PRESS RELEASE – The proclamation by prime minister and minister for finance, Dr Kenny Anthony, that the 2015/16 budget will be a ‘remedial’ fiscal package, with new investment in construction is really bent on pulling the wool over somebody’s eyes.
This is against the backdrop of no government policy implementation in an economy that is unstable, stagnant and facing runaway deficits for the past three years.
“One of the weaknesses in our budget performance in the last three years has been the weakening of the performance in the construction sector, so the government is putting more money into construction,” noting that there was already investment in road infrastructure, including the Gros Islet Choc highway project. ~Dr Kenny Anthony
In actual fact, the prime minister and minister for finance, Dr Kenny Anthony, in classic tongue in cheek fashion gave proof that the ‘Blueprint for growth manifesto”, which he ran on in 2011, has suffered a crash landing.
“There is the study, which is published in the IMF’s October 2014 World Economic Outlook report, examines the macroeconomic effects of public investment in a large number of countries. The findings suggest that in countries with infrastructure needs, now is a good time for an infrastructure push.”
Arguably, Saint Lucia may have traveled down that road leading to the 2007 Cricket World Cup. Based on current fiscal performance and the prerequisites to influence the right mix of capital inflows, the country’s financial management is a long way on gaining new ground.
“The study finds that increased public infrastructure investment raises output in the short term by boosting demand and in the long term by raising the economy’s productive capacity…. in other words, public infrastructure investment could pay for itself if done correctly. However, the report cautions against just increasing infrastructure investment on any project. “
“The potential gains from infrastructure investment are shaped by a number of factors:
• The degree of economic slack. The short-term boost to output is substantially larger when public investment is undertaken during periods of economic slack and monetary policy accommodation, with the latter limiting the increase in interest rates in response to the rise in investment.
• The efficiency of public investment. The output effects are also bigger in countries with a high degree of public investment efficiency, where additional public investment spending is not wasted and is allocated to projects with high rates of return.
• How it is financed. In addition, evidence from advanced economies suggests public investment that is financed by issuing debt has larger output effects than when it is financed by raising taxes or cutting other spending.”
In the past three years the government of Saint Lucia has gotten a free ride on natural disaster repair and maintenance and spent millions on rebuilding roads, river walls and bridges (at excessive cost) with more to come.
However, Saint Lucia’s economy is in stagnation (from negative 1.7%, to 2.3% and 2.7 % in 2014), loaded with unsustainable debt, rising unemployment (plus 25 percent), national insecurity, a sharp decline in the standard of living, hotel closures, disappearing mum-and-pop stores and quality investments
Adding to this, is a staggering food import bill that exceeds EC$350 million annually, rising trade deficits, and inflated government expenditures that recurrent revenue cannot support.
Local financial institutions are reluctant to extend credit to individuals, the private sector and government, and international institutions will not risk their capital stock, with the exception of the IMF.
These are dangerous indicators that the government must repair, ahead of inept ‘remedial’ fiscal packages that are red flags for political agendas, designed to further constrain the financial system, creating huge deficits, and forcing government to increase taxes impromptu on tires, to meet growing budget constraints.
‘Remedial’ fiscal package strategy
The underlying fact is that a ‘remedial’ fiscal package strategy to concentrate in the northern corridor, on road construction, with elections round the corner, and the prospects of adding three new constituencies in that area, hoping to gain the advantage is good electioneering gimmick, but precarious economics.
This is happening, at a time when, focus is needed on the performance drivers in the overall economy to sharply increase output, export and public financial management to improve growth prospects.
Let’s be clear, this is perhaps a deliberate policy to misuse the scarce resources of taxpayers. A blueprint that has been predictable, to increase declining popularity, in deciding, what the prime minister and minister for finance, Dr Kenny Anthony is willing to take responsibility for.
“Mr Speaker, this Appropriation Bill seeks to authorise the Government of Saint Lucia to spend $1.252 billion for the 2014/15 Financial Year. The agenda underpinning the Appropriation Bill is four-fold. We are seeking:
A. To set our country’s economy on a path of higher and sustained growth and employment;
B. To create sustainable, fulfilling jobs, particularly for our youth;
C. To steer our country’s public finances away from a fiscal cliff; and
D. To build resilience, so that we can bounce back faster from future economic and natural shocks.”
The reality is further from the truth with a government that gives pleasure to itself as it needs.
