Prime Minister and Minister for Finance Allen Chastanet on Tuesday listened intently as House opposition MPs commented on a motion to authorise the raising of $120 million through the issue of savings bonds at a maximum rate of seven percent. Not unexpectedly, the ensuing debate veered off in several directions, reminiscent of the weeks before the elections that had resulted in an 11-6 defeat for the St. Lucia Labour Party.
Earlier there had been a small demonstration outside the House, reportedly comprising individuals from former prime minister Kenny Anthony’s constituency opposed to the proposed DSH “Pearl of the Caribbean” development. No surprise that the project occupied opposition MPs for most of Tuesday morning. As for the Vieux Fort South representative, not until mid-morning did he take his seat among his opposition colleagues. As had been the case at an earlier House session, he failed to show up following the lunch break.
A meeting that most expected to conclude before lunch actually swallowed up several hours, thanks to opposition criticism of every word from the government side, often non sequiturs. In his turn, the prime minister said: “I am going to attempt to address some of the concerns and some of the issues brought up on the other side. I think the member for Castries East put it very well when he suggested we are raising the level of taxes as budgeted and then crying that the economy is not doing well following our allegations at election time that the economy was being mismanaged. The fact that the economy was being mismanaged is evident. The fact that he does not understand says a lot about why his party lost the election. Not only were the macro accounts going wrong in this country, the amount of debt and the financing of that debt in five years went from $100 million to $180 million.”
The prime minister defended his government’s proposed establishment of a sinking fund following the reintroduction of an airport charge. In the process he questioned the Leader of the Opposition’s sense of business. “That he could come to this House and suggest a sink fund should be used to finance social programmes because it is cheaper for the government,” said the prime minister, “is tantamount to telling the people to spend their savings. The purpose of having a sink fund is to show you are building wealth in your country and that, come a dark day, you won’t have go cap in hand begging in case of emergency.”
The prime minister offered an illustration: “When we had the situation with hurricane Matthew,” he recalled, “there was prior notice of a storm within days. It meant we did not have the funds to desilt the rivers and that people’s assets would consequently have remained exposed. When you have a sink fund and no alternative, you can temporarily take from it to pay for something.”
The prime minister cited the most recent CDB report on Saint Lucia’s economy: “Notwithstanding the improvement in recent fiscal performance, public finances are still on an unsustainable path. An initial assessment of the fiscal situation shows there is tremendous scope for improvement.”
As for Value Added Tax and the number of exempt items and “the basket of goods” that the opposition continued to celebrate, the PM noted it had cost the country greatly and undermined the VAT system.
“We are here celebrating the fact that we have the greatest number of non-VAT-ed items,” he said. “But that’s not something to celebrate. Any economist will tell you that you cannot use VAT to distribute wealth. You cannot use VAT to direct monies to your social programmes because what it does is distort the tax.”
The prime minister quoted the CDB as saying challenges on the expenditure side highlight the need for greater strategic planning to ensure resources are put to the most productive use. As for the debt situation, the CDB observed that Saint Lucia has “a high concentration short term debt”.
“I am saying there has been an appetite for bonds,” the PM said. “But I am not happy that the appetite for bonds is at 7 %. Don’t believe I am jumping around celebrating. However, the fact is we have the ability now of taking $60 million and converting those short-term instruments into bonds. That is to give some predictability; some stability to the government. You were turning over half of your debt every year and the problem was you saw nothing wrong with that.”
The prime minister also touched on some of what his government had inherited, underscoring along the way that he was trying to work with a budget prepared by his predecessors, with gross inadequacies.
“Since we took office we have had over $63 million in requests from the ministries for additional funding,” the PM said. “In the Ministry of Infrastructure one million dollars is allocated for the maintenance of roads. And that, it seems, has been a practice for a while. By all the assessments we need at least $30 million to maintain our roads. If you want to know why our roads are in the condition they’re in, it’s because they have not been properly maintained. I am sorry that Mr. Robert Lewis is not here. The allocation for his former Ministry of Education? One million dollars for the maintenance of our schools.”
Additionally: “Fourteen-and-a-half million dollars spent on a jazz festival but at the same time you reduce the tourism budget to $35 million. Ministry after ministry and statutory body after statutory body . . . all they have is debt and a budget that does not come close to meeting their needs.”
The PM emphasised the difference between what he referred to as ‘Labour Party policy’ and that of his United Workers Party. “This side believes we have been strangling the country; not encouraging growth in the private sector; taking away the ability of regular citizens to take care of themselves. That is what the VAT has done; that is what government expenditure has done. We believe on this side in lowering the level of taxation; we believe if we put incentives in place to encourage investment in this country we will see the economy grow, and, in growing the economy, even though the rate of taxes goes down, there is the likelihood that you see an increase in the amount of tax revenue.”
The PM said the sinking fund is a safeguard in the eventuality the predicted outcome is not realised. If all goes as planned, he said, the sinking fund monies can be used to repair schools, roads and allow us to do the other things that must be done. “When the CDB says we are on a path of unsustainability it means we have gotten to a point where we cannot afford road repairs, far less build new roads. We have to make some difficult decisions.”
He talked of an urgent need to make the Dialysis Unit fully operational: “I went there recently on a visit. The room is ready; it has been ready for two years. The water treatment system is ready; the entire system is wired. What’s missing were the dialysis chairs. All it would take was a cheque of $3 million. Once that cheque was cut it would have taken four months for those chairs to be here and operational.” Directly addressing the Leader of the Opposition, the PM said: “Don’t try to confuse the people. The room was ready; it could have been operational a long time ago.”
The prime minister also addressed the Citizenship by Investment Programme and its relationship with the controversial DSH project. He further referred to a letter he had written criticising his predecessors for placing Ernest Hilaire in charge of the CIP. All of that in our next issue.