The new Keith Mitchell-led government in St. George’s has committed itself to imposing a self-imposed austerity programme to deal with Grenada’s worrisome fiscal system including high debts.
This was one of the issues, which Mitchell’s ruling New National Party (NNP) addressed in its manifesto for the February 19 general elections in which it won all fifteen seats against the incumbent National Democratic Congress (NDC) of Tillman Thomas.
Within days of coming into power, the Mitchell administration was forced to default on a payment of EC$19 million that should have been paid on March 15 to the island’s creditors group within the Paris Club.
The one-month old government quickly announced that it will be approaching the creditors of loans to Grenada to seek a second restructuring of the national debts now estimated at EC$2.2 billion.
In its manifesto, the NNP said it is committed to sharply reducing overseas travel by Government Ministers in order to tackle the fiscal woes of the country.
As a public service, THE NEW TODAY reproduces from the NNP manifesto the section that deals with Debts and the need for greater fiscal management:
AN URGENT CALL TO ACTION
The NNP appreciates the reality of the situation now facing Grenada
There can be no denying that our economy is on the edge of a dangerous fiscal precipice. Only decisive, prudent and expert management can avert a looming disaster arising from almost five years of an economically inept NDC administration.
The IMF Article IV Consultations Report (June 2012) painted a dire picture of Grenada’s economy. It based its predictions on an economic growth rate of 1.2% for 2012 and 2.5% in 2013. In reality GDP growth rates are now known to be far lower.
In 2011 it was 0.41%, in 2012 a painful -0.72%, and 2013 it is projected at just 1.08%. Such slippage will cause the alarmingly weak economy to deteriorate even further than forecast.
Unemployment, which stood at 23% in 2008, grew to 30% by 2009 and stands today at an alarming 40%.
Youth unemployment, recorded at 36% in 2008, stands at approximately 45% today. Nearly 1 in every 2 young persons is without work! This does not take into account underemployment, where skilled Grenadians have been forced to take unskilled jobs because of the absence of opportunities to use their talents, or the persons who are now working under various temporary arrangements of one week on and one week off.
The fact that the IMF projections do not capture the depth of frustration that many average Grenadians endure on a daily basis is even more worrisome.
Without decisive action Grenada will continue to experience:
• Low growth, high debt and high unemployment;
• Consistent declines in international competitiveness, including the competitiveness of tourism;
• Declining returns to investment and increasing labour cost.
The NNP Economics Team agrees with the IMF on the overall macro-economic situation confronting our Country. We have developed a comprehensive strategy for getting Grenada to work again. We are confident that, challenges notwithstanding, “Our Best Years Lie Ahead” if we unleash the country’s potential to emerge in the “New Economy”.
Such critical actions will:
•Improve productivity and increase labour market flexibility;
•Reorient government spending from consumption to infrastructure development;
• Embrace selective financing pro-growth and high-employment, and in particular revisit the National Policy Statement on Small Business Development;
• Bring Discipline to State-owned enterprises.
Prudent macro-economic management will also be essential to the process, and in this regard, an NNP administration will focus on five strategic priorities:
(1). Fiscal Stabilisation and Fiscal Consolidation;
(2). Debt Management, including Debt Re-Negotiations;
(3). Supporting Competitiveness and Economic Growth;
(4). Institutional Reform, including Legislation; and
(5). Social Assistance and Social Protection.
In the IMF’s Article IV report of July 2012, a sharp increase in government expenditure was recorded under the NDC.
Restoring fiscal balance will require the NNP to immediately implement a self-imposed austerity programme, including at a minimum:
• Sharply reducing overseas travel by Ministers;
• Relying on private sector partnerships, where appropriate, to support the technical work of the Ministries;
• Rationalizing non-essential leases on buildings and rental of assets;
• Making greater use of Ambassadors and Special Envoys to attract investment and secure opportunities in areas central to the “New Economy”.
Prudent Debt Management:
The ECCU has identified an “Eight Point Stabilisation and Growth Programme”. Consistent with these recommendations, our debt management plan will include:
(1). Sharp reductions in the debt-to-GDP ratio by 2020;
(2). Major enhancement in revenue-to-GDP ratio, from 19% to 25%;
(3). Reductions in government expenditure taking into account the Fiscal Affairs Department (FAD) Public Expenditure Review;
(4). Establishment, in the first year, of a Cost Savings and Waste Reduction Committee, comprising Public Servants, Labour Unions, Private Sector, NGOs and finance and accounting specialists, with a target of reducing the indirect costs to Government by 15%-20%;
(5). Debt management and debt renegotiations, including a switch in borrowing from the Regional Government Securities Market (RGSM) to longer-term instruments.
Competitiveness and Economic Growth
The NNP will review the country’s regulatory framework to:
• Revise and/or provide a coherent and coordinated set of medium and long term initiatives to better promote and facilitate investment projects and strengthen Grenada’s attractiveness for international investors;
• Promote sustainable competitiveness, including through special tax incentives that encourage the manufacture of green products and that establish Grenada as a Centre for Green Business Initiatives
Institutional and Legal Reforms:
The NNP will:
• Revise and complete the Public Procurement Act and other vital items of legislation, critical to the NNP’s Agenda for Recovery, Growth and Transformation;
• Continue Financial reforms to ensure that financial institutions meet high prudential standards and safeguard financial stability;
• Revise and introduce other critical legislation, in areas such as double taxation, alien land holding licenses, customs procedures, and other areas of business facilitation;
• Institute a Legal Reform Committee within the Cabinet Appointed National Competitiveness Council;
• Establish a dedicated Ministry of Planning and Economic Development, appropriately staffed with technicians at the highest level of competence to engage in continuous review and planning of the macro-economy.