The Richard Duncan-led Fiscal Responsibility Oversight Committee (FROC) has put Grenada’s national debt at around EC$2.4 billion.
Speaking with reporters in St. George’s, Duncan said that although the debt is still considered high, the FROC believes that the ruling New National Party (NNP) government of Prime Minister Dr. Keith Mitchell is on the right track towards reducing the national debt.
Duncan said the government has been doing something right between 2016 and 2017, as the debt has been reduced from $2.6 billion in 2016 to $2.4 billion in 2017. He stated that has resulted in the island’s Debt to GDP (Gross Domestic Product) ratio going down by 10.3% from 91.6% in 2016 to 81.3% in 2017.
The Mitchell government on being returned to office following the 2013 general election was forced to approach the Washington-based International Monetary Fund (IMF) for assistance with a 3-year Structural Adjustment Programme to address a severe fiscal problem.
As part of the arrangement, Grenada was forced to take measures to cut on expenditure and increase revenue through adjustments in some taxes like the doubling of Property Tax and a widening of the Income Tax net.
Duncan recalled that in its very first report in 2017, FROC was unable to disclose to the local media what the national debt was at the time because of its inability to reconcile figures provided by the Macroeconomic Policy Unit in the Ministry of Finance which provided a public debt of $2.3 billion versus a higher figure of $2.6 billion as of December 31st, 2016.
However, Duncan who is the Managing Director of the Grenada Co-operative Bank Limited (GCBL) said he is satisfied with what was brought before the committee in respect of the national debt.
“The national debt has been published on the Ministry of Finance website; however, as FROC we always make the point that if we are to achieve transparency, information that is already in the public domain, cannot be all that is given to the FROC – transparency suggest that there has to be a certain amount of probing and insight gathered by the FROC and we are satisfied that that has been achieved during the assessment,” he said.
Duncan expressed confidence that the country is well on its way to continue reducing the national debt but advises that care must be taken by government when taking on new debt burdens.
“So, as the economy continues to grow, we continue to repay some of the debt that we have and remember, while we are re-paying we are also borrowing because remember there are developmental projects to take place. So, once we can build what is called surpluses consistently, it means that you are on the right track for lowering your debt and being able to fund some of your development works from the gains you have between the revenue you collect and what you spend…”, he said.
“You don’t have to consistently borrow large amounts to do developmental projects, you can do it from your savings given the surpluses that you have and positive primary balance, but you have to achieve those things at a certain level, consistently over time for it to really make a difference. And that is why the Fiscal Responsibility Law is so important to make sure that we behave consistently, not that when things are good, you will spend, spend, spend and when things are bad, you ask people to tighten their belt and to adjust.
Duncan went on: “You (have to) manage the economy in such a way that over time things will be smooth and balance and not return the country to a three-year adjustment programme because prior to that three year programme, we did not behave as responsibly as we should have”.
The previous NNP regime of PM Mitchell has been singled out for most of the borrowings that saw the national debt skyrocket from EC$373 million in 1995 to well over 2 billion when it lost the 2008 general election.