Statistics on economic performance indicate deficit will rise without wage adjustment

Samuel Sukhnandan, SNO Reporter

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Reginald Darius, Permanent Secretary in Ministry of Finance presented statistics on the island’s economic performance at a press briefing today.

Government is exploring other measures to curb public debt since an increase by 1.5 percent over the past two years.

During a press briefing today, May 9, Permanent Secretary in the Ministry of Finance Reginald Darius, in a PowerPoint presentation, demonstrated what the current state of the economy looked like as it relates to government spending and fiscal deficit.

Friday’s meeting was specifically organised by Prime Minister Dr Kenny Anthony and a team from the Ministry of Finance, Economic Affairs & Social Security to discuss the financial situation of the state with media practitioners.

Darius’ presentation dubbed “Budget 2014/2015 Fiscal Consolidation,” highlighted some of the “scenarios” the administration is looking at toward addressing the ongoing financial crisis.

Statistics indicated a slowdown in public debt, however, he stressed on the need for more effort to address the situation. In 2012, public debt was 72.1 percent and rose in 2013 to 73.6 percent.

The island’s fiscal deficit once stood at 9.2 percent and was considered one of the highest in the world.

Darius noted that this figure has been significantly reduced and plans are being made to reduce this even further. However, one of the major concerns highlighted during his presentation was that “current spending remains sticky due to salaries and interest payments.”

According to the permanent secretary, salaries and wages increased by two percent, while interest payments currently stands at 11 percent, goods and services at minus five percent and transfers at minus nine per cent. While noting that there was a slowdown in the growth of public debt, Darius said a greater effort is required to reverse the trend.

During the 2014/2015 financial year, government plans to enhance its debt service profile, and in doing so is expected to stabilise $227 million in treasury bills and $197 million in bonds.

Darius explained that in the 2013/2014 financial year, the government was able to increase revenue by broadening the tax base with the Value Added Tax (VAT), while improving the collection of property taxes. In addition to that, government was able to reduce current expenditure.

Spending on goods and services was reduced by eight percent, supplies four percent, communications 28 percent, transfer-subsidies by 56 percent and private sector 45 percent. Capital expenditure was also reduced and an adjustment of $26.8 per cent was made in that area.

Darius stressed that in order for the administration to address the current financial burden it is faced with it must seek to meet non-loan financing requirements of $205 million, with recurrent expenditure making up $ 76 million and the remaining $129 million in capital expenditure.

The strategy to rectify fiscal sustainability should entail “enhancing revenue collection, without additional taxation measures,” Darius recommended, in addition to performance budgeting by reducing funding for poor performing programmes.

The government is also aspiring to increase current revenue/Gross Domestic Product (GDP) to above 23 percent, and further plans to reduce the overall deficit to five percent by having lower capital expenditure.

In pointing to the possible salary cut, the permanent secretary said statistics reflect that a 10 percent adjustment in public servants’ salaries will amount to savings of over $37 million, which is equivalent to retrenchment of 990 workers and a recurrent financing gap of some $39 million. With a seven percent cut, government could save $26 million and with a five percent cut they can afford to save $18.5 million, with a recurrent financing gap of $57.5 million.

“Without wage adjustments, capital is under risk of being eliminated, which is not feasible too given the fact that remaining capital is at fixed cost. However, without a wage adjustment, the deficit will rise and the gains from last year will be lost,” he added.

Darius noted because of the present situation the country will have no proper track record to present to the market for future prospective investors.

The dialogue was that of a similar exercise held between government officials and trade unionists last Friday.

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19 comments

  1. First of all the over 300 pensioners employed getting their pensions and also a fatter salary plus allowances should be given an option to forgo pension once still employed or terminate employment and keep a pension. This will save the Govt about 8 Million right there.

    Entertainment and telephone allowances should ceased immediately as all the officers who received these allowances have cell phones paid by the Govt. Another Million right there.

    Office receiving travelling should NOT be using SLG's. All Ministers and PS's are chauffeured around yet they all receive travel allowances some as high as $1400 a month.

    CUT THESE COSTS AND SHOW US U ARE SERIOUS ABOUT CUTTING COST.

