PM Friday promises ‘course correction’ on SVG debt

Prime Minister Godwin Friday says his administration is executing a “course correction” of St. Vincent and the Grenadines’ public finances, after discovering on taking office in November that the country’s debt burden is far worse than previously disclosed.

In an interview on “The Bubb Report” with Grenadian journalist Kellon Bubb, the Friday described a debt crisis, pledged to restore fiscal discipline, and signalled rules-based engagement with international financial institutions.

“We are seeking now to do some course correction to make sure that the cost that the people pay … is not one that is intolerable and that eventually we’ll be able to work towards getting the debt situation manageable,” the prime minister said in the interview broadcast on Sunday.

‘Not quite ready for the depth of the crisis’

The prime minister said that even after years of scrutinising budgets from the opposition benches, the true state of the public finances only became clear after the November change of government.

“To be honest with you, I thought there was nothing about the economy that could surprise me,” he said.

“We knew that things were pretty difficult… but I was not quite ready for the depth of the crisis… that we found ourselves in, in terms of the finances of the country.”

He said the debt-to-GDP ratio, widely understood to be in the 90% range, turned out to be substantially higher.

“… we found out very quickly it’s 113% of GDP and projected to rise much higher.”

He described public finances as “very precarious”.

“The overdraft was completely overdrawn,” he said. “The debt situation was really hampering, and would hamper, the ability of government to implement its plans and programmes.”

Vincentians voted Friday’s New Democratic Party (NDP) into office in November, ending the Unity Labour Party’s 25 years in office.  

Friday said that the fiscal shock collided with the budget timetable, forcing the new administration to attach itself to a process already in train.

“We had to, essentially, tag on to the budget process that was there, because we didn’t have time to redo the entire thing ourselves, at the same time acknowledging that we are in really worse economic shape than we had thought,” he said.

“Even in our days when we were… criticising the government left, right and centre, we didn’t imagine that it was as bad as it was.”

‘You can’t disregard the guardrails’

Friday linked the situation to what he called earlier fiscal recklessness.

“We’ve been saying this all the time when we were in opposition: you can’t disregard the guardrails and simply say, ‘Well, I’m doing it in the best interest of the people,’” he said.

“In the end, if you are reckless and you don’t pay attention… the very people that you say you want to help are the ones who are going to wind up paying the cost of it.”

He said his government has committed to working with the international community to return to the Eastern Caribbean Central Bank’s 60% debt-to-GDP guideline.

The prime minister acknowledged that the adjustment is now harder than it would have been several years ago because of the explosion in debt.

“But we have to signal… that we want to turn it around.”

IMF and partners: engagement ‘on your terms’

Pressed about his references to a “rules-based framework” and the IMF, Friday said dealing with international financial institutions is unavoidable, but insisted that any programme must be shaped by domestic priorities.

He characterised their policy advice as “thoughtful” and said it cannot be simply dismissed.

“They are there to assist you, to try to help you to manage your finances… in a way that enables you… to deliver on the social programmes and developmental programmes that we have planned,” Friday said.

“We engage in that conversation seriously. It’s not… an adversarial relationship.”

At the same time, he said, local needs and political accountability must anchor any arrangement.

“They have their views, their positions, and they cannot be ignored… but we also have our own understanding of the needs of [the] country, of the people, and we are politicians as well,” he said.

“We have to listen to the voice of the people. That’s the nature of democracy.”

Friday listed debt swaps, debt forgiveness and concessional loans among the tools the government intends to pursue.

“Whether you have debt swaps, which we intend to do, whether you have debt forgiveness, which we intend to seek, whether you have more concessional loans, which we intend to obtain — all of these things are important,” he said.

“But the fundamental thing is that we have to grow the economy.”

Pushing growth beyond sub-3% growth

Friday said the central economic test is whether his government can lift growth above the sub-3% range projected by external institutions.

The NDP came to office, winning 14 of the 15 parliamentary seats.

The prime minister framed his electoral mandate in economic terms.

“That election is based upon one fundamental promise,” Friday said. “That is to make the country safe, secure, [so that] people can live and enjoy better standards of living — to essentially deliver a better life to the people of my country.”

To do so, he said, the government is “taking every opportunity” to attract foreign direct investment while “unlocking” domestic private capital, in a region he described as facing a “scarcity of capital”.

“Where we can have investment that fits with our own developmental goals, that creates jobs, that are responsible for our people, we invite and will court such investments,” he said.

“You will see during the term of this government… a tremendous [push] in investments that will create jobs and business opportunities for people. That’s the way we get out of the debt.”

Friday stressed that growth must translate into jobs, business opportunities and social programmes, not only improved ratios.

“We have to find mechanisms for our people to find work, better-paying jobs, to have business opportunities, and where social programmes are necessary… they are put in place,” the prime minister said.