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Commentary: Kenny Anthony's kumbaya budget needs unions as capital underwriters
Published on May 13, 2014 Email To Friend    Print Version

By Melanius Alphonse

The continuous shortfall in Saint Lucia’s economic development is rooted in a number of scenarios, including ideology, a lack of multiyear planning, decision making and the conscious advocacy to keep sound ideas and bring people together.

Melanius Alphonse is a management and development consultant. He is an advocate for community development, social justice, economic freedom and equality; the Lucian People’s Movement (LPM) critic on youth initiative, infrastructure, economic and business development. He can be reached at
In the global economy, decision makers compete for high-quality human resources, experienced leadership, a competitive business environment and geographic locations. Saint Lucia has all of these to its advantage, yet it has continued to suffer from high risk, protracted borrowing and catastrophic financial management.

Which reminds me, Saint Lucia is a member of the Eastern Caribbean Central Bank (ECCB), which together with other participating island states manages their finances, sets individual priorities and embraces whatever philosophy they choose, or find convenient at the time. That is until island states economies get into difficulty and sing Kumbaya, my Lord, Kumbaya.

Reading the Governor General’s Throne Speech 2014, some clever writing caught my attention: “Doing the unthinkable: The situation that confronts us, the new realities that we face, compel us to revisit ideas we once discarded as ‘unthinkable’. We may well have to venture down new paths, including paths we loathed and repudiated.”

In retrospect, not doing the unthinkable has culminated in the reckless performance of the 2014/2015 (Kumbaya) estimates of expenditure! The mad rush by prime minister and minister for finance, Dr Kenny Anthony, to seek consensus with the unions to cut 5% or EC$18.7 million from salaries and wages, after the fact, means in effect the entire economy is a recipe for intellectual dishonesty and further economic mayhem.

And certainly, a face wash and lipstick will not do the trick as is being propagated by a system of governance that has for decades misled the people of Saint Lucia with crisis and tales.

On May 28, 2012, for instance, in the op-ed Deficit Dry Cry, a Robin-Hood classic, I argued that the budget of 2012/2013 budget suffered from an authenticity deficit. Second, it had a calculation problem and truly it was a liberal flip flop from better days to the historical discomfort that the Saint Lucian people are no strangers to hardship. “Saint Lucia has overextended its ability to meet recurrent expenditure and loan repayments and what compounds this situation even more, is the government’s inability to collect revenue in an efficient and timely manner.”

On the basis of that view, the obstacles to progress and where Saint Lucia is today was already imbedded in an inflated, selfish basket of tricks back then. Therefore the “new harsh economic remedies” that the government of Saint Lucia is looking for to provide a quick fix solution is a counterproductive method that lacks straightforwardness and the ability to confront reality.

Over the years, courage and optimism were absent. Half-truths in what was an already toxic environment did not address the realties decisively. The urgency for a path forward was missed, and trust evaporated.

Business intelligence was replaced with distortion in the Saint Lucian economy, as argued in an op-ed on August 13, 2012. “In this global age, businesses look for predictability; they want to know with practical evidence that the economy is heading towards long-term stability and improvements that coexist with business long-term planning. And not a barrage of government short bliss that will be financed via extensive borrowing and charitable donations. These are distortions in any economy. Business and citizens look for budgeting cost comparisons and government efforts to control expenditure and improve efficiency. This in return demonstrates strong resolve that evokes credible strength in financial markets and helps set responsive harmony... Therefore, the common sense is simple; if there is little to no return to be made on investment, there will be no investments, no recovery, no jobs and no growth.”

The government of Saint Lucia had no guts to act and chose not to proceed in laying the proper foundation for a better Saint Lucia (February 20, 2013) that would “leave old troubles behind and focus on new and increase investments through Foreign Direct Investments (FDI) that is private sector driven. But, to achieve this in the immediate future, the Saint Lucian marketplace will require an economic environment that makes use of the instruments of capital markets, insurance and hedge funds in alignment with regional and global markets. The strategy for this is simple – it is to foster investment!”

These ideas were discarded as “unthinkable”. They were loathed and repudiated!

The prime minister and minister for finance, Dr Kenny Anthony presented the following: 2014 -- “Fiscal deficit, debt to GDP ratio, unemployment and economic growth, collectively, paint a very grim picture; neither can we ignore the fact that according to the IMF, Saint Lucia is one of only two Caribbean countries expected to post negative economic growth (-1.5 percent) in 2013. The estimates of the economic review indicate that the growth of the economy contracted further in 2013 by negative 3.3 percent, while most of the productive sectors recorded declines in 2013, led by the construction and trade/distributive sectors.”

