COVID-19 Induces Cash Flow Problems in Government

Prime Minister Allen Chastanet this week received approval from both Houses of Parliament to extend the state of emergency all the way to the end of next month, but not before he received quite an earful from the opposition on how COVID-19 exposed his mismanagement of the island’s finances.

But the prime minister is fighting back saying that the cash flow problem government is encountering is as a result of COVID-19 and not anything else.

The financial problems taxing the government has forced them into negotiations with trade unions over salary adjustments from employees in pay grades of 8 – 21.

Efforts by the government to get trade unions to agree to pushing this month’s salary pay date a week later did not materialize, a situation that led to the Prime Minister’s Senior Communications Officer, Nicole McDonald  stating that government had put itself further into debt after paying public servants their full salaries on April 23.

News outlets quoted Mc Donald as saying that “in order for the government to make the payment of salaries in all cash in April, the government increased its overdraft and incurred further debt.”

The Senior Communications Officer said the Ministry of Finance is dealing with compounding issues such as extremely low revenue intake, significantly high debt repayments and additional financial resources which needed to be allocated to managing COVID-19.

To control its cash flow issues during the COVID-19 era which has seen a drastic reduction in revenue streams over the past five to six weeks, government has proposed a blended payment to public servants of part cash and part treasury bills.

This is presented as 50% cash for workers in pay grades 8 – 18 for a three-month period. The other 50% will be in bonds or treasury bills with a maturity date of one year.

“This was determined to be necessary due to the fact that the government must conserve cash at this time in order for Saint Lucia to meet its debt commitment. To not do so would likely lead Saint Lucia to default. Which would have even more dire consequences for our country going forward,” McDonald was quoted as saying.