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Four current issues of Governance: Fiscal, Housing, LIAT and Investment


Fri, Oct 5, 2012

by Dr The Hon. Ralph E. Gonsalves, Prime Minister of St Vincent and the Grenadines


Over the past few weeks various Ministers and public officials have been highlighting in their speeches, commentaries in the electronic and print media, and various reports, the government’s work programmes and on-going public policy outputs. In this article, I address four current issues: the fiscal condition of St Vincent and the Grenadines; the housing and land programme; the renewal and expansion of LIAT’s fleet of aircraft; and investment. I consider that the public ought to be appropriately informed.{{more}}


The fiscal operations of the Central Government during the first eight months of this year (January to August, 2012) improved when compared to the corresponding period in 2011. This improvement is reflected in the reduction in both the current and overall deficits; a 5.9 per cent increase in current revenue and a 5.3 per cent decline in current expenditure.

However, our fiscal condition is still very challenged. Our current revenue collections, though higher than in 2011, are less than what we expected to collect; and in current spending though less than last year, and less than what was budgeted, still needs to be contained, especially in certain areas, without in any way diminishing, significantly or at all, the delivery of public goods and services. Better prioritising,

lifting efficiency, and reducing/eliminating waste in public expenditure will no doubt assist in such expenditure containment.

Let us look at some of the details of the foregoing summary assessment. On the current revenue side, revenue collections for the first eight months of 2012 amounted to $305.25 million, an increase of $16.9 million or 5.9 per cent over the comparable period for 2011. However, this is $20.6 million or 6.3 per cent less than what was budgeted for the first eight months of 2012. Revenue receipts from income tax, corporation tax, and withholding tax showed commendable increases. Revenue from “Taxes on International Trade” increased modestly by 3.7 per cent on a base of a 7 per cent rise in the value of merchandise imports during the period under review. Taxes on domestic trade increased by a commendable 18.3 per cent during the January – August 2012 period when compared with the same months in 2011. Strong performers in the “domestic trade taxes” category were Stamp Duty (23.9 per cent increase), Excise Duty (27 per cent increase) and VAT (19.4 per cent increase). The higher tax receipts from both international and domestic trade are reflective of improved tax administration and a mild growth in the level of domestic economic activity as intimated by the above-mentioned increase in merchandise imports and vatable trade during the period under review. Revenue from Non-Tax sources declined significantly by 24.4 per cent: For example, declines were recorded in collections from Merchant Shipping (International) fees and absence of in-flows of monies for disaster relief and budget support, as there was in 2011.

On the current expenditure side, there was a decline in spending of 5.3 per cent or $17.7 million compared with the same eight months in 2011. I is noteworthy that despite the non-payment of the 3 per cent due to public servants, personal emoluments (salaries) increased by 2.7 per cent largely because of the in-built increases of “increments”. Interestingly, too, expenditure outlays on the interest paid on the public debt fell by 5.6 per cent, mainly due an 8.8 per cent fall in the domestic component of the debt, resulting chiefly from the reduction of the overdraft limit to $35 million along with more favourable interest rates for Treasury Bills issued by our government on the Regional Government Securities Market (RGSM). Declines in spending on Utilities (23.6 per cent decline), Maintenance Services (9.6 per cent decline) and Supplies and Materials (3 per cent decline) were among the spending curbs which included, too, transfers and subsidies which were better targeted in their delivery.

So, for the first eight months of 2012, the current deficit fell from $46.78 million (January to August 2011) to $12.04 million, a commendable effort. But we are still not out of the woods yet!

On the capital side, capital revenue and grants fell from $32.27 million to $9.3 million largely due to a huge fall in capital grants (from $23.8 million to $4.53 million). Capital spending by the Central Government for the first eight months of 2012 totalled $19.21 million or 33.9 per cent less than for the same period in 2012. Of course, additional public sector investment continued through state enterprises; these are outside the Central Government’s numbers. Overall, the total deficit (capital and current) for the first eight months of 2012 amounted to $21.9 million, or $21.6 million less of an overall deficit than the $43.56 for the first eight months of 2011.

The on-going global economic crisis, the fall-out from the CLICO-BAICO debacle, the sluggishness of the regional economies, and the damage/loss as a consequence of natural disasters and Black Sigatoka, have stalled domestic economic growth and thus hampered better revenue performance. Things economic are tentatively improving but continuing challenges abound. Continued prudence and enterprise are required.


Currently, enterprise and stimulus are on offer in the on-going housing and lands programme of the government. At this very moment, three new initiatives are underway: Accelerated distribution of housing lots; the repair/rebuilding of 150 homes as part of the continuing programme in the post-Tomas, post-April 2011 flood period; and the further construction of low-income homes at Green Hill and Clare Valley.

