PM Mitchell speaks on the debt situations

Grenada’s national debt has grown by approximately .2 of a billion dollars within the past year under the ruling New National Party (NNP) government of Prime Minister Dr. Keith Mitchell.

A year ago when he presented the 2014 budget, Dr. Mitchell who is also the island’s Minister of Finance put the national debt at EC$2.4 billion.

When he presented the 2015 budget last week, the Prime Minister put the debt now at EC$2.6 billion.

He did not give any indication for the rise in Grenada’s debt stock in the near two years since the NNP was returned to power in a sweeping 15-0 sweep of all the seats against the then ruling Congress party of Tillman Thomas.

He said that at December 31, 2014, the total Public Sector Debt is expected to be $2.56 billion or 107% of GDP.

According to Dr. Mitchell, the break down is as follows: Central Government Debt ($2.11 billion), Government Guarantees ($132.3 million), Other Public Sector Debt ($313.9 million) thus putting the total Public Sector Debt at $2.56 billion.

He told Parliament that the island’s total Debt Stock is estimated to grow by 2.9 per cent, however, the stock of Government Guarantees has fallen to $132.3 million from $141.3 million, a reduction of $9.0 million during the past year.

The Mitchell government, with support from the Washington-based International Monetary Fund (IMF) has been forced to institute a 3-year Structural Adjustment Programme (SAP) to deal with a fiscal crisis plaguing the local economy.

Prime Minister Mitchell told legislators that he expected Grenada’s Public Debt to GDP ratio to fall from 109% in 2013 to 107%.

He also used the budget address to refute claims from some quarters that his administration had not been paying debts since it came into office in February 2013.

“Mr. Speaker, there are some persons who continue to suggest that Government is not paying any debts. This is simply untrue”, said PM Mitchell.

“In 2014, Grenada has already made debt payments of $245.6 million. This sum includes $207 million in principal repayments (of which $120 million were Treasury Bill rollovers) and $34.1 million were interest costs”, he added.

Within one month of coming into office, the Mitchell government announced that it was   defaulting on a payment of close to EC$21 million owed to bond holders of some US $193 million since it was more interested in restructuring the island’s debts.

On the issue of  Debt Restructuring, he briefed the Parliament on the efforts undertaken so far by government.

PM Mitchell said:  Mr. Speaker, it may be recalled that in March 2013, one week after the Cabinet was sworn in, our Government took the tough but necessary decision to pursue a comprehensive restructuring of the Public Debt. We then proceeded to develop our Homegrown Programme and to engage the IMF and other partners for their support.

“In an ideal situation, we would have preferred to develop the Homegrown Programme, secure the support of the IMF and other partners and then announce the restructuring. Unfortunately, our new Administration did not have the luxury of time to proceed in that manner.

“Indeed, it was well known that the previous Administration had paid the last coupon due in September 2012 on the last day of the grace period in October 2012 and borrowed to complete the payment. It was also well known that the NDC Administration was selling every asset in its sight to pay salaries to public officers. This was the situation inherited by our Government.

“We had to act swiftly and decisively. It is now a matter of public record that the Homegrown Programme commenced in January 2014 and the IMF’s Board endorsed it in June 2014. Since June of this year, negotiations with our creditors have intensified and are close to being finalised. Upon completion, we expect to see a rise in Grenada’s credit rating.

Prime Minister Mitchell also alluded to the estimated EC$75 million loan owed to the Republic of China (ROC) on Taiwan.

The Taiwanese have instituted court proceedings in New York against the Grenada government for repayment of four outstanding loans.

Within months of Hurricane Ivan creating havoc on the island in September 2004, a previous Mitchell-led NNP government severed ties with Taipei in favour of Mainland China which offered a more lucrative development package.

Dr. Mitchell outlined to Parliament the status of the Grenada/Taiwan outstanding loan payments.

He said:  On the matter of the outstanding debt to Taiwan, I wish to report that the Government has proceeded in a proactive and responsible fashion. Within four months of assuming office, Grenada and Taiwan reached agreement on a standstill of the legal proceedings in New York.

“Subsequently, we have negotiated debt relief consistent with the needs of the Homegrown Programme, endorsed by the IMF. More details will be given when this process is completed”, he told Parliament.

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