Here’s a release dated 30 November,2 011, and issued by the Eastern Caribbean Securities Exchange (ECSE): “Holders of the Government of St. Kitts & Nevis 10-year bond, trading symbol KNG101112, have been advised that the Eastern Caribbean Central Securities Registry (ECCSR), Paying Agent for the Bond, is unable to make the 18th interest payment on the bond, which became due on 25 November, 2011, due to non-receipt of the necessary funds”.
Now yesterday, 01 December, 2011, the Prime Minister’s Office issued a press release (No.762/2011) quoting the Ministry of Finance as saying that “the unavailability of sufficient funds (my emphasis) to service all of the maturities falling due on debt that is eligible to be restructured means that the Government is not able (my emphasis) to make the coupon (interest) payment that fell due to bond holders on 25 November, 2011”.
However, in his press conference on Wednesday, 30 November, 2011, the Prime Minister said that“…we have been advised that until negotiations are completed and the final position is taken, we will hold on the payment of interest (my emphasis) on these bonds until the final decision and agreement is made”.
He didn’t say that he didn’t have the money to pay the bond holders. Instead, he said that he chose not to pay them.
Did he lie on Wednesday? Did he (to use the term coined by popular calypsonian ‘De Unexpected’) give us ‘de Dougie’? In the absence of any evidence to the contrary, I think he did.
If we put aside the political partisanship, the candy coating and the ostrich mentality, we’ll see the plain truth: the Government is in default with creditors; it started defaulting in 2008; it’s choking fiscally and financially; and the effects are being felt all over the economy and society.
The Prime Minister has said that ours isn’t the only country that’s struggling. What he didn’t say (because he takes no blame for anything) is that our present fiscal and financial problems were caused, for the most part, by poor leadership and bad policies right here in St. Kitts & Nevis.
We can’t blame the U.S. mortgage crunch for the loss of well over $100 million by citizens of our Federation in the British American fiasco, when the catastrophe could’ve been averted by proper regulations protecting investors. Imagine how much good that $100 million plus could be doing in our economy right now.
Nor can we honestly blame anything global, or natural, or the closure of the sugar industry, for the $3 billion national debt, for the 200% debt-to-GDP ratio, or for the $200 million arrears.
Look at the money that has gone up in smoke over the years on the sugar industry, and still going up in smoke on White Gate, La Vallee, the Ports Authority, NHC, roads, fences, electricity generators, excessive travel, accommodations and transportation overseas, overseas offices, no bid contracts, kickbacks, sweetheart deals, cronyism, advisers, an oversized public sector, renting property all over the place for Government offices, executive vehicles, widespread inefficiency, etc.
Nobody in America, England or Greece did that to us, so let’s not blame them. And no hurricane did it to us, so let’s not blame God either. We know where the blame must lie. And we must shout it out.
Further, he stood on a public platform in 2004 and with total disrespect for himself, for the office of Prime Minister, for the hallowed traditions of the Labour Party, or for the people of this nation, screamed: “national debt, me arse!” Then later on he stood in Parliament and bragged that if he had to do it over again, he wouldn’t change a thing.
With arrogant, boorish and inept leadership like that, and the poor policies that will come from such leadership, what else can we expect?
Nine months ago, and even before, I said publicly that the ‘haircut’ would come and that Government bond holders and other creditors could lose 25% on their investments. He responded by saying that I was talking nonsense and that I was trying to destabilize the country.
But now the truth is emerging. And people are seeing and feeling it.
The Government faces three options, all of which have been discussed by the IMF (see its reports) and decision makers. And they’re not mutually exclusive.
First, it can swap land for debt.
Government’s major creditors are the St. Kitts-Nevis-Anguilla National Bank Ltd., the Social Security Board (SSB), and holders of Treasury Bills and Bonds.
It’s not the best idea in the world for the Bank to own a thousand acres of land, because land isn’t a liquid asset. However, 1,000 acres of land is better than nothing, and certainly better than a loss; and if the swap can be effected at, say, $150,000.00 per acre, then the Government’s debt to the Bank can be reduced by $150 million in quick time.
Alternatively, the land could be put into a land sales company (which has also been discussed) in which the Bank would have an amount of shares equaling the value of the debt being swapped.
Note, however, that the land would have to be independently valued to satisfy both the International Financial Reporting Standards (for accounting and auditing purposes) and the Eastern Caribbean Central Bank, whose approval would be required anyway.
But what happens next would be very important, because the Bank would be eager to have the land sold so that it might quickly recoup as much of its money as possible.
