enough decisions in order to allow us to remain competitive upon a global basis.”

This is an echo of what he said in his New Year’s address to the nation on January 13, 2019: “One of the major challenges my administration inherited was the limited space to borrow money given the high level of debt accumulated by the previous administration.”

When Chastanet assumed office June 2016, did he really find a situation where all the government of Saint Lucia was doing was paying salaries and its debt? And was the level of debt as crippling as he is making it out to be?

First, on the question of salaries. The February 2016 International Monetary Fund (IMF) Country Report on Saint Lucia had this to say on public sector salaries.

“The deterioration of the fiscal position has its roots in the government’s response to the GFC. An expansion of the public service payroll and wage rises in the middle of the crisis increased the wage bill by two percent of GDP from 2007 to 2012 (not including temporary work programs). Staff simulations indicate that, had the wage bill been anchored to nominal GDP, the debt target of 60 percent of GDP would have already been attained. A wage freeze in 2013 -16 contained the wage bill, but further efforts are needed to fully reverse its previous expansion.”

The problem with the wage bill, therefore, is an inheritance from the United Workers Party (UWP), administration of 2006 – 20 11 and had it not been for Dr Anthony’s conservative management of the wages between 2013 and 2016, the fiscal imbalance would have been worse in 2016.

The background to the public debt also undercuts Chastanet’s attempt to tie it all on the Saint Lucia Labour Party (SLP), administration that preceded his. Let us turn again to February 2016 IMF Country Report on Saint Lucia to place this in context.

The report stated: “A large and rising public sector debt burden constitutes one of the most serious vulnerabilities for Saint Lucia’s economic outlook. The dramatic rise in public debt began around the time the traditional banana industry collapsed in the mid-1990s and was aggravated by the fallout of September 11, 2001, the slow recovery in the United States from the early-2000s recession, and the global financial crisis. Between FY1996/97 and FY2014/15, public debt has risen from 28 to 79 percent of GDP”.

However, the debt to GDP ratio actually fell in 2015.  A study by the CDB, commissioned by the prime minister on assuming office in 2016 pointed out that the rate of debt had already begun to slow down. “In tandem with the improvement in public finances, there has been slower growth in the debt stock” (Pg. 6).

What is startling though is the fact that the level of Saint Lucia’s debt has recorded a steady upward movement from 2016. The February 2018 IMF Country Report on Saint Lucia gives the debt to GDP for 2014 – 2019 as follows:

Central government debt (incl. guaranteed)

  2014   2015   2016   2017    2018   2019   2020      2021    2022   2023

  70.7   67.8      69.2   70.7      72.2    74.6    75.5       77.2     79.2    81.3

It is ironic, the man who is chiefly responsible for this is the same, complaining about the extent of Saint Lucia’s loan payments, in his annual budget – prime minister Chastanet, the country’s minister of finance.  But while he has accused the last SLP government of accumulating a high level of debt, he has incredibly worsened the situation by borrowing in his three years in office, far more than the SLP did in five years.

The estimates of revenue and expenditure for the period 2016 – 2018 indicate that Chastanet borrowed $196.6 million in 2016, $241.2 million in 2017, $300.9 million in 2018 – all totaling $738.7 million. It is no wonder that the leader of the opposition Philip J Pierre, had this to say in his 2019 reply to the prime minister budget address.

“The government of Saint Lucia will have by the end of this financial year borrowed or refinanced nearly one billion’ worth of loans since assuming power in 2016. Current trends may see that national debt including guaranteed debt reaching almost four billion by the end of the fiscal year 2019/2020.

“Saint Lucia is in danger of experiencing the same kind of debt crisis which has derailed the growth and development of other Caribbean islands with disastrous consequences for the quality of life of the people. Given Saint Lucia’s limited fiscal space it is highly irresponsible to take on debt when it can be avoided and make it more difficult and expensive to secure funding for vital sectors like health and education.”

The $1.2 billion includes $515 million, other loans which was not stated in the budget and which covers loans like $270 million for the airport and $24 million for the Parker Company.

Here is a summary of the sums of money that the Saint Lucia parliament has authorized the minister for finance to borrow.

September 17, Chastanet claimed that he had little or no revenue left after paying off loans and salaries – the same Chastanet who has given handouts to OJO Labs, CHTTI, $24 million tax waiver to Sandals. And guess who is building a race track and ancillary structures and services for Theo Ah King? Consider these figures on revenue earned from Value Added Tax (VAT) and the quantum paid as interest by Saint Lucia on its loans.

These are from the 2018 Eastern Caribbean Central Bank (ECCB) annual review (Table 36). All figures in millions of EC dollars.

     VAT revenue           Interest payments

2016 – $345.44                $149.29

2017 – $312.83                $149.65

2018 – $326.31                $159.88

In his reply to the prime minister’s January 2019 address to the nation, the esteemed leader of our party and opposition leader Philip Pierre, in relation to the prime ministers’ assertion about the SLP and the country’s debt situation, stated: “Prime minister, you must learn to tell the nation the truth.”

This is the crux of the problem facing us – [the reputation of Saint Lucia.]

Prime minister Chastanet makes up his truth; and what is frightening is that his truth, which is never the whole truth, is not the imagination of a simpleton; is not the vision of a dreamer, and is not the forgetfulness of a chronic liar.

[For the avoidance of doubt] It is a preconceived calculated plan to discredit opponents and to fool the people into following his leadership. The St Jude hospital project is the most incredible and saddest example of this.

Not a damn seat for them to quote from Lord Kitchener’s 1981 calypso immortalizing George Chambers prediction of The Peoples National Movement (PNM) victory in Trinidad and Tobago elections.

Related: A synopsis of facts, truth and leadership in government

Related: Facts, truth and leadership in government – Part 1

To be continued… Part 3 – St Jude hospital reconstruction project.

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