We have come full circle

Are the people of Grenada listening to Prime Minister Dr. Keith Mitchell when he tells them that the new watchword has to be sacrifice?

It is one thing to campaign on a promise of “delivery” but economic and financial reality is what really matters.

Our people need to pay particular attention to what is happening around them and specifically at the negotiations which Grenada is about to embark upon with the international creditors who are owed most of the island’s debt of some EC$2.3 billion.

A recent statement put out by some of the Creditors seem to suggest that they are gearing up for a series of tough negotiations with the Keith Mitchell-led New National Party (NNP) government following the announcement from the eleven week old administration that the island’s inability to service the high debts has forced it to seek rescheduling of the payments.

There is a clear hint from the creditors in the statement issued that they want the Washington-based International Monetary Fund (IMF) to be a critical player in the process and as a pre-condition that Grenada must agree to pay its costs to be incurred such as legal fees that can easily run into a few millions of dollars.

At this juncture, THE NEW TODAY is forced to ask the critical question of whether the island has not come around full circle in the last 10 years on the critical question of its Debt Burden?

This newspaper has oversight of a document that was prepared by a former NNP government in 2003 when it was trying to raise millions from the Republic of China on Taiwan on the grounds that economic growth in Grenada had come “to a halt in 2000/2001” under the Mitchell government.

In that document, the then government in office made the startling admittance that it was forced to engage in “commercial high cost financing” through the borrowing of loans at high interest rates of 9% and that “the expected economic growth needed to generate the revenues for debt servicing did not materialise”.

Ten years later the island appears to have come “full circle” around once again. As Lloyd Noel wrote in his column in this week’s newspaper, the people who created the unhealthy debt situation are now back in charge as the controllers of the nation’s affairs to deal with most of the debts that they had in fact incurred in their first 13 years in office.

This is what the same set of controllers wrote ten years ago about the debt situation in Grenada, which is now threatening to strangle all of us in Grenada, Carriacou and Petite Martinique:

 

“The lack of economic growth holds particularly negative implications for the country’s domestic and international debt payments. The country’s debt servicing burden is particularly high in the first and last quarters of every year.

The country’s debt burden arose from the need to undertake necessary infrastructure development (Roads, Education, Health, etc) in order to kick-start critical growth-oriented activities.

The scarcity of concessionary financing forced the government to resort to commercial high financing, given the expectation of economic growth. However, the expected economic growth needed to generate the revenues for debt servicing did not materialise because of international shocks, crippling natural disasters, and our lack of technical and professional personnel.

The country debt burden, which averages about 75% of GDP has become a major constraint. This debt “overhang” is definitely a constraint to further economic expansion. Urgent steps need to be adapted to reduce the debt burden as a precondition for undertaking critical social programmes.




In fact, the ability of the government to undertake the social agenda called for by the Grenadian electorate in the just-held General Elections (2003) will hinge pivotally on the extent to which critical components of the national debt can be reduced.

The government has identified a combined strategy of debt renegotiation and rescheduling, financial assistance by friends of Grenada to help with the payment of interests for a period of two to three years, and by limiting Government Capital expenditure.

This cautious approach to debt management will over the next several years also impact negatively on the country’s economic growth, which has been strongly dependent on the level of public investment.

For the last quarter of Fiscal Year (FY) 2003, interest payment towards the country’s national debt will average around US$10 Million. For FY 2004 interest payments of US$30.8 will be necessary. It would be critical for the Government of Grenada to meet these debt commitments.

Over the years, the Government of Grenada has undertaken the most prudent strategy for the country’s development.

Now, in the present circumstances, some short-term assistance will be critical in filling the budgetary and debt gaps and as well in “tiding the country through this difficult time”.

Grenada cannot undertake the requisite improvements (budgetary improvements, debt servicing, professional manpower recruitment, etc) without assistance”.

 

Ten years later – aren’t we back where we were in 2003?

The only addition, which THE NEW TODAY can make to be above, is the following: The more things change the more they remain the same. Too many of our people are only concerned with wanting “to eat a food” at the expense of the State. It cannot be business as back in the days of 1995 and up to Hurricane Ivan in 2004.

The reality of the situation is that the promised “delivery” hinges on the outcome of the pending negotiations for the second time in 10 years between government and the international creditors to find a way for Grenada to be able to pay back those whom the country borrowed millions of dollars from over the years.

The battle is truly on in the tri-island State between those who are sensible enough to understand that this period indeed calls for “sacrifice” and not, the constant repeating of “we will deliver” in order to take Grenada out of its present financial and economic quagmire.

 

 

 

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