BASSETERRE, St. Kitts - PRIME Minister Dr. Terrance Drew has confirmed that the Government has been operating in the red when it comes to its budget, and there has been a dependency on the revenues from the Citizenship by Investment Programme to function.
Over the last several years, the Team Unity Administration, including the Minister of Finance, repeatedly disclosed that the country has been operating with a surplus, while noting that it has been “fiscally prudent” with its spending. That has resulted in a number of “double salary” being paid to public servants.
Now, Prime Minister Drew is suggesting that the finances might not have been as rosy as the pictures painted by the former administration.
While making an appearance on Freedom FM’s ‘Issues Programme’, Dr. Drew reminded that his administration took over a country that was in a budget deficit, stating “it means that more is going out than was coming in”.
“It means in other terms that we are in the red when it comes to our overall funds,” the Prime Minister lamented.
The negative operating budget could be a challenge for the new St. Kitts-Nevis Labour Party Administration as it plans for the 2023 Fiscal year.
Compounding the problem for the Government is the rising inflation.
The Government is still providing assistance for a number of social programmes coming out of the pandemic, and it is still facing food challenges and fuel subsidies targeted to ensure that the rising costs internationally are not passed on to the local consumers.
Prime Minister Drew disclosed that the Government is covering a monthly surcharge of approximately $9 million to $11 million for SKELEC.
“We have decided that that has increased somewhat and we have decided somewhat that we will pay it so that this cost will not be passed on to the people. But SKELEC at this time, as a company, needs a significant financial injection from the Government in order to function. And that is to make sure that the high cost is not passed on to our people, especially during this COVID time, “ explained Dr. Drew.
Providing further details on the challenges at the electricity company, the Prime Minister revealed that his Cabinet has purchased two new operating generators to bolster those with the stock.
In September, the company encountered challenges with its systems after two generators went offline.
The new generators will not be available immediately for shipping as they have to be made, and they are costing the Government $70 million.
“You know that SKELEC had significant issues maybe a month or two ago, [where] the generators brokedown. These are the old gensets, some of them probably are thirty something years old which means it is time to change them out. Each one of them cost $35 million - I am talking about real money. And we need about two of them just to maintain our baseline energy requirement. We will invest in it because you can’t build a country if you don’t have energy, and we don’t have sufficient energy at this time,” the Prime Minister emphasized.
All of this spending comes at a time when governments are being warned to limit spending as the rising inflation is expected to hit the pockets of consumers, limiting potential travel from various source markets, and then there is the expected threat of a recession and rising interest rates that could stymie spending.
The International Monetary Fund (IMF) has called on CBI countries, including St. Kitts and Nevis, to limit spending from its economic buffers as bleak pictures are painted for 2023.
They are projecting that the Federation would see slower economic growth for this year due to the inflation challenges and possible fall-off due to a drop in tourists arrivals.