On Thursday October 5, Prime Minister of St. Kitts and Nevis whom many now see as a full-fledged dictator living inside his bubble of the post-truth era, in a press conference organised by his office, sought to take credit for reducing the country’s debt to 60% of the Gross Domestic Product (GDP). Members of the media who were present scoffed at the Prime Minister’s boldfaced remark ascribing the economic and fiscal success of St. Kitts and Nevis to himself.
Here are the Facts.
A. CAUSE OF THE DEBT
- A series of devastating hurricanes (Georges, Luis, Marilyn et al) in the mid-1990’s wreaking havoc on the built infrastructure and the agricultural sector including the sugar industry
- Unwise investment of over $300 Million in the failing Sugar Industry by Agriculture Minister Timothy Harris. As a result, thousands of acres of land had to be mortgaged to the St. Kitts-Nevis-Anguilla National Bank. The investment could not turn around the industry because the failure of the industry was as a result of external market forces.
- The drastic increase in oil prices from about US$30 per barrel in 2003 to US$140 by 2007. At the same time, electricity and petrol costs were being subsidized by the government to shield the poor and the small businesses from the economic shock.
- The Global Economic Crisis of 2008 slowed growth into negative territory and made it difficult to adequately manage the debt. Debt rose to about 160% of GDP (on the re-evaluated basis in 2012)
B. THE POLICIES THAT MANAGED THE DEBT
- Major debt restructuring on the advice of the regional and international public institutions. This meant renegotiating current debt instruments to a more favorable position to the government and people of St. Kitts and Nevis.
- The Debt-Land Swap: Lands that had been mortgaged to the St. Kitts-Nevis-Anguilla National Bank were by law transferred to a Special-Purpose Company owned by the Government and the Bank to determine the economic use of the land.
- The change of the tax structure to a more transparent one including the introduction of the value-added tax.
C. THE RESULT
- Debt plummeted from 160% of GDP to 66% of GDP between 2011 and 2015
- Businesses are better off by being able to claim input VAT for their businesses
- St. Kitts and Nevis has attained the Eastern Caribbean Central Bank’s (ECCB’s) 2030 debt-level target by 2017.
- The country is grateful to the Dr. Denzil Douglas-led administration