The fiscal out-turn of St. Vincent and the Grenadines for the first eight months of 2021 shows a measure of fiscal stability.
That’s according to Prime Minister Dr. Ralph Gonsalves, who made the point in a document, which outlines the fiscal condition of the Government, from January1st to August 31st, in the midst of the Covid 19 Pandemic, and in the wake of an explosive volcanic eruption.
The Prime Minister pointed out that, even though there is a current account deficit of $9.6 million and a deficit on the overall account (recurrent and capital) of $62.1 million, net of the Capitalisation of the Contingencies Fund (CCF) of roughly $7 million; the deficits this year are manageable.
He noted that last year’s comparable current account deficit up to the end of August was $47.3 million; the overall deficit was $101.4 million.
The comparable deficits in 2019 were: $30.6 million on the current account; and $46.5 million on the overall (capital and current) account.
The Prime Minister also noted that after the first eight months of 2019, capital expenditure was only $36.5 million; in 2021, up to the end of August, capital expenditure stands at a very substantial $105.2 million or nearly three times the comparable capital expenditure in 2019.
Dr. Gonsalves said, given this fact, the extent of the overall deficit in 2021 is understandable; and it is manageable despite the challenge of raising monies on the difficult regional money market at the time of COVID and its consequences. Still, he said St. Vincent and the Grenadines’ prospects are buttressed by our ongoing credit worthiness and the payments of our debts on a timely basis.
The Prime Minister said the Government of St. Vincent and the Grenadines took a number of critical decisions on fiscal management which have contributed immensely to fiscal stability.
The establishment of a Fiscal Responsibility Framework which was laid in the Parliament at the time of Budget 2019 and published in the Official Gazette. This Framework contains all the central elements of the government’s fiscal policy which rest, upon other things, on the twin principles of Prudence and Enterprise, among other things.
The setting up of the Contingencies Fund, funded by a one percentage point increase in VAT and a US $3 “disaster levy” per hotel room per night of occupancy. The “disaster levy” was suspended from May 1st 2020 as a consequence of the COVID pandemic. At the outset of COVID, the Contingencies Fund was capitalised in the sum of approximately $45 million.
In addition the Government decided not to spend in 2020, one-half (US $20 million) of IDA-19 soft-loan monies from the World Bank. This sum was put into a Catastrophic Deferred Draw-Down Option (CAT-DDO) to fund any public health or natural disaster emergencies.
Also Dr. Gonsalves pointed out the sensible approach of the Government in not locking-down the country, not declaring a State of Emergency under the Constitution of St. Vincent and the Grenadines, and not imposing a curfew in its attempts to contain and reduce the spread of COVID. He noted that keeping the country open meant keeping the economy open, thereby reducing or slowing the extent of economic decline in 2020 and 2021.
In addition, the Government was able to manage the COVID 19 pandemic relatively well thus far; and managing the volcanic eruptions and their aftermath quite well, thus far.