PM hopes new initiatives will boost economy

Seemingly undaunted by the economic challenges the country faces, Prime Minister Dr. Ralph Gonsalves hopes to stimulate the economy in 2010 with a set of new initiatives.

He told the nation this week at the 2010 Budget Debate the resources needed to fund the projects will come mainly from grants and concessionary loans.{{more}}

Since last week’s presentation of the Estimates, Vincentians have eagerly awaited Gonsalves’ Budget speech to find out how the projects he put forward will be financed.

Addressing the nation last Monday afternoon in his ninth Budget Address, Gonsalves painted optimism, but was also quite cautious.

To this end, he noted that the loans sourced for 2010 will “not include any commercial borrowings,” since the country, on the heels of the worst economic recession in recent history, was not “out of the woods”.

The major sources of finance will come from project grants, budget support from the European Union and other governments, concessionary loans, suppliers’ credit, and monies from the international reserve asset.

This year’s Budget amounts to $913.5 million, with the recurrent expenditure reaching $523 million and the capital expenditure totalling $303.3 million.

Grants for projects are estimated to sum up to $64.8 million, of which $26 million will be provided by the European Union, $15.4 million by the Republic of China on Taiwan, $9 million from Trininad and Tobago, $7.6 million from the Caribbean Development Bank, and $4.2 million from Venezuela.

With regard to grants which will be provided in the form of budgetary support, Gonsalves said in some cases this will require the government to reallocate resources from one project to other areas of spending.

“For example, some of the grant and loan funds approved for the Cross Country Road may be reassigned to other uses, with the approval of the Government of the Republic of China,” said the prime minister, adding other sources of financing are being identified for when work on the road resumes.

Gonsalves reiterated that the Government has already negotiated a loan of US$50 million from Banco del Alba of Venezuela on highly concessionary terms, of which US$20 million have been allocated to the International Airport Project.

He noted that the balance of the loan has not been assigned to any specific project and is available for general financing of the 2010 Budget.

Prime Minister Gonsalves stated that other major sources of concessionary loans include the Government of the Republic of China which will be providing $21.4 million, the Caribbean Development Bank $37.7 million, and the World Bank $9.2 million.

The total listed to be provided by the Caribbean Development Bank includes an amount of US$12.5 million (EC$33.8 million), representing the second half of the policy-based loan which was approved by the bank in 2009.

“Again, this amount has not been assigned to any particular project and would be available for general financing of the Budget,” Gonsalves noted.

The other major source of financing is the proposed use of some $20 million of the St.Vincent and the Grenadines allocation of SDRs, at the existing exchange rate, which is equivalent to EC$33.76 million. The SDR is an international reserve asset, created by the International Monetary Fund to supplement its member countries’ official reserve.

This country’s SDR allocation has increased from 335,000 SDR to 8.0 million SDR.

Opposition Leader Arnhim Eustace in his Budget response charged the Prime Minister has brought the country to the brink of collapse.

He noted that the prime minister does not heed the warning of others and listens to himself alone.