At the same time, the process would have to be pursued in tandem with a productive land use policy by the Government, which policy must recognize the land, not just as an asset, but also as patrimony.
And not just as an asset for homes, and commercial and industrial facilities, but also, critically, for food production. It’s a burning shame that we import so much food in ‘The Fertile Isle’, and that we’ve lost the taste for who we are.
In addition, the Banking Act should be amended to prevent a bank or any other financial institution from lending money to the Government, or to allow it to do so only at a premium, if the debt-to-GDP ratio exceeds, say, 80%.
Likewise, if the SSB is to get land in a swap for debt. However, any disposition of land to the SSB must be effected within the framework of a more progressive and practical investment and asset management policy by the SSB.
Also, the law needs to be amended to allow the SSB to invest more funds abroad, whether in the region or beyond, and also to prevent it from lending money to the Government, or allowing it to do so only at a premium, if the debt-to-GDP ratio exceeds, say, 80%.
Finally, bond and even treasury bill holders could be invited to the swap, but only, in my view, if they’re citizens of the Federation.
The second option is debt restructuring, in which case the debt still exists but payment schedules are extended and interest rates are reduced, with the creditors taking a hit, but hoping in the long run that they might be able to recover, even if not totally.
This is part of the discussion currently taking place between the Government and the bond holders. And it could be extended to treasury bill holders who, in time, might be asked to convert their bills (short term) to bonds (long term).
The third option is debt write-off, in which case the creditors would forgive a portion of the debt. In such a scenario, the Government might want to issue bonds for the rest of the debt.
Again, the local banks (and the SSB) would take a hit, but the Banking Sector Reserve Fund (BSRF) that’s been set up by the IMF under ECCB management would be used to help out if liquidity challenges arise. Also, new shareholding investments might take place, especially if careful analysis came up with a very attractive share pricing. And that could help with liquidity also.
As well, a stimulated economy means more jobs and greater contributions into the SSB fund. So recovery is probable.
This alternative allows for a quick and significant drop in the Government’s debt and its debt-to-GDP ratio. And provided there are proactive and sensible policies in place, and transparency and efficiency are practised, the Government might find the breathing space to improve the quality and reliability of its services, reduce some charges and taxes, stimulate economic activity, and enhance the investment climate.
There’s a fourth option which can be used to generate more revenue for the people, and set a decent, healthy tone for governance: the friends of leadership need to be stopped from robbing the public purse. One of them is making millions annually but isn’t paying 5 cents in company tax or VAT. Others are getting duty free privileges when they don’t deserve them, or getting deferrals and exemptions from taxes and other charges when there’s no basis for that in law or conscience.
And finally, there’s actually a fifth option, this one not to bring down debt directly or upfront, but to stimulate the economy: SIDF money, which can be used to provide grants for the construction and upgrade of national security and other government facilities and programs. This would trigger a construction boom and provide jobs, and, at the same time, help to enhance the quality of service of the relevant government departments and agencies.
A lot of this money needs to go, as a matter of highest priority and government policy, towards human resource development; towards scholastic and technical training in science and technology; towards the trades; towards growing our capacity for food production, processing and marketing; towards the inculcation of a better work ethic and healthier lifestyles; towards entrepreneurship; and towards a new approach to education which focuses on producing a well- rounded, well trained, confident, cultured, productive, civic-minded populace.
Our only hope of success is: (i) to become a truly knowledge-driven economy; and (ii) to ensure that the governance of our nation is based on efficiency, integrity, transparency, and accountability.
The present crisis provides us with an opportunity for a rebirth. We must grab it. But in doing so, we must first realize that it’s impossible under the leadership of Denzil Douglas.
Tunisians, Egyptians, Libyans, Jamaicans, Italians and others, over the past nine months, have chosen the path of rebirth, and in doing so they’ve set aside the old leaders. And other nations are doing likewise, as we speak. It has to be so.
There’s absolutely no good reason, on the basis of efficient and competent governance, integrity in public life, accountability, transparency, electoral propriety, vision, policy, etc., to allow Dr. Douglas to continue as the leader of this country.
Like Nero, who was so deluded that he set about to burn Rome flat (to hell with the human carnage) so that a new city, to be called ‘Neropolis’, would be built in his honour and glory, and who played his fiddle while Rome burned, with his sycophants around him singing his praises, Dr. Douglas has come close to destroying this country, and he continues to fiddle around, aided and abetted by his self-serving sycophants, while our people suffer, and suffer embarrassment.
Nero’s rule ended because of his delusions, his incompetence and his extreme disregard and disrespect for the people of Rome. So let it be with our Ruler.
We’ve had too much of ‘de Dougie’
