Prime Minister Allen Chastanet unveiled his 2019/2020 budget this week, listing his government’s priorities as infrastructure, agriculture, sport, health and education but acknowledging that Saint Lucia is “lagging behind” its Eastern Caribbean neighbours.
Last year, the country’s budget was themed ‘building resilience’. This year it focuses on ‘growth by empowerment’ with a medium-term development plan to map Saint Lucia’s progress up to 2022.
Saint Lucia’s debt to GDP ratio continues to trend in the right direction, falling from 65.2 per cent in 2017 to 64.9 per cent last year. This encouraging marker was driven in part by growth in tourism and agriculture, as well as a 6.4 per cent uptick in government revenue bolstered by healthy uptake of the Citizenship by Investment programme which generated EC$ 66.4mn this year.
Hoping to stimulate more activity in the coming year the government intends to spend EC$ 300.6mn funding projects, with most of this going towards capital expenditure and earmarked for infrastructure, social programmes and the development of core industries such as tourism and agriculture.
Caribbean comparison
The prime minister may have pledged to meet Saint Lucia’s challenges “head on” but how do the country’s performance and plans compare with other Caribbean islands? Both Barbados and Jamaica released their budgets last month and both were characterised by an emphasis on economic independence and stability.
For Jamaica that comes in the form of reducing its runaway debt to 96 per cent of the country’s GDP — the first time it has dropped below 100 per cent in two decades — and building on the 2018/2019 growth rate of around 2 per cent. Hoping to stimulate investment, the Jamaican government is cutting its heavy tax burden, abolishing or phasing out several taxes at a cost to government of around JA$ 14bn. Jamaica also hopes to spend its way out of trouble, with an increase in government expenditure to around JA$ 800bn.
The tone of Jamaica’s budget may be fiercely independent (with Minister of Finance Dr Nigel Clarke telling parliament: “Economic independence means that we as a country are empowered to chart our economic destiny. We are a people of destiny, a nation of purpose.”) but the yawning gap between expenditure and revenue means a shortfall — one that forces Jamaica to borrow an estimated JA$ 160bn in the coming fiscal year.
In contrast to Jamaica, which hopes to kickstart economic advancement, Barbados focuses on “staying the course” — making slow but steady progress to ensure fiscal stability continues. But the nation arguably has more work to do than its Caribbean neighbours. Once given the dubious honour of having the third highest debt to GDP ratio in the world, Barbados is still one of the region’s worst performers with debt amounting to around 125 per cent of its GDP. The country’s economy contracted by 0.6 per cent last year and is expected to remain flat through 2020. Current GDP for the island is around BBD$ 10.2mn.
Barbadian Prime Minister Mia Mottley delivered a realistic, but optimistic, summary. Acknowledging the country’s “major challenges” in her Budget presentation she said: “We can’t recover a lost decade in ten months or even five years. I am not going to fool the people of this country.”
With stability high on the agenda, the Barbadian government is looking at a seven-year plan and hoping to reach its targets through stimulating international business and growing tourism. In sharp contrast to Jamaica, the Eastern Caribbean island is upping taxes, broadening the VAT base and increasing industry taxation. In addition, Mottley is focused on improving ease of doing business through liberalising exchange controls and streamlining bureaucracy. In the tourism sector, she is increasing VAT on accommodations and urging stakeholders to innovate into new niches such as medical tourism and gaming.
Common themes
What do the budgets of Saint Lucia, Barbados and Jamaica have in common? A focus on infrastructure, security and reforming the public service.
The fight against crime is an ongoing issue for all Caribbean nations. Disturbed by a rising tide of gun crime, Barbados is investing BBD$ 41mn in extra security equipment at its Bridgetown Port and looking to secure its borders with more equipment and canine patrols. For Jamaica, national security is also at the top of its agenda, receiving the largest slice of its JA$ 72bn capital expenditure budget. Just over JA$ 20bn will be given to upgrade military barracks, purchase new security equipment, renovate police stations and improve correctional facilities.
In Saint Lucia, citizen safety was one of the key tenets of the prime minister’s development plan with the government aiming to reduce crime by 45 per cent and repeat offending by 30 per cent by 2022. It intends to do this by investing in policing, the judicial system and rehabilitation services. EC$ 1.8mn will help fund a CCTV initiative in Castries, while infrastructure and human resources at the courts will be further strengthened.
Infrastructure is another concern for small island states and features significantly in both Saint Lucia and Jamaica’s spending in 2019. Almost a third of Prime Minister Chastanet’s development budget is going to the Department of Infrastructure, Ports and Energy — allocating EC$ 79.8mn for road repairs, bridges and maintenance projects. This marks Saint Lucia’s biggest public investment in infrastructure in over ten years.
Similarly, infrastructure is the second biggest expense in Jamaica’s capital budget which channels JA$ 18.4bn into road upgrades, construction of new highways and rehabilitation works.
With a focus on gaining efficiencies within the public sector, Jamaica and Barbados are embracing technology in their 2019 Budgets. The latter has made digitisation a priority for seven government departments so Barbadians can soon pay their taxes, renew their driver’s liences and passports, and pay fines online. Jamaica is launching an online pension service for public sector employees in addition to modernising the tax office services.
In Saint Lucia, the newly created Performance Management and Delivery Unit will be tasked with overseeing the implementation of the medium-term development plan and required to “build capacity in delivery across the public service through better planning, implementation and knowledge sharing”.
A global backdrop
While Barbados looks inward and Jamaica prioritises independence, Saint Lucia was keen to put its Budget in a global context. Prime Minister Chastanet warned of the nation’s fiscal vulnerability, saying: “Uncertainties in the economies of our source markets for tourism and investment could pose a threat to us and we are watching these developments closely.”
Notwithstanding global shocks, all three Caribbean states are predicting slow but steady growth in 2019. Saint Lucia is looking ahead to 3 per cent expansion in the coming year thanks to more activity in public and private sector construction and greater revenue from tourism. According to the prime minister: “This is going to be a very important year for our country. We must not allow ourselves to get distracted. After 40 years we must have learned by now that we are stronger when we work together, when we are all-in.”
