King presents 1.3 billion-dollar budget

Prime Minister Stephenson King delivered the 2011/2010 on Thursday April 14 in the House of Assembly under the theme “Creating a Safe and Secure Environment and Rebuilding Communities while Transforming the Economy to Attain Sustainable Development.”

The budget for this fiscal year is estimated to be 1.3 billion dollars.  The exact figure is $1, 337, 807, 300.

In his introduction the Prime Minister revealed, “While the recession was still strong in the rest of the OECS member countries, all of which experienced negative growth in 2010, the economy of Saint Lucia grew by 4.4 percent in 2010 compared to an average of minus 3.2 percent for the OECS as a whole. The Eastern Caribbean Central Bank estimates that Saint Lucia will grow by 5.4 percent this year. Our own forecast is a more modest 4.5 percent, as we concentrate on the implementation a job-creating growth strategy.”

In lieu of a new Gross Domestic Product (GDP) methodology, King announced St Lucia’s Debt to GDP ratio has decreased.  Said King, “The new methodology recognizes the changing structure and characteristics of the ECCU economies, expands the coverage and provides a more accurate measure of economic activity in the various countries.  There are several implications of this development including an improvement in the various fiscal and debt ratios. For example, as a result of the higher value of GDP, Saint Lucia’s public debt to GDP ratio is 64.8 percent at the end of 2010 instead of the figure of 75 percent indicated by the less accurate GDP series.  The real GDP of Saint Lucia grew by 4.4 percent in 2010 compared with a contraction of 1.3 percent in 2009.”

The PM went further to state St Lucia’s growth was driven by the construction and tourism sectors supported by the distributive trades and the real estate sector.    However, the PM noted growth in the last quarter of 2010 was stymied by Hurricane Tomas. According to the United Nations Economic Council for Latin America and the Caribbean the estimated cost of losses and damages from Tomas amounted to $907.6 million.

The main contributors to the growth were, “tourism which grew by 8.2 percent compared to a decline of 2.6 percent in 2009; construction which grew by 20.5 percent compared to a contraction of 23.1 percent in 2009 and the distributive trades which grew by 14.5 percent compared to a decrease of 13.1 percent in 2009.”

According to the PM, tourism recorded strong growth in 2010 evidenced by the record increase in the number of stay over visitors (305,937).  He attributed the increased arrivals from the US, Canadian and German markets.  However, there has been a decline in arrivals from the UK and the Caribbean.  For the UK, the PM estimates weak economic conditions, volcanic ash which interfered with flights and the introduction of the passenger levy accounted for decreased arrivals.  Rise in airfares and weak economic conditions accounted for the decrease in Caribbean arrivals.

“Following a decline of 23 percent in 2009, construction expanded by around 20 percent in 2010, driven mainly by public sector investment and supported by private sector expenditure,” said the PM.  Major public sector projects include the new national hospital, rehabilitation of the east coast road, the post-Tomas disaster recovery programme, the senior citizens home, the meat processing facility, repairs and rehabilitation of schools and “various disaster management projects throughout the country.”

Agriculture took a beating from drought early in the year and Tomas towards the latter part of the year.   “Banana production fell by around 31 percent to approximately 26,000 tonnes, resulting in a reduction in export earnings by 27.2 percent, to $41.0 million.”

Moving to central government’s fiscal operations, the PM said, “When we examine Central Government fiscal operations, preliminary estimates suggest that the overall fiscal deficit grew from 4.0 percent of GDP in 2009/10 to 5.5 percent in 2010/11. The higher deficit led to a rise in the debt to GDP ratio from 63.8 percent in 2009 to 64.8 percent in 2010.  The larger deficit resulted from growth in total expenditure of 11.6 percent to an estimated $1,032.7 million while total revenue and grants grew by 6.4 percent to $858.3 million.”

Additionally, St Lucia recorded a 17.5 percent growth in capital expenditure (approximately $283.4 million).  Capital expenditure grew by 9.7 percent ($753.8 million).  Current revenue collections rose by 4.7 percent ($798.5 million).