It is important to note the bonds and other financial instruments purchased on the regional government securities market (RGSM) market experienced a shortfall for Saint Lucia of EC$221million. Short term loans from the banking sector also decreased by EC$9.6 million, and government found itself struggling even further, having to do the unthinkable to overextend its overdraft to EC$55 million in the last quarter of 2013/2014.

At this juncture it was too late to cut costs or defer on obligations even if revenues continued to decline. Eventually, the government came to its breakpoint and the sinking fund was activated to the rescue. There can be no good news on the horizon, as imports continue to rise and particularly the food import bill to levels of 50% to 60% of gross domestic product (GDP). This will only increase the trade deficit and putting more pressure on the current account, and public debt of 73.6%, when it should be in the comfort zone of 55% or less.

The prime minister and minister for finance, Dr Kenny Anthony should be setting targets to reflect the period 2006 -2009, which recoded 56.7%, 56.6%, 55.8% and 57.5% debt to GDP respectively. The period 2010 - 2013 numbers reflect 60.6%, 65.5%, 72.1% and 77.6% as per the economic review.

This is another opportunity to engage farmers and manufactures, foreign direct investment (FDI), the prioritization of a development model and to revisit Saint Lucia’s trade policy.

Currently, the debt ceiling has become a factor, as the government of Saint Lucia has no more room to borrow in a negative 3.3% economy, with 80% of capital projects (bridges, road renovation, infrastructure improvements, slope stabilization, etc.) incoming debt from the previous administration, plus that of the current government’s largesse.

Before I proceed, reducing the deficit and debt ceiling legislation is past due some eighteen months when the Lucian Peoples Movement (LPM) made the recommendation that “Saint Lucia is in serious need of a debt ceiling, which will limit the amount of money that this government and all future governments can borrow.”

Now, that the fan has hit the ceiling! “We may well have to venture down new paths, including paths we loathed and repudiated.” Of things that we once held sacred we may have to ask ourselves the question, why? ~ Throne Speech 2014.

The estimate of revenue is projecting EC$868.48 million, down from 2013 levels of EC$875.48 million. VAT has roughly 90% compliance and contributed 6% of government revenue. The 15% VAT also contributed to a 4.2 percent inflation in 2012. The rate of inflation for 2013 is 1.5%.

Salaries and wage consume 53% of the 70% non discretionary expenditure. The World Bank has estimated that the total damage caused by the Trough is in the amount of EC$267.76 million, “equivalent to 8.3% of Saint Lucia’s Gross Domestic Product (GDP).”

The overall deficit as a percentage of gross domestic product (GDP) reduced from 9.4% in 2012, to 5.7% at the end of the 2013 financial year to EC$213.5 million. (The deficit remained in line with last year’s fiscal balance.)

The capital program allocation for 2014/2015 is EC$326.3 in contrast to EC$380.3 million for 2013/14, and the recurrent expenditure for 2014/2015 is estimated at EC$925.8 million, down from EC$947.9 million in 2013/14.

These numbers really magnify the point that the government of Saint Lucia was either adopting a blind operational posture or withholding its true understanding of what led the country to where it is today.

The primary view as reported in this year’s approved (Kumbaya) estimates of EC$1,252,021,500 is to close EC$75.4 million gap. That’s the palatable story line! But the bigger picture is finding EC$100 million of largesse that was squandered and is coming due soon in a negatively performing economy.

Currently, the government of Saint Lucia is under international, regional and local duress to face the truth. In return, the prime minister and minister for finance, Dr Kenny Anthony is laying that responsibility on the backs of workers, the poor and vulnerable Saint Lucians, to oblige unions to his dictates, to underwrite the 2014/2015 (Kumbaya) estimates of expenditure, while turning a blind eye to the issues of consultancy hiring, strategic padding of loyalists in the public service, embassies and consulates, and, non-core government operations that the liberal elites splurge on.

It is situations like these that prompt analysts of the sudden financial posture to understand why, in the throne speech, the clever writer conceded, “We shall have to be critical of ourselves, of the way we do things, and the reasons we have not been as successful as we would have liked.”

