BASSETERRE, St. Kitts -THE Government of St. Kitts-Nevis has been commended by the International Monetary Fund (IMF) for significantly reducing its overdraft balance and for recording four years of unbroken primary fiscal surpluses.
Prime Minister Hon. Dr. Denzil Douglas, in his final instalment of “Ask the PM” for the month of March, revealed that representatives of the IMF visited the nation earlier this month and informed that the nation’s economic performance for the fiscal year 2008 was “very good”.
“We were commended for cutting our own overdraft balance by 50% between 2007 and 2008. We did this by converting from high interest overdraft instruments to lower interest rate instruments whenever it was possible. In addition, we made a concerted and successful effort to slow the rate of government expenditures, and this of course reduced the need for overdraft.
“We were commended for having produced four consecutive years of primary fiscal surpluses at the same time that the entire Eastern Caribbean Currency Union recorded a deficit. What this means is that when you subtract all government expenditures, excluding debt service, from all government revenues, the revenues far exceeded the expenditures,” the PM stated.
According to the 2009 budget, the nation has been recording primary surpluses since 2005, and in 2007 a primary surplus of EC $97.6 million was realized—a significant improvement compared to EC $67.7 million in 2006.
Douglas stated that his government decided to invest in the necessary infrastructure essential for sustainable growth and development, and that although this route toward development simultaneously caused a significant increase in debt, the government was able to reduce the debt to GDP ratio by a sizable amount.
“This of course necessitated acquiring debt just as a family planning ahead for long-term financial stability often acquires debt in the form of a mortgage. Here again, our own analysis and projections were correct because the economic growth that we have created has caused the debt to GDP ratio to fall by 20% since 2005.”
As detailed in the latest budget, the 20% reduction in debt to GDP ratio has reduced the amount of overall debt to 177.4% of GDP. However, this figure is still almost three times as much as the accepted 60% recommended by the World Bank.
The government intends to continue reducing this figure, as the Minister of Finance Hon. Dr. Timothy Harris has announced that the level of indebtedness “does not provide us with the fiscal policy space that we would like or the agility to manoeuvre in times of turmoil”.
Despite the mammoth national debt that has posed a number of constraining factors on the nation’s fiscal response, Prime Minister Douglas said his government remains resolute in protecting the Federation’s reputation in international financial circles by meeting all its financial obligations.
“The bottom line is that my government believes in sound financial management. As a result, my government has never failed to meet our financial obligations to our creditors. That is not something that all countries can say,” Douglas affirmed.
The IMF document is expected to be made public shortly for general perusal. The IMF has been making annual assessments on all its member countries since World War II, paying particular attention to the economic development and growth statistics as it relates to each country.