The PM projected the economy will grow in 2011 driven mainly by tourism and construction.  Public sector projects include rebuilding the St Jude’s Hospital and “projects associated with post-hurricane reconstruction which will account for much of the activity in the construction sector.”

In terms of the government’s strategic priorities, “many of the strategic priorities announced in previous years, will continue to be relevant this year and, at least, into the medium term.”

The PM announced the government’s first priority is “to reduce crime and make St Lucia safe for everyone.”  The strategy includes “improving the capacity of the police and security personnel and examination of existing legislation with a view to strengthening the legal and judicial process.”

As part of the crime-fighting strategy, the government intends to increase resources and the effectiveness of social programmes, especially those targeting the youth and inner-city communities and vulnerable groups.

Another strategic priority for government is the reconstruction and re-engineering of the country following Tomas’ devastation.

The PM announced government is going ahead with the Hewanorra International Airport Re-development project.  Said King, “It is absolutely clear that based on the operational deficiencies, existing airline business, future growth and the reliance of the country on tourism, that this project is well grounded and developed.  An airport development charge was introduced that will finance this development project.”

The St Lucia Air and Sea Ports Authority (SLASPA) is negotiating a joint venture initiative for the build-out of the Jeremy Street Development at the Northern Wharf as is consistent with the National Vision Plan for the re-development of the Castries waterfront and according to the PM, “will serve as an added incentive for cruise lines to visit St Lucia.”

Ongoing and planned public sector projects include: the new national hospital, St Jude’s Hospital reconstruction, reconstruction and rehabilitation of infrastructure, feeder road programme, construction of the national meat processing facility, constituency projects, Government of St Lucia Financial Center and Government of St Lucia Hypermart Building.

To revitalize the agricultural sector government will provide assistance to banana, plantain and vegetable farmers, reinstatement of farm roads, clearing of main and lateral drains, setting up drainage systems and repairs to agricultural building infrastructure.  Additionally, a youth agri-entrepreneurial project and a national standards and certification program is in the pipeline.  A total of EC$15, 353, 047 is budgeted for those projects.

In the area of private sector development, manufacturing and consumer affairs the government intends to implement a reform strategy completed by the International Finance Corporation, reform the Fiscal Incentives Regime, complete the Private Sector Development Strategy, develop a National Services Policy and Strategy, the implementation of the National Export Strategy and to pass the Consumer Protection Bill.

In health care the government plans to advance universal health coverage, establish quality management systems for health care facilities and the establishment and upgrades of health care facilities.  EC$23.7 million is earmarked for St Jude’s reconstruction.  The Dennery Hospital will be converted to a polyclinic and another polyclinic will be established either in Micoud or Vieux Fort.    The national hospital is 51 percent complete and will most likely construction will be finished by April 2012.  The completion date had to be postponed due to Tomas.  Upon completion, Victoria Hospital will be transformed to an urban polyclinic.

EC$13 million has been allocated to retrofit schools worst affected by Tomas.  Initiatives in this sector include increasing the number of bursaries awarded to students of the Sir Arthur Lewis Community College and post secondary school programmes.  One hundred new bursaries, totaling half a million dollars, will be offered.  EC$1 million is set aside for the Education Access Fund to ensure that students from impoverished families and those who were affected by Tomas can writes as many CXC/CAPE subjects possible.

Under the Basic Education Enhancement Project (BEEP) funding to the tune of 37.9 million from the Caribbean Development Bank will be used to upgrade the learning environment of primary and secondary schools.  The Education Enhancement Through ICT Project costing EC$16.2 million will be implemented.  EC$190, 000 will be used on consultations geared towards upgrading SALCC to a university college.

In social safety net reform the government intends to reform the largest Safety Net Programme, namely, the Public Assistance Programme.  Likewise, government intends to extend the After School Programme, HOPE, BNTF and Koudmain Ste Lucie Programme.

