Excerpts of Dr. Friday’s Address at the party’s 42nd Annual Convention
Economies all over the world are emerging from the devastation of the COVID-19 pandemic. In some countries, for example the USA, the growth in jobs has been robust.
According to the IMF, the global economy grew by 5.9% in 2021 and is expected to grow by 4.9% in 2022. In each region and country, however, the IMF says that the prospects for economic growth are tied to increasing vaccination rates and the overcoming of the pandemic.
For health and economic reasons, and based on the best scientific advice, we have accepted vaccination as the safest and quickest way to overcome the pandemic and get back to our normal lives. But, that is a choice each of us must make for ourselves. Unfortunately, the stubborn, wrong-headed approach of the ULP government is making the situation worse. It isn’t helping. Only a change of government can create the conditions for a better solution to this problem. It is our goal that will be brought about sooner rather than later.
Our economic woes preceded the pandemic. The members of the ULP government would want us to believe that our economic problems started with COVID-19 and the volcanic eruption. But this is not so; the problems were there before. Take for example, the year 2019, the last year before the COVID-19 pandemic struck, our economy grew by a mere 0.4%, the worst in the OECS. Between 2014 and 2018, the St. Vincent and the Grenadines economy grew by an annual average of 1.5%. For an economy as small as ours that is really no growth at all.
The national debt and the cost of repaying has grown out of bounds. Our national debt in 2021 was $2 billion. The ECCB set a level of 60% of GDP as a prudent rate at which the debt should be. We now have a Debt/GDP ratio of over 98.1 %. This far exceeds the guidelines of 60% set by major financial organization like the ECCB, World Bank and IMF. Before the pandemic and the volcanic eruption, it was in the mid-70s% and climbing; well above the 60% recommended top level.
The central government debt is roughly the size of the economy. It is clear that the pandemic and volcanic eruptions exposed the underlying problems of the economy and made them worse. The St Vincent and the Grenadines economy had no ability to absorb any economic shocks because we were already skating on thin ice, economically speaking. We were already stretched too thin to endure much more pressure.
Also, recall that the government’s own poverty assessment study conducted in 2018 showed that between 2008 and 2018, poverty increased in St Vincent and the Grenadines. During that period, poverty overall increased from 30.2 percent to 36.1 percent of the population and indigence (i.e. poorest of the poor) increased from 2.9 percent to 11.3 percent of the population. While in Grenada, the poverty rate was down 13% over the same period.
The government’s study defined indigence as follows: “The Indigent/food line is based on the minimum amount of money needed to purchase some basic food bundle. Households or persons unable to meet the cost of obtaining these basic food items are categorised as critically poor, indigent or food poor.” So over twelve thousand people in St Vincent and the Grenadines in 2018 could not buy a basic food bundle to feed themselves.
In some areas, namely Barrouallie and Northern Grenadines, the poverty rate more than doubled. Only in Colonarie did poverty decline. Everywhere else, it got worse. Correspondingly, the IMF found that unemployment increased in St. Vincent and the Grenadines over the life of the ULP government.
In 2017, it said the overall unemployment rate in our country was 25 percent. This was worse than it was in 2001, when the ULP came to power, when it was 20.9 percent. The youth (15-24 years) unemployment rate in 2017 was put at a staggering 46 percent. It is no doubt worse than that today. It is no wonder young people are crying out in pain and are feeling left behind in their country. Many have left for greener pasture in other OECS countries or even further away.
When young people increasingly feel that there is no future for them in their own country, and leave to use their many talents elsewhere, then we are truly lost as a nation. This rot and decline must stop. We can and must stop it. But, clearly, some people are doing well. Their own poverty report said some are getting more than others in the meagre growth we experienced. They must have connections to be doing so well.
Tax Relief is Needed
The tax burden grows. As the cost of import rises because of supply chain issues and other factors, the burden on ordinary people gets heavier. The VAT was, by different means, increased three years in a row following 2015 elections. It goes up but does not ever come down. I believe it is time for it to come down. In the last general elections, we said that we would reduce the VAT from 16 percent to 13 percent. We believe it is necessary to reduce the VAT to reduce the impact of rising cost of living on people.
The government says they did not increase taxes in the last Budget, but they also did not provide any tax relief as, for example, was done in Grenada. If you are building a house, you know that the cost of plywood has skyrocketed; the cost of steel and cement and other building materials have gone up. Foodstuff and clothing costs have risen rapidly too.
Meanwhile, employers say they cannot increase wages. So, people are squeezed by stagnant wages and rising prices. Given the pressure people are feeling, the government must now consider cutting VAT in half to provide real relief to ordinary people.