PM Chastanet’s Estimates of Revenue and Expenditure
The Prime Minister presented the 2021/2022 estimates of revenue and expenditure to the House earlier this week, and this was followed by debating among the parliamentarians. The estimates for prior years up to 2019/2020 can be obtained from slugovprintery. Interestingly, the current administration has not posted the 2020/2021 estimates yet. Is this another example of the lack of transparency or incompetence from the current administration? In this blogpost, we take a deep dive into the major highlights from the presentation of “2021/2022 election estimates of revenue and expenditure”.
Revenue v Expenditure
The current administration indicated a deficit of $802M out of a total expenditure of $1,697M in 2020/21 which equates to a 47% deficit of the total expenditure. There is an increase in deficit after earlier estimates projected it to be 39%. The current administration has tried to obtain grants to reduce the impact of this deficit though the grants are for specific projects and not general revenue. The forecast for fiscal year 2021/2022 is only slightly better with the deficit of $630M (38%) out of the projected $1,638M expenditure. This deficit could conceivably increase in a similar manner as what happened in 2020/2021 if the tourism recovery takes longer than the optimistic projections from the current administration. The government is projecting an increase in revenue of more than 13% which is rather optimistic given that current projected GDP increase was in the range of 7%. Current administration optimistic revenue projections tend not to align with the general industry consensus.
The World Economic Forum projects that tourism will not recover to prior levels for at least a couple more years. “According to a recent UNWTO survey, travel experts are now very cautious in their outlook, with the majority not expecting a return to pre-pandemic levels before 2023. “While much has been made in making safe international travel a possibility, we are aware that the crisis is far from over,” UNWTO Secretary-General Zurab Pololikashvili said. “The harmonization, coordination and digitalization of COVID-19 travel-related risk reduction measures, including testing, tracing and vaccination certificates, are essential foundations to promote safe travel and prepare for the recovery of tourism once conditions allow.”
GDP Decline
The British Virgin Islands indicated the following “The Virgin Islands experienced the fourth-highest decline in gross domestic product of the Caribbean Development Bank’s 19 borrowing member countries in 2020, according to the CDB’s Regional Report: 2020 Review and 2021 Outlook, released late last month. With its 18.9 percent drop in GDP, the VI found itself behind only the tourism-dependent countries of Anguilla, Turks and Caicos Islands and St. Lucia, which experienced declines as high as nearly 30 percent.”
The figures in the Estimates indicated a GDP of $4.42B (18% decline) at the end of fiscal year 2021 and estimated to rise to $4.85B (10% increase) at the end of fiscal year 2021. The GDP as of March 2021 is projected to be lower than that of March 2017 which was calculated to be $4.55B. This administration will be contesting the upcoming election with an economy only marginally larger than they started with and while the COVID-19 pandemic has been a huge negative shock, the impact has exacerbated by the current administration’s decision to go “all in” on projects such as the Pearl of the Caribbean. The current administration would have certainly taken most of the credit had their very optimistic projections regarding projects such as the Pearl of the Caribbean had paid off and hence should take a lot of the blame for the misguided economic priorities.
Economic Development Goals
The current administration had a detailed list of key programs which included the following:
· Completion of rebasing of the National Accounts and the Supply and Use Tables to 2018
· Implementation of the 2020 National Population and Housing Census for Saint Lucia
· Development of Tourism Satellite Accounts (TSA)
· Establishment (implementation) of new IT governance structure to support statistical production, compilation, analysis, and dissemination.
· Strengthening/Modernization of existing Statistics Act
· Implementation of MICS
· Continuation of publication of quarterly labour force statistics
However, as the current administration has shown the section for achievements/progress 2020/21 is completely blank. Is there an update on these items or did the current administration achieve zero progress on these items during the last fiscal year?
Debt
There has been much debate about Saint Lucia’s escalating debt. The CDB earlier indicated that Saint Lucia’s Debt to GDP ratio from 61% to 102% though subsequently indicated an update to 86% which is still a significant increase in one year. Furthermore, the debt listed in the estimate of revenue and expenditure has absolutely no mention of the CIP COVID-19 bonds. These bonds are being marketed as “socially responsible investing (SRI) option in the investment migration industry” though it remains debt. Some initial observations from the 2021/2022 Estimates include the following:
· No mention of the total external debt such as the $298M of CDB debt listed in the 2019/2020 estimates. From the numbers in the 2021/2022 Estimates the total of CDB debt as of December 31 2020 appears to be over $400M (30+% increase)
· The sum of the principal payments remaining for bilateral loans has increased from $85M as of December 31 2018 to $166M as of December 31 2020.
· No mention of any CIP bonds in the estimates though there was $91.3M mentioned as CIP bonds in the June 2020 Debt bulletin. There was an indication of $28M for Citizenship by Investment revenue in fiscal year 2019/2020 but then $0 for all other columns on Page 18.
· Why is the following bond entry negative on page 607? “River Doree US11.43M 5yr 6% Bond -4,024,634.42”
· Typo on “Extgernal Debt” on pages 605 to 608 on the Table ending.
· Hewanorra International Airport Redevelopment project is indicated as a contingent liability under SLASPA. The principal is $270M which is at the interest rate of LIBOR+1.5% and has already accrued close to $6M of interest.
The 2021/2022 estimates of revenue and expenditure appears to be a hastily crafted budget that the current administration is not expecting to follow through with particularly given that there will be a general election within 6 months. There are numerous optimistic projections that appear to give the impression that the COVID-19 pandemic is already resolved, and our tourism-dependent economy will be back immediately. However, it appears that the economy will continue to result in escalating debt burdening Saint Lucians for some time.
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