It is not setting the long-term view for the economy that badly needs structural change to gain a competitive advantage, and a paradigm shift to maintain long-term sustainability.
The irony is this: the prime minister and minister for finance, Dr Kenny Anthony has failed to provide a cohesive strategy to balance the scarce natural and financial resources of Saint Lucia.
If this is any indication, then there is more trouble on the horizon.
Liability and opportunity
Striking a fiscal balance drives success and related benefits, but this requires a formulation that combines the use of monetary policy, structural reform and fiscal stimulus, to enable a better balance between price stability, growth and inflation in an enabling macroeconomic environment for strong investor confidence, in addition to across-the-board policy to increase production, in order to raise private sector investment.
It is conventional wisdom that fiscal and monetary policies can breathe life into new and existing investments if the conditions are right. For example, in the case of Saint Lucia, particular attention is required in information and communications technology (ICT), healthcare, education, agriculture, infrastructure development, tourism, security and the manufacturing sector.
Recently, director general of the OECS, Dr Didacus Jules, outlined a liability as well as an opportunity with regard to the rapid rise in the regional food bill, which stood at US$473 million in 2011.
In Saint Lucia’s current predicament agriculture/agri-business and a clear international trade and investment strategy is perhaps best suited to engage a better mix of economic recovery.
Further, with 40-50 percent collapse in the price of crude oil and abundant world supply, the country has not capitalized on the exchange of debt for oil, the design of substantial oil for food programs with Venezuela and to increase storage capacity in Saint Lucia and pass on the benefits to consumers.
These matters fall, like water on the back of a duck, bearing in mind the inability of the prime minister and minister for finance, Dr Kenny Anthony to grasp the concept. Much the same as the 10-15-30 proposal of my creation, which is design to cut the cost of electricity by 10 percent, government cost of operation by 15 percent and the food import bill by 30 percent.
But, to make progress on these, trust and partnership between the private sector, government and civil society needs extra strengthening: for the simple fact that success requires partnerships, from one end of the business cycle to the other to improve Saint Lucia’s Doing Business 2015 ranking that is 100 out of 189 economies and to improve its ability to anticipate external factors.
In October of 2011, I made the recommendation that “Saint Lucia is in serious need of a debt ceiling, which will limit the amount of money that this government and all future governments can borrow.”
Despite the prime minister and minister for finance, Dr Kenny Anthony acknowledgment of this during his presentation of the 2014/2015 estimates of expenditure in the House of Assembly:
“I believe that the time has come for Saint Lucia, to enact legislation to positively set debt ceiling for governments on the conditions of moving forward. The first move would be to ensure that the constituents set their own fiscal position, and live in accordance with it,” the prime minister said.
The 2015/2016 budget in due, yet the political will and the legislative muscle to proceed, remains confined to a predictable pattern of hollow expressions; outside of being proven incorrect.
Undermining fiscal performance
In the absence of these improvements there will not be an increase in investments that are exponential for economic growth. And, it cannot be business as usual; whereby fiscal prudence is not a priority, and on the other hand taxpayers are asked to buckle their seat belts.
In fact, government is seriously undermining fiscal performance and the country’s future for ideological reasons via the politics of deception and flattery that has take on a new outward appearance.
Election gimmicks are not a relief mechanism in the interest of economic development for the upliftment of the people of Saint Lucia.
The prime minister and minister for finance, Dr Kenny Anthony must step away from fiscal arrogance, get the analysis right and make decisive policy decision that reduce uncertainty, improve the general public atmosphere and the regulatory environment.
Hence, with an election campaign just around the corner, a “remedial” fiscal package in 2015/2016 is equivalent to another election gimmick that will not begin a quantitative transition of the country’s economic dilemma; except for a more centralized form of socialist governance that is in competition with citizens and the private sector.
Melanius Alphonse is a management and development consultant. He is an advocate for community development, social justice, economic freedom and equality; the Lucian People’s Movement (LPM) www.lpmstlucia.com critic on youth initiative, infrastructure, economic and business development. He can be reached at [email protected]