St Lucia’s 2022/23 budget of $1.842B styled ‘the peoples budget’

2
291
Prime Minister of Saint Lucia, Philip Pierre
      • Civil servants will get their increase April 2022
      • Civil servants will get part of their backpay in December 2022, and the second tranche will be in March 2023
      • Financing – $505.12 million
      • Providing the platform for sustained growth
      • Supporting the continued robust performance of our tourism industry
      • The expansion of construction in the public and private sector
      • Encouraging prudent, responsible, and transparent fiscal management
      • Implementing tools that will assist in significantly reducing waste and unnecessary spending
      • Developing institutional frameworks designed to eliminate corruption, and
      • An environment where there is a substantial reduction in revenue from fuel

By Caribbean News Global contributor

CASTRIES, St Lucia – Prime minister and minister for finance, economic development, and the youth economy, Philip Pierre, on March 29, presented a $1.842B budget “the largest budget in Saint Lucia’s history” styled “the peoples budget”.

“As you are aware”, said prime minister Pierre, “the estimates of revenue and expenditure statement is the precursor to the budget address, which will facilitate the introduction of the Appropriation Bill to parliament on April 26, 2022.”

The COVID-19 pandemic’s persistence and the Russia/Ukraine war present considerable downside risks, which warrant innovative and transformative policy interventions, prime minister Pierre noted.

In essence, the estimates of expenditure will fund projects that put people first.”

This proposal has the following objectives:

  1. Support government’s agenda of economic transformation;
  2. Job creation, particularly among the youth;
  3. Accelerated economic recovery and growth; and
  4. Reduction of poverty and increased wealth creation.
  • With an expenditure of $1.842 billion – $1.349 billion is proposed to be spent on recurrent expenditure;
  • $382.6 million on capital expenditure;
  • $110.5 million on principal payments (or what we sometimes refer to as Amortisation). The total that expected in revenue and grants is $1.327 billion 

Tax Revenue – $1.016 billion – Non-Tax revenue – $133 million –  Capital Revenue – $10.7 million – Grants $176.6 million.

“We are projecting an increase in our GDP to $5.47 billion which in part explains our projected increase in revenue. As a prudent government, we propose to change the trajectory of our primary as well as our overall balances,” said the finance minister.  

The following are excerpts of the estimates and revenue for FY 2022/23: [The full document is available in a pdf format at the bottom of the article.] 

Development – capital expenditure budget

The driving force behind the development expenditure programmed in the budget is the need to stimulate the economy through the implementation of various projects. The government has allocated some $561.06 million towards the implementation of various projects for the next fiscal year comprising of $382 million of capital and $179 million of recurrent expenditure related to the projects.

Capital expenditure

The government has allocated some $382.65 million to its capital program, made up of $12.67 million in locally funded capital expenditure and $369.98 million in externally funded capital expenditure. The proposed capital budget represents $104.11 million or a 72.8 percent increase over last year’s revised estimates of $278.54 million.

The proposed capital budget represents $104.11 million or a 72.8 percent increase over last year’s revised estimates of $278.54 million.

It is important to note that capital expenditure constitutes 68 percent of the total development budget of $561.06 million. This amount represents $167.32 million or a 70.2 percent increase over last year’s revised estimates of $393.74 million.

This is primarily due to the emphasis placed on infrastructural development (30%), economic development (22%), health (8.08%), agriculture (5.95%), and education (5.2%) – accounting for approximately 71.23 percent of the total capital budget.

Wages and salary

In the 2022-2023 budget a total provision of $590.70 million for wages and salaries, of which a sum of $560.56 million or 94.89 percent has been programmed to cover personal emoluments to central government employees while $30.13 million has been allocated to cover compensation and other benefits to project staff.

A sum of $108.55 million has been allocated to retiring benefits, of which $14.15 million is in respect of employer contributions to NIC. Overall, employee compensation is programmed to increase by 11.88 percent relative to the outturn for the current financial year. The allocated amount also makes provisions for in-year promotions and other salary and wage allowances.

Public servants will be pleased to note that government will keep the promise made by the former administration and pay the increase in salaries by the end of April 2022.

Debt service … interest payments account for 61.2 percent or $174.47 million. A sum of $110.56 million is provided for principal repayment.

Transfers

As it relates to transfer payments, which include grants and contributions, subsidies, and public assistance, … a sum of $212.39 million, representing an increase of 20.4 percent or $36.03 million above the projected outturn for 2021-2022.

2022-2023 Revenue

With the resurgence in economic activity that is expected in 2022-2023, the draft estimates have targeted total revenue and grants in the sum of $1.328 billion.

