The impact of falling oil prices, internationally, on the Venezuelan economy will be felt in St. Vincent and the Grenadines, but Vincentians will not pay a higher rate of value added tax (VAT) to make up for the shortfall.
Prime Minister Ralph Gonsalves said on Monday that the Estimates of Income and Expenditure for 2016 that he will ask Parliament to approve on Friday will include “creative” responses to the new economic realities.
With oil prices down to less than US$30 per barrel on the international market, Kingstown and other capitals participating in Caracas’ PetroCaribe initiative is set to receive less of their oil imports as loans, to be repaid over 25 years at 2 per cent interest.
Participating nations used the loan monies to fund social programmes.
Gonsalves noted the emerging economic realities when he spoke on radio on Monday.
“When you hear me present the package, you will hear… I can deny explicitly that we are not going to have any increase in the rate of VAT, as they had suggested, or from 15 to any number,” he told listeners.
Gonsalves, who is also Minister of Finance, told listeners that he is emphasising the point that the nation’s economic planners have to be “very creative and we have to mix prudence and enterprise in this period.
“We see what is happening in the world and we see the uncertainties and we will be losing a significant amount of money through the PetroCaribe funding — we still will get some — because of the falling prices.”
He said that while falling oil prices are good for the Vincentian economy, “at the same time, if the price is higher, the proportion [of the monies from oil imported under PetroCaribe] which will come to the government on the funding aspect over the 20 to 25-year period would have been higher is the prices were higher, clearly.
“So, there will be a shortfall on that and you will hear how I’m leading with all those issues.”
Gonsalves said that the Estimates will speak to fulfilling promises that his Unity Labour Party made to citizens during the campaign for the Dec. 9 general elections in which the party was elected to a fourth consecutive term.