Shrink in St. Vincent Economy as National Debt Rises


According to an I Witness-News report, Prime Minister and Minister of Finance Dr. Ralph Gonsalves, in presenting the 2011 national budget on Monday, Jan. 24, said all major sectors recorded low or negative growth in 2010 while the rate of inflation was 2 per cent, compared with 0.5 per cent in 2009.

“This rate of inflation was mainly on account of an 11.3 per cent rise in the cost of electricity and increases in the prices of petroleum products,” he said.

Gonsalves further said that last year, the government recorded a current account surplus of EC$1.3 million, a slight improvement over the deficit of EC$3.3 million in 2009.

The overall balance registered a surplus of EC$12.6 million compared with a deficit of EC$55 million in 2009.

Meanwhile, the 2010 Balance of Payments recorded an overall surplus of EC$27.9 million associated with increased inflows on the capital and financial accounts.

Legislators in Kingstown are debating an EC$785.5 million budget for 2011, which Gonsalves said “has been crafted in an external economic environment shaped by the global financial and economic meltdown of September 2008, and continuing”.

The budget, which was presented under the Rubric “Fiscal and Financial Stabilisation, Job Creation, Wealth Creation, and Social Safety at the Tail-End of the Recession”, includes several proposals for stimulations of the productive sectors as well as increases in some licences.

“My Government’s overall fiscal strategy for 2011 will focus primarily on stimulation of the productive sectors in order to return the economy to its growth trajectory,” Gonsalves told Parliament.

He said his Unity Labour Party administration, which was returned to office last month, is “looking to the private sector to play a more dynamic role in this process” and has devised several “new measures to provide the necessary incentives”.

Gonsalves further said “strengthening our fiscal and financial stability” will be “an equally important focus” this year and his government has formulated and will implement a Fiscal Stabilisation Plan.

The plan includes a Debt Management Strategy, “in order to stabilise the fiscal accounts of the Government through the transparent and prudent management of public finances.

“Numerous studies have shown that a country’s macroeconomic conditions are among the most important determinants for both domestic and foreign investment. We have therefore proposed new expenditure and revenue proposals as part of this process,” Gonsalves said.

Of the EC$1.17 billion national debt, EC$580.8 million is owed to external sources while EC$588.6 million in domestic debt.

The central government accounted for EC$885.0 million (77 per cent) while the remaining $270.1 million (23 per cent) was held by public enterprises.

Of the total debt, EC$635.4 million or 55 per cent, was represented by loans, with bonds of EC$356.5 million (30.9 per cent), overdrafts EC$84.1 million (7.3 per cent), Treasury Bills EC$60 million (5.2 per cent), and other EC$19.2 million (1.6 per cent).

(Contents of this article as obtained from I Witness-News)

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