22nd September 2021
Hon. Philip J. Pierre
Prime Minister
Office of the Prime Minister
Greaham Louisy Building
Waterfront,
Castries
Dear Prime Minister,
It is with a heavy heart that I write to you regarding the current COVID-19 crisis in Saint Lucia. As of yesterday, our country has recorded over 10,700 cases with 2,182 active cases and 168 deaths; with 18 deaths reported in one day. Based on current trends, by the time this letter reaches you, these figures would have undoubtedly and unfortunately increased.
Mr. Prime Minister, over the last few weeks you have repeatedly spoke of the “science” and also evidence-based decisions, two concepts you seemed to have ignored while you were in opposition. Nonetheless, I am somewhat pleased that you have finally embraced evidence-based decision-making since assuming office. Sadly, it would appear that you are not following your own advice.
By now, you are well acquainted with the debilitating economic fallout from COVID-19, in addition to the health impact.
When our United Workers Party came into office in 2016, the cost to operate the country was approximately $103 million per month- $43 million for wages and salaries, $30 million for debt financing and $30 million for operating costs (rent, utilities, consultancies etc.). Meanwhile, government’s monthly revenue was approximately $85 million per month. This meant that government ran a deficit of approximately $20 million per month.
This had been the case since the early 2000’s until 2019. You would recall in 2013 the then Prime Minister Dr. Kenny Anthony, stating that something had gone wrong, and that the government could not borrow any more money.
Well this is precisely what went wrong. In 2002/2003, the interest rate on government debt was approximately $40 million per year, and in 2016/2017, it had ballooned to $150 million. The impact of not addressing the cause of this deficit and continuing to borrow money to fund this shortfall was, and continues to be unsustainable.
By 2019, the policies implemented in 2016 to address this fiscal imbalance, had started to bear fruit. The unemployment rate had dropped from 25% to 16% and the debt to GDP ratio was at 59%. We had had three years of economic growth, and foreign direct investments were showing promise, with several projects on the verge of commencing.
The reduction of the Value Added Tax (VAT) rate, combined with the application of a gas tax and increasing the airport tax helped government revenue to grow steadily – peaking in 2019 to $105 million per month. During this same period, government used these new revenue streams to increase the allocations to education, health, security and infrastructure. Government targeted key expenses by critically reviewing operations, in particular that of statutory agencies.
In early 2020, we started to feel the negative impact of COVID – both from a health perspective, and an economic perspective. By later that year, it got progressively worse.
The policy we adopted then, which was different to many other countries in the Region, was to co-exist with COVID. Even then, we understood it was about lives and livelihoods and that we had to find the equilibrium between them. That equilibrium was guided by the science and the resulting policies were evidenced-based.
Try as we may, we could not prevent people from being infected by the virus, but given the limited health infrastructure and the vulnerability of the population to the virus, all we could do was to slow the infection rate to limit the number of people infected within our health system. We had to make sure when people got infected, especially those with underlying conditions, that we would be able to take care of them, avoiding what we saw transpire in Italy, England and New York, where the number of cases taking place simultaneously overwhelmed the health system. If people are unable to get early detection and basic medicine their chances of surviving are dramatically reduced.
Initiatives like using hotels as quarantine stations and isolation facilities helped reduce the infection rate. We also came to understand that social activities, house parties, public functions, funerals, weddings, and any mass crowd events combined with alcohol contributed significantly to increasing the infection rate. Hence, curfews and limiting/eliminating alcohol consumption were very effective. We also learnt that businesses, public offices and schools were very successful in imposing the necessary social protocols like social distancing, wearing face masks and sanitizing. In other words, people were actually safer at work than staying home. Tourism, manufacturing, construction and our call centers all required unique protocols to stay open while keeping the population safe and preserving livelihoods. Given your reluctance to curtail these sectors, I believe you have come to understand the science and evidence of this strategy.
We also understood the precarious economic situation we were in. As a result of closing the economy for three weeks in April and reopening slowly until September, government’s revenue dropped from $110 million a month to $60 million and our costs increased from $100 million a month to $120 million a month.
