Now that the Government has turned to the International Monetary Fund for a rescue package of technical support and a standby loan of almost a quarter billion dollars, (EC$226 million), Kittitians and Nevisians have suddenly become concerned and are worried about the possible hardships that may result, if the planned recovery measures fail, and they are required to pay more in taxes and increased fees.
The challenges ahead are tough and Kittitians and Nevisians have been bracing for even more financial difficulties in the months and years to come.
If any doubts remained, the current financial picture was summarized last Friday, by an official of the International Monetary Fund, IMF, Mr. Alfred Schipke, Division Chief, Caribbean Division in the Western Hemisphere Department.
The IMF official said at a press conference on Friday 3rd June, 2011, at Government Headquarters, “As you know, at 200 percent of GDP (or EC$3 billion), St. Kitts and Nevis has one of the highest debt levels in the world. Currently interest payments amount to 20 percent of revenue and the high debt levels undermine the country’s growth potential, make it more vulnerable, and constrain the government in responding to exogenous shocks,”.
Despite varied loyalties however, and in the best interest of the country, many are hopeful that the proposed austerity measures being attempted by the Government, in concert with the International Monetary Fund, will in fact deliver the right medicine that is desperately needed to revive an ailing economy that is being crippled by this 3 Billion Dollar National Debt.
However, Mr. Schipke has expressed confidence in the Government’s fiscal initiatives. He told reporters at last Friday’s press conference, that he believes in the economic program being pursued by the Government.
Mr. Schipke is in Basseterre working with the Government to help craft a suitable economic development model, to address the problem.
Mr. Schipke, who is based in Washington D.C., said that despite the stigma of the IMF in the region, the dialogue with the Government of St. Kitts and Nevis could be used as a model for International Monetary Fund relationships with other Caribbean countries.
“We have confidence in the strategy of the government because we are also putting our risk and reputation on the line. We are setting a path of confidence and strong economic growth,” said Mr. Schipke in an opening statement at the joint Ministry of Finance and International Monetary Fund Press Conference at the conclusion of a two and a half -week mission to St. Kitts and Nevis.
He told reporters that the Government of St. Kitts and Nevis is embarking on comprehensive debt restructuring to put the country on a sustainable debt path.
“The reforms will be a change in paradigm and will create the conditions for improved confidence, investment, and economic growth. This would also ensure burden sharing by all stakeholders. Domestic population has already made sacrifices,” said Mr. Schipke.
He noted that the government intends to implement a number of complementary measures to strengthen public financial management, improve the collection of revenue at the
Customs and Inland Revenue departments; and develop a debt-management strategy to reduce the debt-to-GDP ratio over the coming years.
“A key element of the government’s program is to further strengthen the social safety net and making it more efficient to protect the most vulnerable in the society,” said the IMF official.
He said there are still financing gaps despite all the fiscal efforts that have been attempted, such as the VAT; and the debt would remain unsustainable.