“When we include the grants from the friendly governments and multilateral institutions that we anticipate for this year this figure becomes $1.126 billion. Our re-current expenditure stands at $1.36 billion and accounts for 80.2 percent of the budget for 2020-21, while the capital expenditure for this fiscal year stands at $335.39 million which accounts for 19.5 percent of the total budget (an increase of approximately $89 million) over the allocation for the previous fiscal year 2019/2020.
“As a result of the downturn in our revenue performance (which is largely attributed to the advent of the COVID-19 crisis) we have a wider than expected financing gap of approximately $560 million. This borrowing requirement is further divided into $267.12 million in government debt instruments (raised from the Regional Government Securities Market and elsewhere) and loans mostly from external providers/creditors amounting to $292.86 million.”
The government of Saint Lucia should be well-advised of the non-interest and investors’ appetite for the government of Saint Lucia’s bonds and huge uncertainties about economic outlook and investors sensitive to COVID-19 developments. There is already trouble ahead to meet existing revenue shortfall that will be compounded come October, with the non-existent tourism industry, foreign current shortfall, and trade deficits, etc., will pressure the government to seek more borrowing and or make drastic cost-cutting measures.
The budget address speaks to “the revenue projections when compared to the planned current expenditure results in a current deficit of $216.21 million. This year’s recurrent deficit is $ 342.41 million. Given the roll-out of the government’s Public Sector Investment Programme (PSIP) and the associated capital expenditure programme outlined for this fiscal year, the overall deficit has increased to $ 433.78 million. This is due, in no small measure, to the extraordinary circumstances and challenges associated with the COVID-19 response. As a result, the overall deficit, when adjusted for interest payments gives in a primary deficit of $ 252.52 million.”
Sources of funding:
- Recurrent revenue – $1.019 billion comprising:
- Tax revenue of $924.92 (54.4 percent)
- Non-tax revenue of $94.59 million (5.6 percent)
- Capital revenue including the proceeds from the sale of assets in the amount of $10.82 million.
- Grants in the amount of $106.98 million from the friendly governments and multilateral institutions including:
- Republic of China on Taiwan (ROCT) $38.65 million;
- Japan International Cooperation Agency (JICA) $20.0 million;
- UK/Caribbean Investment Fund (CIF) – $13.39 million
- European Development Fund (EDF) – $5.9 million
- World Bank (IDA) $ 2.2 million.
As well as other contributions from agencies such as UNEP, DFID, PAHO, FAO, ILO and the ECCB.
Given planned expenditure this year of $1.697 billion and projected revenue and grants totaling $1.126 billion, then this leaves a financing gap of approximately $560 million, net of refunds.
This will be financed as follows:
- Government debt instruments—including bonds and treasury bills of $267.12 million;
- External borrowing of $292.86 million.
The budget conclusion betrays a lack of original thought that includes, “We are now living through arguably the most uncertain moment of our existence as Saint Lucians, as a region and as a world due to COVID-19. We are all anxious and fearful and not without reason. Employees will be wondering: “will we still have jobs when this is over?” Employers will be wondering: “will we still have customers/clients or a business and when do we re-open?”
Governments will be contemplating: “how do we minimize debt levels, protect our citizens and save our economies?” This is real. We cannot pretend that we are immune or will be spared the effects of this pandemic. We cannot close ourselves off to the rest of the world. We have to co-exist with COVID-19. This is our new reality. We have to create a balance between protecting public health and restoring livelihoods.
We are aware that we need to spend deeply in order to keep our economy afloat. We are also acutely aware of the need for even more spending to accelerate recovery. This budget is a clear manifestation of our government’s commitment to addressing these imperatives. This budget sets the path for job creation, growth, environmental sustainability and social inclusion.
In this address, I have sought to give an account of our stewardship. I believe our record of performance could stand scrutiny anywhere. Our management of the economy as reflected by the consistent pattern of growth over the last four years; the reduction in unemployment; the lowering of the debt-to-GDP ratio and; the vision that has been outlined for our country in the Medium Term Development.
Strategy clearly demonstrate that we are on the right path and that Saint Lucia is in safe hands. While members opposite may disagree as we know they will, the facts speak for themselves. I want to quote from some of the opening lines of the book, “A tale of two cities” by Charles Dickens.
“It was the best of times; it was the worst of times. It was the age of wisdom, it was the age of foolishness It was the spring of hope, it was the winter of despair We had everything before us, we had nothing before us”.
This story makes the connection between the two cities of Paris and London and the possibilities for transformation at the personal and societal level. In our environment, this is relevant not in the context of two cities, but in two distinct pathways and choices, that are open to us.
For my government, the prime minister said: “We choose challenges and opportunities over doubt and fear We choose unity over division. We choose truth over lies and deceit We choose hope over despair. And we choose growth over stagnation the transformation of our nation is not an overnight exercise. This is a journey that will take time. Along this journey, we have met communities of “naysayers”, “doubting Thomases” and “prophets of doom and gloom”. We have passed groups voicing messages of negativity and “do nothing.”
“But on this journey, we have also encountered many communities of believers, and even more voices of positivity and hope, and they are boarding the bus of optimism, as they know where it is headed. They want to be part of this journey. We will not betray their confidence. We are not afraid. We are not alone. We are All In as we Build a Stronger Saint Lucia Together.”
Looking ahead @GlobalCaribbean
My final thought is centred on COVID-19 worsens pre-existing financial vulnerabilities, the real economy, financial markets and risks management and safeguards to financial stability.
Despite international financial support, closely monitoring financial vulnerabilities and safeguards to financial stability, policy advice and capacity development must accompany recovery.
Pre and post-COVID-19 the budget address for the financial year 2020/2021 is a wonderland patch job of a political gimmick ‘the political economy of economic policy’. It’s politics at play. The political economy is about how politics affects the economy and the economy affects politics.
There exist a disconnect between government, the domestic economy and indigenous people, regional and external financial markets and the real economy.
Read the World economic outlook update full report WEOENG202006.
The 2020-2021 national budget alluded to rising debt level but did not offer adjustments to mitigate refinancing risks, potential credit losses, revenue reduction and insolvencies that loom large in Saint Lucia, the region and external.
Related: St Lucia’s PM budget address: A wonderland of vacuous relics: Part 1