St Vincent And The Grenadines:
Government Presents Tax Free Budget

KINGSTOWN, St Vincent, CMC – Prime Minister Dr. Ralph Gonsalves has presented an EC$913.5 million (US$338.3 million) tax free budget to Parliament, removing also the Value Added Tax (VAT) on wheat and raw chicken imports as well as packaging for agro-products.

He described the fiscal package as the “most challenging” since his Unity Labour Party (ULP) came to office in 2001 and that his administration was focusing on the productive sector with a view to bringing relief during the hard economic times.

Supporters of both the ruling ULP and the main opposition New Democratic Party (NDP) demonstrated outside the Parliament building late Monday, as Gonsalves, who is also the Finance Minister, announced a 20 per cent increase in the fees for citizenship, residency, and work permits respectively, with exemptions for persons who become citizens by marriage.

“These are the only things we are increasing in the budget … and these affect foreigners,” Gonsalves said.

The budget comes at the beginning of the year in which, political observers believe, the ULP administration will seek a third consecutive term in office even though the polls are constitutionally due by March next year.

The budget is EC$162.6 million (US$60.2million) or 21.7 per cent higher than the approved estimates for 2009 and the government will run a current account deficit of EC$20.5 million (US$7.5 million).

But the Prime Minister said that this “manageable amount” is a temporary situation necessitated by the global economic situation.

He said several of the programmes contributing to the deficit were needed to safeguards the gains made in poverty reduction and the “education revolution”.

“As Minister of Finance, I could have contrived a current accounts surplus… Had I done this, I would have acted contrary to the people’s interest, made matters worse, precipitated a needles crisis and put the country into a tail spin,” he told legislators.

He said the exclusion of some of these programmes, such as social welfare benefits and education, healthcare, and public safety initiatives, would have resulted in a current accounts surplus of over six million dollars (US$2.2 million).

“I could have balanced the books, but in the process, I would have unbalanced the country,” he said, noting however that he was aware of the resulting financial imbalance of such a deficit and that his administration was “taking action to return to normalcy as soon as feasible, given the global economic situation”.

Gonsalves said among the source of finance for the capital budget are project grants, budgetary support from the European Union and friendly governments, suppliers credit, and US$20 million (EC$54 million) of the Special Drawing Rights at the International Monetary Fund (IMF).

The Prime Minister said that the national debt had increased by 10.2 percent to EC$1.9 billion (US$400 million) in 2009.

“This is not an unreasonable rate of increase given the tremendous growth in physical, social and human infrastructure which we have achieved and given the global economic situation and the virtual drying up of aid from most of our traditional donors.”

He said the country had to finance more and more of its own development and had to do so while trying to keep its debt within manageable levels and in keeping with international norms.

“The situation calls for creativity and innovative policy measure, we are now confronted with the difficult choice of whether to maintain fiscal stimulus, raising issues of debt sustainability of phasing out the fiscal stimulus, raising danger of adverse interaction between real economic activity, the health of the financial sector and the fiscal situation.”

Leader of the Opposition Arnhim Eustace will respond to the budget presentation later on Tuesday.

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