September 2, 2011
Eustace calls on Government to get SVG economy going again

Arnhim Eustace, Opposition Leader has stepped up on his calls for the government to take action to fight off the effects of the international crisis.{{more}}

Eustace, who was at the time speaking on the ‘New Times’ radio programme last Monday, August 29, made the comment in the wake of the release of the preliminary findings of the annual Article IV discussions held between an International Monetary Fund (IMF) mission and government officials here on economic developments and macroeconomic policies.

The team visited the country from August 10 to the 19 and held meetings with Prime Minister Dr Ralph Gonsalves, the director general and other senior government officials, as well as members of the Opposition and representatives of the private sector and labour unions.

Eustace read sections of the statement issued by the mission’s leader Nita Thacker.

“St. Vincent and the Grenadines has been facing a challenging year. In addition to the continued impact of the global slowdown, the country was severely affected by two recent natural disasters: Hurricane Tomas in October 2010, and torrential rains and floods in April 2011. Economic activity contracted by 1.8 percent last year, and is expected to remain subdued this year despite some pickup in reconstruction activity,” Thacker wrote in the statement.

Thacker further indicated that growth was expected to recover in 2012 and reach its potential level of 3.5 percent over the medium term provided that recovery in advanced economies did not stall.

“These developments have also put pressure on the government’s fiscal position as revenues have not kept pace with the increased demand for spending. The ensuing deficits have been financed by borrowing, mainly external, leading to an increase in the public sector debt-to-Gross Domestic Product (GDP) ratio.”

The report stated that the local authorities recognize the need to ensure medium-term fiscal and debt sustainability, and the need to build financial buffers given the vulnerability to shocks and that they were committed to generate primary surpluses in the range of 2 percent of GDP over the medium-term.

This prompted Eustace to call on the government to outline how it intends on achieving this goal.

“Let them say where and how they are going to reduce it. Are you going to put more taxes? Can we afford more taxes at a time like this?” the Opposition Leader questioned.

“They laughed at us when we spoke about it before,” he said.

“They have to move from deficit to surplus, which is what the New Democratic Party (NDP) did for the 17 years it was in office,” he continued.

The country could not continue to operate on the basis of deficits, Eustace contended.

“We cannot continue to spend more money than we receive. We have to come up with measures which include reducing expenditure or increasing taxes. That is what we have been trying to say all along,” Eustace said.

He said that the government was not spending money wisely.

“You can’t let expenditure get away. You have to be prudent with your spending.”

“They have committed themselves to the IMF that they are going back to a surplus. Let them say how they will be doing that,” Eustace said.

The mission is expected to prepare an official report which will be discussed by the IMF’s executive board which is scheduled for early October this year.