The increase in cost was primarily due to the cost of the isolation facilities, the operationalizing of OKEU, converting Victoria Hospital into a dedicated respiratory facility, national security, and importantly, the redemption of government bonds. As you would know, redemption of bonds is a non-budgeted item as it is customary in the past that bonds tend to be rolled over. If there is a shortfall this has normally been covered by our recurrent revenue.
A catastrophic fallout from COVID-19 was the financial impact on many businesses and personal incomes, which resulted in many companies, institutions and individuals redeeming their bonds. In 2020, the Government had $700 million due and approximately 25% were redeemed. The government had to pay close to $170 million in cash. This left the Government with a deficit of approximately $500 million entering the Budget of 2020/21. This revenue shortfall was partially made up through the support of the CDB, WB, IMF and ECCB. Recognizing the fallout of COVID, all of these institutions moved unprecedentedly quickly to approve funds to help with budgetary support.
I was very proud of the team in Finance and Economic Development for the incredible job that they did in the most difficult of times. Tasked with the efforts to extract ourselves from the EU Blacklist, juggling the sudden and drastic drop in revenue and increase in costs, the introduction of a new Finance Act, the arduous task of applying to multiple agencies for funds, all while designing a social and economic stabilization and recovery plan, this team was able to accomplish all of these tasks.
The Government of Saint Lucia continued to meet all of its financial obligations, specifically all wages and salaries, all debt commitments including the bond redemptions, government operating costs, and the increased costs due to COVID protocols.
The financial institutions provided approximately EC$300 million in very concessionary loans to the GOSL. The IMF funds and WB funds could not be used for debt payments, so they had to be allocated to other operating costs, including costs associated with COVID. The remaining shortfall came from increasing the overdraft facility with ECCB and the local/regional banks, and increasing our payables. Payables normally average $30 million, and, as you know, they are now in excess of $100 million. It means individuals and business who have provided goods and services to the Government have not been paid, or it has taken an excessive amount of time to be paid. While we have had no choice, this can only continue for a while before these entities will want to be paid in advance for any services.
While we were able to provide some income and food support, it clearly was not enough, a fact you will now have a greater appreciation for. The current crisis is at a point where we will have to reintroduce some of these programs. The question is, where are the resources going to come from? This reality will be made worse if the entire economy must be shut down again. Sir, this problem will not resolve itself, nor will it disappear any time soon.
Prime Minister, the intention of this letter is not to lecture you or remind you of what you espoused while in Opposition, but more importantly, to advise you that your government must act urgently and decisively before the health and economic systems totally collapse. Sir, you cannot wait for the situation to get so overwhelming that we have no choices.
Our COVID-19 statistics continue to increase at an alarming rate. More concerning is the high rate of deaths, in part, because people cannot access timely help. Unfortunately, when you came into office many of the front-liners were already exhausted and the current situation is only making it worse.
Sir, by now you must realize that you will have to adopt some of the same policies that have proven successful in the past. We need to urgently slow down and temper the COVID-19 infection rate. To achieve this we must reduce public socializing. To do so will require longer curfew hours, and prohibiting alcohol sales and consumption. It may also require the use of 758/759 zoning for a period of time to help the police enforce these protocols.
You have on many occasions commented on the poor and limited housing conditions and that is why using some of the hotels to facilitate isolation of positive cases would be useful, but I do appreciate the extraordinary cost. If your government does not act now, as I have alluded, the country will very soon reach a point where it will shut itself down, jeopardizing many more livelihoods to save lives.
Finally, we need to step up the campaign on vaccination. We note the number of Saint Lucians getting vaccinated is far below the target and propose a broad community outreach programme where we bring the vaccine to the people and engage in a rigorous education campaign.
The Opposition stands in solidarity with the people of Saint Lucia and we are willing to offer our assistance. For the sake of our people and country you need to change course. I fear that if you do not heed this advice it will be catastrophic.
Yours sincerely,
ALLEN CHASTANET
Leader of the Opposition