The government has allocated EC$3 million to the upgrading sporting infrastructure.

In housing expansion and development, the government promises affordable housing for low and middle income households.  Through the Housing Assistance Programme it is expected that assistance will be provided to households adversely impacted by Tomas.

Addressing crime, the PM said the re-organization of the Royal St Lucia Police Force has been a success.  Further, his six-point action plan to combat crime which was announced to the nation on February 11 has made significant progress.  He especially highlighted the police’s Operation Restore Confidence and hailed it as a major accomplishment.

For water sector reform, the government outlined its new strategic direction, namely operationalization of the Water Policy and the Water & Sewage Act, full operation of the Water Resource Management Agency and the Water and Sewage Commission and the reorganization and revitalization of the Water and Sewage Company.

Focusing on the youth, the PM revealed in introduction of a National Youth Corps Programme, a Sign-Up Initiative, the commencement of work on a juvenile rehabilitation for boys and girls.  The PM affirmed government’s commitment to ensure every child has access to a computer.

Government intends to institute a National Competitiveness and Productivity Council aimed at promoting and monitoring productivity growth which will be funded by the Inter-American Development Bank to the tune of US$500,000.

EC$10 million is allocated for constituency development.

In response to the fuel hikes on the world market, the PM admitted there is little anyone can do to cushion the blow on the economy.  King revealed government subsidizes the 20lb gas cylinder by $10.  The price of that cylinder is now EC$43.16.  He promised government will further subsidize LPG gas by EC$5.  The EC$15 subsidy will be reviewed after three months.

Said King, “Any policy decision made by the Government has implications; whether it is translated to reductions in revenue, increases in expenditure, higher public debt or distortions in prices. Placing a cap on fuel prices, given the escalating import prices, would result in a dismantling of the pass-through mechanism and expose Government to indeterminate losses of revenue. Significantly lower revenue could result in Government cutting its expenditure and/or having to increase borrowing to finance the deficit. Government can ill afford significant reductions in revenue at this time, given the tremendous pressures in providing resources to fight crime, rebuild the battered infrastructure after Hurricane Tomas, provide the social safety nets necessary for the poor and vulnerable and strengthen provisions, in particular, areas such as healthcare.”

Tax reform is on the government’s agenda.  The government plans to implement Value Added Tax by April 2012.  A National Security Levy will be imposed on selected items imported into St Lucia.  King also proposed a 50 percent increase in the tax on cigarettes.  With the proposed increase, the total tax on cigarettes will be 150 percent.

The allocation of expenditure is as follows: EC$763.7 million for the Economic Service Sector (of that figure, $302.2 million is for Debt Servicing, retiring benefits and contingencies); $36.1 million goes to the Ministry of Agriculture, Forestry and Fisheries; $18.5 million will go to the Ministry of Commerce, Industry and Consumer Affairs; $138.6 million for the Ministry of Communications, Works, Transport and Public Utilities; $435.8 for the Ministry of Finance, Economic Affairs and National Development; $47.8 million goes to the Tourism Ministry (of that number $40 million is for marketing and promotion); $40.7 million for the Ministry of Social Transformation, Youth and Sports; $198.6 million for the Education and Culture Ministry; $155.9 million for the Ministry of Health, Wellness, Family Affairs, Human Services and Gender Relations; $127.2 million for the Attorney General’s Chambers and the Ministry of Justice and the Ministry of Home Affairs and National Security; $42.8 million for the Office of the Prime Minister, Ministries of the Public Service, Human Resource Development, Labour, Information and Broadcast; $8.9 million for the organs of parliament (Office of the Governor General, Legislature, Services Commission, Electoral and Audit Departments).

In order to control public expenditure, the government has announced a freeze on the number of persons in the public sector, continuing work in the operational and efficiency review of the public sector, raising the current student-teacher ratio and continuing work on an objective and transparent mechanism for social assistant.