At the projected level, total revenue and grants are forecast to increase by $248.1 million or 23 percent above the preliminary outturn for the fiscal year 2021-2022. The forecast is comprised of $1.15 billion in recurrent revenue, $10.7 million in capital revenue, and $176.7 million in grants.

Recurrent revenue 2022/23

Inflows are projected to increase by $148.6 million relative to the approved estimates for 2021-2022 to reach a total of $1.150 billion for the fiscal year.

When compared to the revised estimates or outturn for the preceding year, Recurrent revenue increased by $122.7 million or 11.9 percent. The increase stems from slow but sustained recovery during the latter part of the fiscal year 2021-2022 and the continuation of the recovery anticipated in the tourism, construction, and agricultural sectors during the new fiscal year.

The total projected recurrent revenue for 2022-2023 is comprised of tax revenue of $1.016 billion or 88.4 percent and $133.9 million in non-tax revenue. Tax revenue is forecast to increase by 9.5 percent in comparison to the outturn for 2021-2022 while non-tax revenue is expected to increase by 34.2 percent compared to the revised estimate for the preceding year.

The increase in tax revenue is influenced by the continuation of the recovery in economic activity resulting from the easing of the COVID-19 pandemic. The significant increase in non-tax revenue is projected as a result of the higher anticipated Citizenship by Investment (CIP) inflows expected to be deposited in the Saint Lucia National Economic Fund pursuant to the Saint Lucia National Economic Fund Act.

Let me add, that we hope that the CIP programme does not suffer from any adverse international events.

Value Added Tax (VAT) from international trade transactions (collected by the Customs and Excise Department) is projected to yield $165.5 million in 2022-2023, which is 5.38 percent above the outturn of $157 million in 2021-2022.

As the economy rebounds, a higher level of economic activity is anticipated in the construction sector over the medium term.

Airport tax is projected to record an increase of 16.41 percent or $3.6 million above the 2021-2022 outturn to reach $25.5 million for the new fiscal year.

This projection is influenced by the higher revenue intake anticipated from an increase in tourism arrivals, including stay-over arrivals, which is expected to increase by approximately 26.2 percent in the new fiscal year.

Service charge on imports is projected to increase by $6.94 million or 8.41 percent above the outturn for 2021-2022 to reach $89.5 million for the new fiscal year. This projection is influenced by the higher revenue intake anticipated from an increase in economic activity during the current fiscal year.

Financing – $505.12M

The government anticipates moderate improvement in the revenue administration and grant receipt from friendly donors, a significant financing gap remains. … based on the projected level for revenue and grants, the budget targets an overall deficit of $394.57 million for the fiscal year 2022-2023.

When added to the principal repayment for the year a financing gap of $505.1 is anticipated which will be financed by a blend of foreign and domestic financing resources.

In addition to total revenue and grants of $1.327 million, it is anticipated that [my] government will have to borrow a total of $505.12 million comprising $425.4 million, equivalent to 84.2 percent of the total financing requirement for the year from external sources.

Domestic financing is expected to be moderate given that much lower amounts are programmed from primarily bonds.

This is entirely in keeping with [my] government’s strategy of relying on external borrowing on concessional terms rather than the market debt which bears higher interest rates.

Domestic financing requirement amounts to $79.7 million which is expected to be sourced through various means including treasury bills, treasury notes and bonds.

The total amount to be raised from external sources will be as follows:

  • Caribbean Development Bank – $57.3 million
  • International Development Association (IDA) – $82.3 million Republic of China on Taiwan EXIM Bank – $191.8 million CARICOM Development Fund (CDF) – $3.06 million
  • CDB-Inter-American Development Bank – $8.6 million
  • Canadian Clean Energy & Forest Climate Facility Fund – $1.4 million
  • World Bank (Development Policy Credit) – $81 million

Conclusion

“We are a different team,” said prime minister Pierre. “We are a team of Saint Lucians who understands the plight of Saint Lucians. None of us were born with a golden spoon, none of us were privileged to be able to live a certain lifestyle.”

“We are children of ordinary and regular people and we understand the plight of ordinary people, and this is why this budget, these estimates of expenditure, has that philosophical underpinning to put people first.”

“As the allocations programmed in this budget indicate, we intend to continue to tackle the challenges with boldness and confidence; we remain optimistic, assured, and rooted in our resolve to maintain economic stability and chart a path to sustainable growth and development,” stated prime minister Pierre, “we will pursue the initiatives and programmes funded in this budget to bring transformative change that will impact the lives and livelihoods of our citizens and we will put the people first.”

2 COMMENTS

LEAVE A REPLY

Please enter your comment!
Please enter your name here