Now those conditions have changed. I am certain that freethinkers will shine more light on the following:

• Finance minister Hon. Stephenson King in 2011/2012 budget was EC$1.337 billion

• Finance minister Hon. Kenny Anthony in 2012/2013 budget was (an inflated, selfish basket of tricks) EC$ 1.457 billion

• Finance minister Hon. Kenny Anthony in 2013/2014 budget slimed to EC$1.327 billion

• And now, Finance minister Hon. Kenny Anthony in 2014/2015 Kumbaya budget is EC$1.252 billion

Note the gradual decline. As I have repeatedly stated, “Saint Lucia is not a billion dollar economy.” And take a look at my op-ed When ideology trumps economic commonsense! March 26, 2013: “As such, an adjustment should be made to reflect the disparity of an old pattern that has prolonged economic and political hangovers. Otherwise, to remain on this path is a reflection of ideological suicide that will keep Saint Lucia in a foxhole of labour debt and extensive economic weakness.”

The fundamental question is what did the government do, and why not? There was plenty of historical evidence suggesting that the government was probably causing more harm than good. But those who govern and those who financed campaigns were too preoccupied influencing hefty contracts and busy lobbying public opinion. Was this the game of “block-a-hole?”

To many it was déjà vu as the deception continued:

“Sadly, though the writing was on the wall in terms of where Saint Lucia was headed, but the government continued to operate as an entity that has lost its mind; immersing itself in backward approaches which seek to lavish generous gifts on the chosen, while rendering favours to the party faithful at the expense of Saint Lucia's ailing economy.“ ~ September 4, 2013

“Its obsession and preoccupation with politics rather than governance has rendered it unfit to offer the kind of collective leadership that is needed, and is likewise incompetent to encourage national participation to fixing the economy,” St Lucia government rendering citizens impotent and frustrated. ~ October 10, 2013

These ideas were discarded as “unthinkable.” They were loathed and repudiated!

Meanwhile, developers and investors needed reassurance and explanation that Saint Lucia would reshape itself and meet fiscal challenges that “require high quality sustainable performance, productivity, and a departure from complacency to competitiveness and strong global market presents for capital investments to revive new streams of revenue and growth,” the government did not present a compelling plan and no swift countermeasures were taken in view of the undistorted truth about an anemic economic environment. ~ October 10, 2013

Regrettable, the psychology did not change. Policymakers lacked the mental conditioning to look ahead. Saint Lucia was not prepared for the worse possible scenario of low cash flow, credit freeze and impending surprises.

Actually, the prime minister and minister for finance, Dr Kenny Anthony was caught by surprise on numerous occasions, including the Chiquita and Irish fruit company Fyffes announcement of an all-stock deal to merge and create the world’s largest banana company: as well as the belated concern about EC$150 million in non-performing bank loans in Saint Lucia’s loan portfolio.

Yes, the world has changed, the economic space of the past is over, economic contraction and inflation has squeezed out credit – the lubricant of the economic engine. And yes, Saint Lucia’s economy is in survival mode, overwhelmed by fear, vagueness, and skepticism. But that must change for growth and development to take place.

Prime minister and minister for finance, Dr Kenny Anthony has not demonstrated the superb leadership and guidance that is required. His lack of confidence is contagious, making everyone weak instead of strengthening each other. There is a broad view that decisive action of inclusion with the view to changing the mindset from fear to practical optimism, uncertainty and doubt to structural and financial strategies, and operational changes in a timely manner is lacking for a better Saint Lucia.

“All of government must begin to be better managers and implementers. If we are to push forward an agenda of reform and find results, time is of the essence. We cannot allow projects to languish, not for want of money, but for a want of leadership.” ~ Throne Speech 2014

Therefore, it would serve all Saint Lucians best if prime minister and minister for finance, Dr Kenny Anthony would cut the bait and switch technique currently on the way with unions and other institutions.

This would be a huge change for Saint Lucia if prime minister and minister for finance, Dr Kenny Anthony would also get to work -- and adopt solutions that could provide options to economic growth, that combine the use of monetary policy, structural reform and fiscal stimulus, and to enable a better balance between price stability, growth and inflation in an enabling macroeconomic environment for strong investor confidence.

The LPM has other progressive options in the article Keynesians’ liberal economic days are gone ~ February 24, 2014. It is a tough change. But one that is absolutely urgent to perform an economic repair task, from worn-out psychology that produced a Kumbaya budget!

Maybe, this time, these ideas will not be discarded as “unthinkable.”

Maybe, this time, these ideas will not be regarded as loathed and repudiated!

Maybe, this time, there is a better chance to understand why “the best and brightest will always be mobile” and why, “We may well have to venture down new paths, including paths we loathed and repudiated” ... in pursuit of the “producers of greatness” for Saint Lucia.
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