BASSETERRE, ST. KITTS, SEPTEMBER 11TH 2012 (CUOPM) - St. Kitts and Nevis Prime Minister the Rt. Hon. Dr. Denzil L. Douglas called Tuesday for a review of economic and financial policies.
Addressing scores of private and public sector stakeholders in his capacity as Minister of Finance, at the 14th Annual National Consultation on the Economy, the St. Kitts and Nevis leader said that in reviewing the policies, those that have not worked must be changed and new ones introduced that will propel the twin-island nation upward and forward into a higher future.
The one-day consultation is being held under the theme “The Challenge of Fostering Growth Given the Conditions in the Global and Domestic Environments”.
Following a review of the global economic and financial climate, Prime Minister Douglas noted the Caribbean Region’s vulnerability to changes in the global economic and financial markets given the limited diversification of these economies, underdevelopment of capital markets, large current account deficits and high public sector debt.
“However, we must have faith that the solid economic and fiscal performance that we observed before the current crises can be regained and the Region must use this opportunity to build economies that are more resilient and competitive,” said the Prime Minister.
He said that the annual consultation comes at a time of a significant time in the journey as a nation and it is therefore incumbent upon all to remind themselves of “where we have come from, to examine our current position and to devise a strategy for our future.”
“It is therefore a backward gaze for the purpose of moving forward with purpose and alacrity. When we look at how far we have travelled in our efforts at diversifying the economy away from dependence upon sugar, in improving compliance with our financial services regulations , tax reform, border security, fiscal consolidation and debt restructuring we can conclude that it is truly amazing how much we are able to do with so little,” said Dr. Douglas.
In comparing the fiscal performance pre-2008 and post 2008 he observed that 2008 was a defining moment in the St. Kitts and Nevis economy.
“It was in 2008 that the global economic slowdown had its beginning and it was in 2008 that we were impacted by Tropical Storm Omar which caused the closure of the Four Seasons Hotel for several years. In the wake of these two significant events, receipts from tourist arrivals fell by more than EC$72 million in 2009 after declining by more than EC$36 million in 2008. In addition to this unprecedented decline in tourism receipts, Foreign Direct Investment declined by 26% in 2009 as there was a major decline in the financing of tourism-related projects and real estate. The foregoing, together with the spike in global commodity food prices, precipitated a rapid deterioration in the external accounts and in 2009 the current account deficit increased to 34% of GDP from 24% in 2007,” said Prime Minister Douglas.
The overall impact of all of these adverse circumstances was record shrinkage in the economy by an unparalleled 9.6% in 2009. The 2009 decline was the 6th most severe of the 184 countries monitored by the IMF and the largest of any country in the Currency Union.
“Government has sought to offset the impact of external events on the country’s finances by increasing current revenue, accelerating land sales and streamlining expenditure. As part of the fiscal reform programme Government launched a comprehensive fiscal reform effort focussed on broadening the tax base, increasing the efficiency of tax collections, reforming public enterprises and decreasing subsidies to the energy sector. Given the severity of the economic downturn the fiscal performance has been remarkable. You will receive an account of this in a separate presentation from the Ministry of Finance. However despite these efforts, the severe recession has eroded corporate tax receipts and taxes on international trade are declining due to the international paradigm shift away from border taxes as reflected in our agreements at the CARICOM level as well as the Economic Partnership Arrangement (EPA) with our European partners. However, we cannot sit back and allow all of our gains to be eroded. It is very clear that growth in the economy is paramount in order to sustain the fiscal gains and to improve the standard of living of our people,” said the Prime Minister and Minister of Finance.
He is of the view that the time is now right for a comprehensive policy review in order to set the stage for the future.
“It is obvious that we must make certain changes to the way we operate and take into consideration the uncertainty that we are now experiencing and which by all accounts will continue for some time. I am therefore calling on all stakeholders to enter into this phase of assessment with us and to put on the table their suggestions for our strategy moving forward,” said Prime Minister Douglas.
The Government he said will continue to build on the various partnerships that have been forged with the private sector thus far and to increase the level of collaboration in the context of a vision for the country that seeks to harness the potential of every man, woman and child in the Federation. ” We must therefore focus on certain aspects of growth that would be critical to our moving forward at this time,” he said.
Prime Minister Douglas said as his government seeks to deal with the issue of high energy costs “we are looking very seriously at the role that renewable energy will play in the future.”
“As you are aware, the geothermal project in Nevis is very much alive and that is expected to bring enormous relief in terms of cost for doing business and sustaining livlihoods. We are also partnering with the Republic of China on Taiwan in the area of solar energy where the manufacturing of solar panels would be undertaken in our country. Again, this should have a positive impact on the cost of energy and will provide a great opportunity for our citizens to become trained and skilled in the area of green energy services.
We must look at our ability to compete in the global environment as this is one of the fundamental considerations in seeking to enhance our growth potential. It is for this reason that the education of our youths and indeed of the entire working population will be centre stage in our Budget deliberations. We must focus on the technical and vocational capacity in our education system as well as our capability to build managers who can operate at the highest level in large corporation s. I would also like to use this opportunity to encourage the private sector to invest in the youths of our country, to invest in your employees because your businesses stand to benefit greatly as productive employees make more profitable businesses,” said Dr. Douglas
The St. Kitts and Nevis leader said the issue of the financial sector and the ability of the people to access financing both at the personal and business levels are also critical to the growth and development.
“We hear of excess liquidity in the Banking System yet our people seem not to be able to access funding to construct homes and to finance new businesses. I would like to encourage financial institutions to be creative and innovative at this time in order that we can work together to take us past this hurdle of low growth. You hold a major component of the resources that are necessary to spur growth and it must not appear that you are holding our people to ransom. At the same time I would also want to warn our people not to overextend themselves when it comes to credit facilities and to be very careful not to become involved with those institutions which seek to charge exorbitant rates and fees which will, in the end, put you under financial distress. The rates that we hear about are tantamount to usury and government may be forced to introduce measures to protect our citizens,” said the Prime Minister and Minister of Finance.
Dr. Douglas said he highlighted some of the very significant issues on which to focus during this consultation.
“Other issues will be discussed more thoroughly in the specific presentations which will follow. It is obvious that we are operating in an era of dramatic, unprecedented and uncontrolled events. However, we have seen that despite this we have been able to record significant success in the area of our fiscal and debt management. We must now bring all of our resources to bear on the issue of growth. I trust that all of you will participate fully in the discussions which will follow each presentation and that at the end of the day we would have been able to craft together a path that would lead to growth in our domestic economy,” said the St. Kitts and Nevis Prime Minister and Minister of Finance.