About 140 housing lots have been recently sold at highly-subsidised cost to low-and lower-middle income persons in North Windward. A similar distribution of over 50 lots in North Central Windward, 100 or so lots in Barrouallie, and 350 lots in North Leeward is shortly to take place. Others are in the offing as the Land Surveyors conclude their work.

The General Manager of the Housing and Land Development Corporation (HLDC) Mr Morris Slater has advised me that the 150-housing repair programme has started; and so, too, the construction of 20 houses at Green Hill and 20 at Clare Valley. He has advised, too, that when those programmes are at full throttle, by Christmas 2012, some 1,000 persons would be employed. Already 70 workers are at Green Hill; 112 are being recruited immediately for Clare Valley; and 120 workers, so far, have been engaged on the housing repair programme.

Further, the CIBC-FCIB has reduced its mortgage lending rate for housing construction to 5.99 percent; Scotia Bank is at 6.99 percent; Royal Bank is at 7 percent. I had called for lower lending rates; I am still calling for even lower rates from the Banks. Meanwhile, the Credit Unions and other domestic financial institutions are actively lending in increased sums for housing, consumption, and investment.


On July 20, 2012, at a Shareholder’s Meeting of LIAT, chaired by the Prime Minister of St Vincent and the Grenadines,

a decision was taken on the renewal and expansion of LIAT’s fleet of aircraft. Immediately, LIAT is purchasing six new 50-seater aircraft to replace the aging Dash-8 300 aircraft. Formal negotiations have been entered into with the manufacturer/supplier of these six new planes.

The cost of these aircraft is US$105 million or EC$283 million. Of this amount, the shareholder governments are required to inject EC$78.6 million in the financing arrangements over a three-year period. St Vincent and the Grenadines’ share of this is EC$7.8 million, in accordance with its shareholding size. Of this amount, $3.8 million is to be paid now, $3.2 million in 2013, and $0.8 million in 2014. I intend to finance this year’s portion through funds from Petro Caribe which are at hand. Over the same period, Antigua and Barbuda, Barbados, and now Dominica will contribute accordingly. We expect three of the six aircraft to be delivered in 2013, another three in 2014.

LIAT’s shareholders are committed to expanding the fleet in two phases: first, 70-seater turboprop aircraft to enhance airlift from Puerto Rico and Dominican Republic and to go to Jamaica; this specific decision will be taken within the next four or so months; and secondly, to search for a strategic partner to link with LIAT for a regional jet service to Central America, Fort Lauderdale and New York. All of this expansion is in tandem with the construction of the Argyle international airport.


There is a pick-up in private sector investment particularly in tourism. There is evidence of this at Buccament, Canouan, Bequia, and Petit St Vincent. We are hopeful about tourism and other investment from Qatar. We continue to explore and advance the positive leads for investment in geothermal energy which will be a significant game-changer for St. Vincent and the Grenadines. And three medical schools have been established. The plans for the public-private investment for a new city at Arnos Vale are being actively pursued. Amajaro is investing in the cocoa industry; so, too, Vincentian farmers. Investment in agriculture is rebounding. So, too, private domestic investment in tourism, light manufacturing and services.

Public sector investment has been significant even though central government capital investment has slowed. Public sector investment in electricity, water, and airport construction through public sector entities has been commendable. Central government capital investment especially through the Caribbean Development Bank, the World Bank, the European Union, and Petro Caribe/ALBA are on the verge of major expansion. The CDB and World Bank financing of post-disaster projects, the European Union financing of the development of the Health Sector (through the 10th EDF) and economic diversification under the Banana Accompanying Measures (BAM), are all underway. So, too, the Petro Caribe/ALBA investments in a string of projects designed to reduce poverty and enhanced economic development. Meanwhile, capital investments by the Central Government continue, especially in road building, education, national security, and sports.


The government of St Vincent and the Grenadines has a compelling development narrative which is many-sided, yet focussed. Our country’s resources of land, sea, the environment, and people are at the core of our developmental narrative. So, too, are the resources of leadership, sovereignty and independence, and good governance. And at the central government/public sector level, we apply carefully the twin principles of prudence and enterprise in a coherent whole. We in the ULP government have a people-centred vision, a progressive philosophy of social democracy applied to our circumstances, a focussed economic strategy of building a modern and competitive post-colonial economy, a socio-cultural framework for the further ennoblement of our Caribbean civilisation, coherent and development public policies in all spheres, and corresponding practical programmes for implementation in the context of international solidarity and deepening regional integration.