2021 fiscal year will be a challenge – Finance minister
Lawmakers have approved Estimates of Revenue and Expenditure of over $1.2 billion for the 2021 fiscal year, a year that finance minister Camillo Gonsalves said is sure to be a challenging one due to uncertainties surrounding Covid-19 and La Soufriere volcano.
The approval of this year’s Estimates came late Wednesday evening, following debate from both sides of the House.
“The capital Estimates reflect the fact that we have to continue to keep the people of St Vincent and the Grenadines safe
on the healthcare front, we have to continue to help them be strong; the vulnerable be strong on the social protection front and we have to keep the economy of St Vincent and the Grenadines both ticking over in the present and preparing for prosperity in a post pandemic future,” Gonsalves said in his presentation of the Estimates this week.
He said a huge variable in this fiscal year is that there is no certainty of the impacts of the COVID-19 pandemic on the local, regional and international economy.
The question of when this country will return to normalcy is up in the air as a result of the pandemic is coupled with the uncertainties of the ongoing effusive eruption at the La Soufriere volcano, which also has the potential to escalate into an explosive eruption, causing more economic and fiscal implications.
These are among the reasons cited by the finance minister when speaking of the challenges that arose in the compilation of this year’s Estimates.
For 2021, government has put forward an EC$1,212,601,578 fiscal package – a 2.2 per cent increase over 2020’s approved budget.
That figure comprises recurrent expenditure inclusive of amortisation and sinking fund contributions of EC$895,199,329 and capital expenditure of EC$317,402,250.
Financing of the 2021 Budget is expected to come from current revenue of EC$647,386,000 and capital receipts of EC$565,215,575.
Gonsalves said on Wednesday that the Supplementary Estimates of EC$67.7 million, which were brought to the House on April 7 last year, have been reflected in the revised estimates of 2020 column of this year’s Estimates of Revenue and Expenditure.
The 2021 current expenditure exclusive of amortisation and sinking fund contributions amounts to EC$698,125,511.
“Consequently…and this is important for us to note and to discuss, there is a projected current account deficit of $50.7 million in these estimates,” the finance minister said, adding that 2021 current revenue is roughly EC$647.4 million – 4.8 per cent or EC$32.7 million less than the amount budgeted in the previous year.
“Again, we are projecting lower current revenues for 2021. The deterioration in revenue performance in 2021 is reflective of the slowdown in real economic activity that we project for the year, and the tax policy stance taken as an impact of the pandemic,” Gonsalves said.
He told lawmakers that revenue from tax sources is expected to contribute EC$554 million to the Consolidated Fund in 2021 while non-tax revenue is expected to gross EC$93.4 million.
The finance minister added that tax revenue is expected to fall by more than 5 per cent as major tax types are expected to contribute in the following ways – “taxes and income and profit is expected to fall by $7 million or 4.3 per cent; taxes on goods and services expected to drop by $7.2 million or 3.7 per cent; taxes on international trade and transactions, we project to fall by 7.8 per cent or $13.7 million”.
Gonsalves said however, that a conservative projection for revenue can be seen on the recurrent side in 2021, which is largely due to the uncertainty of the COVID19 pandemic and the fact that the country is starting 2021 in a weaker position from a revenue standpoint, than it did in 2020.
As at December 31, 2020, the total public debt amounted to EC$1,871,029,887 – 20 per cent more than the total disbursed outstanding public debt for the same period in 2019.
The total domestic debt amounted to EC$579.6 million at the end of 2020 – a 17.2 per cent increase when compared to the same period in 2019.
The external debt at the end of 2020 stood at $1.29 billion – an increase of 9.8 per cent when compared with external debt as of the end of 2019.
“…Given all of the uncertainties and all of the vagaries of the current year, we are cautiously optimistic that we have struck the correct balance between caution and prudence and enterprise that will help St Vincent and the Grenadines to continue to be strong today and to be prosperous tomorrow,” Gonsalves said.
This week’s passage of the Estimates of Revenue and Expenditure precedes the 2021 Budget Presentation and Debate, which is slated to begin on Monday, February 1.