Prime Minister Allen Chastanet has admitted that the country’s Gross Domestic Product could contract as much as 18 percent this year which could result in a possible doubling of its fiscal deficit.
Chastanet made these remarks during the delivery of the Appropriations Bill better known as the Budget for the Financial Year 2020/2021 Tuesday in the House of Assembly.
Stating that government revenues have taken a beating with serious cash flow challenges as a result of COVID-19, the prime minister added that in order for the country to survive, managing incoming cash flow over the next few months will be critical.
The prime minister has been speaking of cash flow problems in government from the early throes of the pandemic making it clear that the issues being experienced by government would cause an inability on the part of the government to fully meet salary obligations of its workers for three months.
The prime minister, in a letter to trade unions last month, told them that government would need their full and urgent cooperation in order to alleviate the crisis of a salary reduction of public servants by accepting a proposal where employees from Grade One to Grade Seven would be paid their full salaries while those from Grade Eight to Grade 21 will receive 50 percent of their salaries in cash and the other 50 percent in treasury bills for a three-month period only.
Trade unions have since dismissed the government’s proposal. To date the issue has remained silent. April, May and June salaries of public servants have been paid in full, raising consideration whether government cash flow problems today are as serious as was made out to be three months ago.
Meanwhile Chastanet Tuesday said that government anticipated that many Saint Lucians would have lost their jobs as a result of the pandemic and so approached the commercial banks very early on, to assist by giving customers a moratorium on loan and mortgage payments, as well as making a number of other new arrangements to continue doing business during the crisis.
“Our government wishes to place on record our deepest appreciation to the domestic financial institutions for their positive response to our early approach to them. When the virus first entered our country, our government immediately adopted a three-phased approach to tackling the crisis. Our top priority was protecting the health of Saint Lucians by ensuring that our healthcare system was prepared to deal with any possible outbreak. We negotiated with Cuba to get 110 doctors and nurses on island to provide support. We took timely and decisive actions to limit person-to-person interactions including enforcing social distancing, closing our borders, declaring a state of emergency, applying a curfew and eventually shutting down completely. We also set up quarantine facilities at three hotels and fast-tracked the move to the OKEU Hospital to facilitate Victoria Hospital becoming a respiratory centre,” Chastanet said.
The prime minister further said that the country is now in the stabilization phase which may last well into September this year. Next, he said, is the recovery phase to be expected by September, by then government would have a clearer assessment of the economic impact of COVID-19 and be better able to consider making further adjustments to its fiscal projections.
“Notwithstanding the level of uncertainty that the future holds, we recognized from the outset, that COVID-19 would have caused extensive social and economic dislocation and hardship for most Saint Lucians. We therefore announced a Social Stabilization Programme which comprises two components of income support. One targets NIC contributors and the other, non-NIC contributors (such as sole traders, artisans, and musicians among others),” Chastanet said.
According to the prime minister it was recognized that the extent of the impact of COVID-19 required a much more structured and long-term response, therefore from the outset, government adopted a multi- sectoral and bi-partisan approach as a matter of national importance.
He said government moved to establish the Economic Recovery Multi-Sectoral Committee, comprising representatives from the private sector, trade unions, employers and the Opposition, a body tasked with making recommendations to prepare an Economic Recovery and Resilience Plan given the adverse effects, that “lock down” and physical distancing measures have had on earnings of all sectors within the economy.
“This Committee and its sub-committees met on numerous occasions, and after extensive discussions, where submissions were received from a wide cross-section of the public, an Economic Recovery and Resilience Plan, consisting of three economic recovery strategies and three resilience strategies were developed,” Chastanet said.
According to him while the full scope of the Economic Recovery and Resilience Plan will be presented to the nation in the coming days some key components of the plan include Stimulating the Economy, Fast Tracking Shovel-Ready Capital Investment Projects and Strengthening Social Protection Systems, while the three Resilience Strategies are, Building Resilience of Productive Sectors, Health Resilience and Disaster Risk and Climate Change.
“With respect to measures targeted at stimulating the economy, we will implement the following: Stimulating the Economy (1). Provision of US$3.1 million re-purposed from the Climate Adaptation Fund, to provide blended loan/grant assistance ranging from to $5,000 to $25,000 to micro and small enterprises, with a focus on food security and digital technologies. This will be provided through the Saint Lucia Development Bank and will benefit between 1,200 and 1,500 enterprises. (2) Provision of low-cost financing to meet working capital requirements of SMEs affected by COVID-19. This will also be administered by the Saint Lucia Development Bank. An allocation of EC$5.0 million has been made towards this initiative which is expected to benefit 350 people. (3) A 50 percent waiver of Commercial Property Taxes for the period 2019 or 2020 to landlords who extend moratoriums of a minimum 20 percent of monthly rental charges for a period of three months, covering either April to June or July to September 2020. This is intended to support tenants affected by the slowdown in business activity,’ noted Chastanet.
“We have not forgotten those in rented accommodation,” he added. “We propose offering a tax deduction to landlords of 20 percent of the monthly rental value for a period of six months. In effect, a tenant who pays a monthly rent of $1,000 may now have their rent reduced to $800 and the landlord can claim an amount of $200 per month for that period,” Chastanet said.