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  2. I am sure all of them were seating in VIP this past Sunday enjoy Jazz at the expense of a "struggling country".

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  3. The reality is that they will take from the already struggling Public Servants; nothing will change in terms of the elaborate and exorbitant spending by Kenny and his boys and the poor will only suffer more. But I suppose Kenny has people to pay back and the struggling Public Servant is not his priority. But the longest rope has an end

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  4. We Lucian's not stupid.to much jobs for the boy's and girls a promise is a comfort to a fool.next election what they will try to fool us with

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    • Such open government hostility towards the working population in Saint Lucia is remarkably unprecedented. Never before have we come to such a low point of government alienation.

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  5. The rush to bring down the deficit immediately only serves on purpose. That is for the country to look more appealing to perspective creditors so this government to improve its credit rating. This will enable them to be in a position to take more loans thus restarting the vicious cycle. This may be in a rush for this government to start projects in an effort to look good for the next election.
    If this government is serious about reducing public debt the approach could be a gradual one where we start by trimming embassies and their staff who are relatively useless. We then could tackle the amount of permanent secretaries and consultants needed to run this giant bureaucracy. We could then go further and streamline or privatize some of the government processes realizing more savings.

    This whole plan carefully thought out by this administration to my mind is one where they are trying to press oil out of a sluggish economy for the image of the administration. Peter can't pay for Paul's extravagant lifestyle, mismanagement, old habits and image. For if we the tax payers continue to bail out inefficient and ineffective administrations pretty soon we are going to be ruined.

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    • Mr. PS: The deficit may still rise, and by a significant amount, with or without the wage/salary cost cut. There is nothing in your budget that dynamically controls spending. Emphasis on the word "control". You like your predecessors expect that the OECS Secretariat will do your work for you. You have no quantitative targets, milestones and monitoring systems to assist with tweak anything going awry. You are out there like in a canoe without a paddle.

      Your fundamental driving strategy is one word, H.O.P.E. There is (are) no mechanism(s) in place. You are still banking that cost control will happen by all itself through the "invisible hand", and the quantum of anticipated receipts will flow according to your great expectations.

      Now, nowhere in the world does any of this type of economic transmission work in this way. Maybe, and just maybe in your parallel universe, where another Saint Lucia exist. In other words, you are still hell-bent setting us up for failure again, unless by happenstance, your dreams come true.

      Good luck! We will need a lot of it. But remember, hope is not a strategy.

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      • Since when dis the PS Finance became the Minister of Finance. It looks like a very long time ago. This is because the PM does not seem to understand what he himself is reading at times. It figures.

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  6. If the PS of Finance wants Public Servants to accept a pay cut. There should be a similar cutting down on the amount allocated to the STEP program.

    It is only fair that if we sacrifice in order to maintain gains made last year. That the people who like to bounce and draw from STEP should similarly be called upon to sacrifice. STEP is ran at 1 million EC dollars per cycle. Cut out a cycle or two. Saving the government 1 to 2 million dollars.

    Added to the 5% wage cut that will be a total savings of 20.5 million EC dollars (18.5 Mil + 2 Mil)

    Statistics can be made to say anything by the speaker. I can hire someone to use thos same statistics and he will say somethiong completely didrent from the PS of Finance. Because you are giving your analysis of the statistics, to make your arguments look stronger. That does not make what you are saying the TRUTH!

    STEP workers MUST sacrifice for the country too.

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  7. Darius for your big head supposedly loaded with brains, I truly hope that this isn't your thinking.

    Wage cut for 9000 people or retrenchment of 900 leads to the same thing. Less spending power by that group. Less spending power = less demand. People either don't have the money to spend or watch their pennies more closely. Less taxes to collect from those individuals means even less revenue for govt. Fewer sales at business = less revenue for govt. What do businesses do with less revenue. Same as govt, cut costs. Easiest costs to cut is jobs. If you don't cut jobs and you cut salaries, same crap. Eventually business will be forced to lower prices to meet less spending power. Then you have deflation. Deflation can be even worse than inflation. Ask Japan with 200% Debt to GDP and 20 years of economic stagnation to tell you how great deflation is. Morons

    Now put me on that stupid vision commission and give me a big salary.

