Twenty Lost Years

THE recent Caribbean Development Bank/ Eastern Caribbean Central Bank Report on Saint Lucia’s economy, while it confirmed the obvious also shed light on the work of the Ministers of Finance over the last 20 years, giving all a failing grade.

The obvious for me was the imprudence of lowering the VAT rate at this time and the present unsustainable fiscal deficit. Dr. Justin Ram had to tip-toe around not being seen as interfering in the local politics, but essentially advised the government to instead re-look at the zero rated and VAT Exempt list and to reduce it while creating some safety net for the poor and vulnerable. The CDB is actually saying to use the VAT to increase our revenue. In fact my understanding is that the report went even further to advise that the analysis is showing that a reduction in VAT has a minimal multiplier effect and thus will not improve the revenue of government.

As difficult as it is now, the abundance of information is saying to us that the country cannot afford a VAT reduction at this stage. I again would strongly advise that while we pursue it as an ultimate goal, let us for now remain focused on growing the economy within the present fiscal space. I believe if we are focused in this objective, then we should be in a position as a nation to reduce VAT within the next two years. There is a maturity of a nation that is required at this stage and one that transcends the mundane political thought that so readily arises in these periods of our history.

The CDB/ECCB Report also spoke about the use of public funds and how our public sector investment programme has not functioned as an investment Programme. How have the projects the Government funded assisted in growing the economy? This is where the failing grade has been assigned to our Ministers of Finance. The analysis is showing that our investments in the public sector have been poor economic investments, yielding little contribution to the growth of the economy. In the 2015 Review of the Economy published by the Ministry of Finance, Saint Lucia’s Official Public Debt as at the end of 2015 stood at $ 2.91 billion. Of that figure $ 1.53 billion was domestic debt and $ 1.38 billion was External.

When one begins to dis-aggregate that debt it is noted that in the 15 year period from 2001 to 2015 the increase in debt was close to $ 2.0 billion, and the lowest increase was in the sole budget that was passed when Sir John was Minister of Finance and when the public debt increased by a mere $ 16 million. Sir John was a strong believer in balanced budget, and I recall his famous comment on Budget Allocations – ‘That money is not there, that was put in by a typist’.

We as a nation cannot afford these public sector “disinvestment” programmes. The projects we choose to fund must be critical to economic development. Spending close to $ 0.5 billion (construction plus land acquisition cost) on the Gros Islet Highway from Choc to Rodney is a “disinvestment” project. Spending another $ 0.5 billion on a road from Fond d’Or to Rodney Bay is a “disinvestment” project.

If a generation is defined as forty years, and we split the last 40 years into two twenty year periods, we can examine what we have done in a generation as a nation. I look at the achievements in the period 1976 – 1996. I see the Gros Islet Highway, which spurred economic activity in the north; I see the Rodney Bay Marina and Pigeon Point Causeway that have become the cornerstone of our tourism. I see the Rodney Bay Sewerage Treatment Facility, the John Compton Dam which are both critical infrastructure to support the economic activity in the north. I see the West Coast Road which spurred growth in tourism in Soufriere. I see the expansion of Hewanorra Airport and the new Terminal which again supported the tourism sector. I see the feeder roads programme that spurred the significant increase in banana production, bringing Saint Lucia to be the major exporter of bananas. I see the Deglos Landfill that again supported the economy. I see the expansion of Port Vieux Fort, I see the many factory shells built by the NDC that provided employment to many Saint Lucians. I see Point Seraphine that is central to the cruise ship industry. Oh indeed I see a lot in the period 1976 -1996, and will continue to hold Sir John as the finest mind that I have encountered in my lifetime.

From this outstanding platform, we entered the next two decades. When 1976 -1996 is placed next to 1996 -2016, it seems like a lost 20 years, and a lost $ 2.3 billion. We built a prison and did not follow through to provide the infrastructure for the judiciary to function. We built police stations in several rural communities and yet we did not follow through and build a Police Headquarters and a Police Station in the area of the highest population and economic activity. We built a Fire Station in Babonneau before we consider building a Fire Headquarters. No significant intervention took place in sea ports or airports. We widened the Gros Islet Highway with such a poor design that the savings in vehicle operating cost and time for travel are minimal.

Sad to say but we may have lost two decades. The present government has telegraphed that there is a connection between economic growth and crime and has been focusing on the critical outstanding infrastructure relating to national security and justice. We have a very proactive Minister of National Security and Justice, whose short stint so far has been most outstanding, One hopes he continues to get the support for the transformative change required.