National debt now $2.4b. ‘What do we have to show for it?’ MP asks

An opposition lawmaker is questioning how the Unity Labour Party (ULP) government spent the almost EC$2 billion in debt it amassed since coming to office in March 2001.

The question comes even as the Fiscal Responsibility Mechanism, which the government set up two years ago to monitor its management of the economy, is urging a reduction in expenditure. 

“… our national debt has increased significantly from 2001 when this government came to office,” Fitz Bramble, MP for East Kingstown said this week as he commented on the EC$1.6 billion 2024 budget that Parliament approved this month after a premature end to the debate of the fiscal package.

Bramble, an economist, pointed out that when the New Democratic Party (NDP), of which he is a member, was voted out of office in 2001, the public debt was EC$738 million.

“In 2023, the public debt was $2.4 billion — more than three times what the Unity Labour Party met when they came into office in 2001,” Bramble said

“Can you imagine that? When [then prime minister,] Sir James left office, the debt was $738 million. Now it’s $2.4 billion, and what do we have to show for it?”

Bramble said he was not saying that all the debt that the ULP incurred was “useless”, mentioning among the projects on which money was well spent, the Argyle International Airport.

“But the question is, how has this $2.4 billion of debt incurred by the Unity Labour Party administration … improved the quality of life of Vincentians? That is the question that the Honourable Minister of Finance needs to come and answer.”

He said a lack of primary balance surpluses is among the factors complicating realities regarding managing the national debt.

“In other words, we’re operating at a primary balance deficit, we are spending more than we’re earning from tax revenue, and so on. So that has impeded our ability to restrain and to repay our debt…” the MP said.

Bramble said that if economic activity and growth was better, the country would be in a much better position to service the national debt.

He said that the debt-to-GDP ratio is an important indicator of how debt impacts the economy and lives of people.

“In [2001], when the New Democratic Party demitted office, the debt was 54.2%, which means that when the NDP administration left office, every dollar that this country made, we only owed 54 cents in debt.

“Today, in 2023, our debt-to-GDP ratio is 85%. Which means for every dollar that this country generates, this economy generates, we owe 85 cents in debt,” Bramble said. 

“This is mind boggling, especially when you consider the socio-economic conditions of this country that our people have to face.”

The government established the rules Fiscal Responsibility Framework in December 2019 by way of a parliamentary resolution.

The objective of the Framework is to establish the principles and procedures of responsible fiscal management and to facilitate effective parliamentary oversight and public scrutiny of the fiscal performance of the government.

The framework is guided by principles of responsible fiscal management: accountability, sustainability, stability and transparency.

It is intended to aid in achieving the goals of achieving and maintaining a sustainable fiscal balance; achieving and maintaining prudent levels of public debt; prudently managing fiscal risks; and promoting prudence and enterprise in fiscal management

Bramble described the members of the framework as “very reputable and competent and well-respected Vincentians”.

They are accounts Brian Glasgow, Maurice Edwards (a retired Director of finance in the government of SVG), Professor Justin Robinson, Shafia London and Linton Lewis lawyer and chartered accountant.

He said the Fiscal Responsibility Mechanism report noted that the country should aim to reduce debt-to-GDP from 85% to 60% by 2035.

“Seriously?” Bramble said. “Do we think based on the plans or lack thereof of this current government that we will be able to reduce our debt-to-GDP ratio from 85% to 60% by 2035?

“Well, I am not alone in my in my doubt of achieving such an objective because the FRM (Fiscal Responsibility Mechanism) report also says this is ambitious since this government has historically increased debt-to-GDP ratio from 54% in 2000 when they came to office and the government’s record of unsustainable borrowing and very low economic growth does not provide much more confidence that this target will be reached.”

He further pointed out that the report said that given the anticipated level of expenditure and the current economic environment, the long-term debt fiscal role is very ambitious, and will be a challenging milestone to achieve within the designated time frame.

“So, we see here that we are in a dire strait,” Bramble said, adding that the International Monetary Fund said in its 2022 Article IV consultation that SVG’s public debt is sustainable but remains at risk of distress.”

Bramble said debt distress refers to a situation where a country is experiencing or about to experience a distress event, such as being unable to meet the repayment due to its creditors.

“It is a state of financial strain that can lead to default, loss of market access, higher borrowing costs and harm to economic growth and development. And debt distress can have very many consequences,” he said.

“We may not be able to pay back the people who we owe.,” he said, adding that if this happens, “we as Vincentians may very well face … rising cost of living…

economic instability, leading to job losses, reduced investment and a decline in economic growth … and reduced access to services.

“Countries facing debt distress may need to cut back on public services to allocate resources towards debt repayment, which can negatively impact citizens’ quality of life and increased poverty. As resources are diverted from social programs and development projects, to pay back our debt, debt servicing,” Bramble said.

“So, we see that our current debt situation is really, really serious. And that might very well be an understatement.”