BASSETERRE, St. Kitts-THE Federation’s national debt, which stands at just over EC $2 billion, has been brought under control and will be reduced in light of the growing global financial crisis, Prime Minister Dr. Hon. Denzil Douglas stated in a press conference Wednesday (Feb. 4).
“We will continue to monitor [the national debt] and continue to pursue all of the specific national goals that we have set for ourselves, that is to cap the debt, which we have already done, and then gradually reduce it over a period of time,” Douglas said.
At the time the PM was addressing a recent statement by the International Monetary Fund (IMF) which assessed St. Kitts-Nevis’ national debt as being one of its biggest problems.
“While public debt has declined by 20 percentage points of GDP since 2005, it remains formidably high at more than 170 percent of GDP at end-2008,” said Paul Cashin, Head of the IMF Staff Mission to the Eastern Caribbean Currency Union countries in a statement on January 29.
“The paramount challenge is to reduce vulnerability through demonstrating a commitment to place public debt on a downward trajectory towards a sustainable level, while maintaining macroeconomic stability amid the global downturn,” the IMF representative added.
Douglas, however, said that his Government is well aware of the threats national debt poses to the country.
“The IMF is right, one of the greatest challenges this country faces is in fact its national debt. In fact, it did not need the IMF to say that. We continue to say that year after year.”
With the nation’s debt now reportedly capped, the Prime Minister said the Labour Administration would be focusing on tactics such as negotiating to have interest rates reduced and finding developers or other “friendly countries” to assist in development programmes as a way to cut the national debt.
In the past St. Kitts-Nevis’ borrowing has typically focused on development projects that promote investment, and Douglas said this type of debt has been “essential to getting us out of this situation”.
“I want to make the point that when I said that if it becomes necessary to incur more debt to advance the country, I meant it and I still mean it.
“However, things have changed. The world almost overnight has gone belly up with regard to the financial situation. So, if we are going to borrow we have to be exceptionally careful about borrowing at this time,” the Prime Minister stated.
With the global financial crisis’ first serious impacts upon the Caribbean being seen through a slump in tourism dollars, major losses in remittances and the financial distress of major corporations like the Trinidad-based CL Financial Group, Douglas said now is the time for the Federation to be prudent in their borrowing.
“We too have to be very cautious with what we are doing because we recognise that the global financial crisis has now in a way hit the Caribbean. Though the principle of which I spoke still stands…[if ] you do not have enough money to service your debt, naturally, you cannot go out and just simply borrow.
“The government, in being very cautious and careful in its development strategy, is watching very closely the debt situation,” the Prime Minister said.