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    • What vision commission you are talking 'bout my man? That commission is off on the wrong foot already! The framers themselves lack vision. There was no inclusion in the terms of reference or scope of the commission. So, how stupid can we get? Whose, or what kind of vision is this? A country-bookie style vision? Wow! Saint Lucia is really idiot country!

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  8. Are ministers of government included in the 5 percent decrease? I hope of this is implemented that it will apply to all public servants including these political positions

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  9. I am yet to be convinced that a pay cut is in order at this time. I haven't seen any change in the operations of government to suggest that such a move is in order. How could you ask public workers to take a pay cut while others enjoy such luxuries as entertainment and telephone allowances? With avenues such as email, bbm, whatsapp and all the other means of communication, why are we still paying such high phone bills? Cut all entertainment and telephone allowances until things get better. Cut on the credit limit(phone) of all ministers, heads of departments by half. Close one of the missions in the USA. Get as many public officers as practical to work in their area to help cut on rent and utility expenses. Do something about all these SLGs having to drive from the south to Castries just to change brakes or collect some envelopes or blank papers. Get rid of the consultants who make over $100 000 a year. If they are so bright as to be hired to give direction then they should be able to survive after more than two years on these huge salaries. After taking these steps if u have not come up with your 75 million we can look at pay cuts

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  10. There is only so much you can cut. The minute the pay cut is done the borrowing will resume and we will be back in the current position we are in. They need to look at ways of increasing income from outside the country and not internal methods.

    The question though is in the figures quoted are Government Ministers and Permantent Secretary Salaries included in the cuts?

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  11. This man must be the most heartless, unconscionable human being I have ever known. He sees nothing wrong with taking home the exorbitant salary that he currently does, yet producing nothing to show for it. But what makes things worse, is the fact that the PM does not just allow him to get away with failing at his high paying job, he is actually going ahead with his recommendations. Jesus Christ

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    • Why don't this x pet and patriot take a 50% salary cut....he already has all the perks and priveilges any civil servant can dream of...

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  12. See what happens when the PS Finance is the same person as the Director of Finance? The left brain and the right brain are no different. All that is being done is passing decisions from one hand as a fait accompli, to the other. No critical analysis can be expected to emerge from this.
    Our mission critical problem at this juncture is to reduce it gradually, but not eliminate the deficit all at once. Greater clarity is needed here too. That is because such a focus has its own very negative economic ripple or knock-on effects.

    The ultra-conservative and austerity focus on wage reduction and wage compression is most certainly misplaced. It crowds out the search for other useful developmental alternatives. So it means that the PS Finance is taking a 6 for a 9.

    There is some kind of cut on capital expenditure in the budeget, but this has not at all been very been clearly or satsfactorily stated what was cut out. It is nonsensically desperate to cut willy-nilly the capital expenditure, if the cut goes into or entirely eliminate programmes that will grow future job opportunities and economic growth, at the expense of addressing the continually-postponed necessary structural adjustment of the economy.

    Granted that economic policy outcomes depend so heavily on the assumptions behind those policy initiatives that are executed, the idea that just one person is n effect, the judge, jury and executioner regarding a portfolio of economic recommendations, is fraught with danger at best, and is tantamount to courting economic disaster, tread-milling in the poverty trap, at worst.

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    • He taking a six for a nine. He alone is buying it. We're not so stupid old chap! Not even if they have to enforce that with tear gas. We will make this government pay dearly if it does that. CSA! CSA! CSA!

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    • Economic Theatre

      Since, it is Mr. PS who has to do all the explaining, this clearly shows that Mr. PM does not understand neither fish nor fowl about the details he is supposedly advancing. Before this, the PS Finance as is his wont, passes another sheet of paper or document from one hand to another. The Director of Finance nods in agreement. Then the Director of Finance passes another document from one hand to another. The PS Finance sees no need to further detain the Director of Finance on any matter therein. Other deliberations on what and how to do, have continued in like fashion.

      But wait a minute! Wait a minute! Both hands belong to the same person? Never mind. The actors read their lines superbly. One is brimful with pride on the Throne. The OMG! What a great show! Great show! (Applause! Applause!) Take a bow. Meanwhile, the curtains fall.

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