BASSETERRE, St. Kitts – THE alarming growth and size of the national debt precipitated much debate during this year’s Federal Budget debate, as reducing the debt to sustainable levels was laid as a common goal.
It is nothing new for concerns about the national debt to be raised during a budget debate. However, as the Federation prepares for tightening its fiscal policy against a backdrop of bleak economic outlook for the region, the issue of reducing the national debt has gained even more gravity.
At the start of 2009, the total stock of Public Sector Debt was recorded at EC $2.54 billion. During this year’s Budget debate, parliamentarians on both sides of the aisle acknowledged the size of the debt compared to the nation’s annual GDP and sought to discuss measures that could bring about its consistent reduction.
Leader of the Opposition Mark Brantley argued that, for too long, the nation has been told that the indebtedness is due to the ravages of hurricanes and external economic instability. While he acknowledged that these two factors may have contributed to the national debt, he asserted that they form a mere “snapshot of the real problems”.
“[The national debt] is not to be treated flippantly as though it has no relevance. It is a result of poor economic and financial planning from a government who has embarked on reckless spending on borrowing programmes....The ratio of debt to GDP should have been carefully monitored to have ensured that it did not exceed sustainable levels,” Brantley said.
The Concerned Citizens Movement (CCM) representative noted that with the annual worsening of the nation’s fiscal position and most of the national debt now being commercial, the hope of gaining debt forgiveness seems more distant. Brantley used very strong language to explain his view of the full debt situation.
“Government revenue is expected to fall this year and this albatross of debt continues to stifle our thrust forward, leaving the government little room to weather exogenous shocks. Indeed it must be known to all that SKN is perhaps one hurricane away from bankruptcy and it is only for the grace of God that we have been spared from calamity,” Brantley asserted.
Proclaiming that the nation’s financial management “cannot be business as usual”, the Opposition Leader outlined some of his suggestions, calling for a cooperative approach between Government and the Opposition.
Encouraging greater efficacy in tax collection and having restraints in government spending topped the list of responses. The Opposition Leader recommended that the Government can appoint a high level liaison officer to large projects and make sure a “realistic sense of timelines” on these projects are given. Government was also advised to pursue active debt forgiveness and a renegotiation of commercial debt at more favourable rates where possible.
“[Plans include] ensuring that all fiscal concessions to developers have hiring benchmarks attached so that our people are guaranteed employment at all phases of those developments. [We must adopt an] active and relentless pursuit of alternative energy options including wind, solar and geothermal. A unit should be jointly developed with the NIA to ensure that we reduce our dependence on fossil fuels by at least 20% in the next 5 years,” Brantley outlined.
He also suggested that wages, emoluments and benefits of Government Ministers should be rolled back and that the level of Government travel and the size of entourages, when travel is unavoidable, should be curtailed.
In response, Minister of Consumer Affairs and International Trade and former Minister of Finance Hon. Timothy Harris noted that when a financing gap develops between the nation’s expenditures and receipts, it must be responded to by loans or overdraft. Going forward, the aim is to bring the magnitude of the national debt under control through “decisive and sustained” action, Harris explained.
“We have to cut our garment according to our cloth and we have to balance our books. Deficit budgeting has to become a thing of the past. The measures outlined in the Budget are necessary elements in that belt-tightening exercise.
“We cannot carry on in a period of austerity as if we were in a period of boom. Until we bring our debt into sustainable levels, the level of growth required to take us to the next level of socioeconomic development will elude us.”
Harris prescribed expenditure reduction and growth stimulation in the medium term. In response to a suggestion to roll back the salaries of ministers, Harris said “the poor ministers will be made poorer” and that it will not directly reduce the national debt.
“This cut in ministers’ salary really will not affect the national debt in any recognizable way. And so I would accept this prescription as being worthy of consideration only from the vantage point of its symbolism of all enjoined in the burden of national sacrifice and then it must be all enjoined in the burden of national sacrifice and not just the ministers,” he said.
