THE COST OF BORROWING TO MEET RECURRENT EXPENDITURE No doubt there are implications for borrowing. Interest payments increase and loans become due. Given market conditions, many investors are not interested in rolling over debt when it becomes due, so we must pay. The highest amount ever borrowed in Saint Lucia in one year is 239 million. This was done by the UWP in 2010. It was necessary to pay for a 14.5% increase in salaries that the country could not afford. Thereafter, we found ourselves under severe financial pressure to meet expenditure that became necessary as a result of Hurricane Tomas. In fact, between 2006 and 2014 the Government borrowed $563 million. In 2012, the SLP Government borrowed for Hurricane Tomas Rehabilitation works and to pay wages and salaries, as the country was not making enough money to pay for the 14.5% increase in wages and salaries of public servants, plus the 35% increase in the salaries of top management, implemented by the UWP. This is why the Prime Minister pleaded that the country could not afford the 16% demanded by Mary Isaac et al in January 2013. The Prime Minister proposed 0%,0%,0% because the country could not continue to spend 53% of current expenditure on salaries. In 2012 alone, Government had to borrow $195 million to meet the cost of salaries, interests etc. Despite sharing this information with the unions, they insisted we could pay their demands. After weeks of protest and a deadlock, strikes and the loss of millions in revenue as a result, the Prime Minister reluctantly agreed to 4%. This 4% would be financed by borrowing and so in 2013, Government had to borrow $122 million. Clearly, this is unsustainable and leaves the unborn generation in a bad financial position. Since then, regional economies have been under severe pressure and as such the risk associated with lending to Governments have increased. In other words, investors are extremely nervous and are reluctant to do business with Governments. Given their Barbados experience the haircuts implemented by St. Kitts/Nevis, and proposed by Grenada, the economic troubles in Antigua and Barbuda, we cannot raise the desired sums on the RGSM. I told you previously, last years budget was under-financed by $230.6 because of our inability to raise the projected sums through bonds and loans. What then can a Government do, but look internally to adjust its expenditure? From 2013 the Capital Budget was stripped to bones. Government has cut subsides, transport, travel, goods and services and communication. We cannot close our hospitals and schools...Neither can we default on our loans as there are consequences for our countrys reputation. While our public service is not too large compared to others in the region, our salaries are higher (except for the Cabinet and Parliamentarians who have not received increases since 1998). Further, the 39% increase received by public servants from 1997 to present is the highest in the region. This is why government is proposing the 5% adjustment, as opposed to the retrenchment of workers. Even with the 5% cut, our salaries will remain among the highest and disposable income would not change significantly, as a result of the decreases in income tax rates. It is time to decide what is best for Saint Lucia. The Prime Minister, his cabinet, ambassadors, top management and employees of the Crown are part of the 5%. However, Grades 1, 2 and 3 will be protected because they earn less than $1800.00. Further, Grades 4 will not be affected once the income tax measures take effect. What Prime Minister is proposing is a small, sacrifice to save our economy from crashing. There are some who can afford to leave Saint Lucia to find a better life elsewhere. Many of us cant. Let us think of our future. Let us make an adjustment today, so our children can have a stable environment to grow up in.
Posted on: Thu, 19 Jun 2014 17:10:12 +0000
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