NATIONAL CONSULTATION ON THE ECONOMY Theme: “The Architecture of an Efficient and Sustainable...
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NATIONAL CONSULTATION ON THE ECONOMY
Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of
our Economic Growth Agenda”
St Kitts Marriott Resort8th September 2011
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Ministry of FinanceSHORT TO MEDIUM TERM FISCAL STRATEGY
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Overview of PresentationRecent PerformanceHistorical PerformanceShort to Medium Term Fiscal StrategyKey Fiscal and Other MeasuresFiscal Targets and Expected Outcomes 2010
to 2013Selected Projections 2011Other OptionsRisk Factors
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Recent PerformanceEconomic Developments:By the end of 2010 economic activity in St. Kitts
and Nevis declined by 4.2%
The Construction Sector contracted by 28% while the Manufacturing Sector declined by 15%
GDP at market prices for 2010 is estimated at $1,821.76m
The inflation rate was 0.7%
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Recent PerformanceFiscal Performance:Overall consolidated fiscal position of St. Kitts and
Nevis deteriorated at the end of 2010 with an Overall Deficit of 6.6% of GDP compared with a deficit of 0.9% in 2009
Consolidated Primary Surplus of $7.5m (0.4% of GDP) compared with $108.5m (5.8% of GDP) in 2009
Central Government Overall Deficit of $88.8m recorded (4.9% of GDP)
Central Government Primary Balance of $24.2m (1.3% of GDP)
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Central Government Fiscal Performance EC$m:
Fiscal IndicatorJan – June
2011(1) 2010(1) 2009 2008Current Revenue 254.54 419.77 449.93 432.71Current Expenditure 255.96 465.21 440.09 428.28Current Account Balance (1.41) (45.44) 9.84 4.43Capital Revenue and Grants (incl. land sales) 11.14 62.82 84.87 90.05Capital Expenditure & Net Lending 23.36
106.20 74.69 82.86
Overall Balance (13.63) (88.81) 20.02 11.62Primary Balance 41.01 24.22 127.62 122.94(1) Preliminary
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Central Government Fiscal Performance in % of GDP 2005 2006 2007 2008 2009 2010Item
Total Revenue and Grants 25.69 26.77 25.78 26.17 28.74 26.49
Recurrent Revenue 23.44 22.72 22.28 21.66 24.18 23.04
Recurrent Expenditure 25.11 23.68 21.96 21.44 23.65 25.54
Recurrent Account Balance (1.67) (0.96) 0.32 0.22 0.53 (2.49) Capital Expenditure & Net Lending 4.41 5.43 3.89 4.15 4.01 5.83
Overall Balance (3.83) (2.34) (0.07) (0.58) 1.08 (4.87)
Primary Balance 1.85 4.32 5.27 6.15 6.86 1.33
Debt Service/Recurrent Revenue 38.53 43.27 41.23 41.94 38.87 42.76
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Central Government Fiscal Performance – Recurrent Revenue
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Central Government Fiscal Performance - Debt
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Total Public Sector Debt to GDP
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Medium Term Fiscal StrategyThe medium term fiscal strategy of the Government
is geared towards meeting the targets agreed to under the IMF Program. This includes: Minimizing budget deficits
Improving revenue generating capacity
Reducing expenditure levels
Reducing debt level and large debt service payments
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Fiscal Strategy Cont’d
1) The Government’s fiscal strategy is designed to support its wider economic growth objectives
Stable, consistent, and predictable economic policies are essential to promote confidence and investments by the private sector:
Releasing lands for development purposes Fostering partnerships with the private
sector Privatization of entities that are suited for
commercial activities
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Fiscal Strategy Cont’d 2) Structuring Government Revenue More Efficiently and Equitably
On the revenue side, the Government will continue to expand the tax base to improve equity and simplification of the tax system.
Continue to implement Value Added Tax New Income Tax Act enactedContinue to implement new unincorporated
business Tax ActContinued modernization of the Customs
and Inland Revenue Department
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Fiscal Strategy Cont’d3) Reducing the Public Debt Retire high interest rate debt and replace with
debt carrying lower interest rates. In particular restructure the debt based on the advise of Debt Advisors
Possible medium term objectives towards the achievement of debt sustainability
Define benchmark sustainable debt targets Set an interest to revenue target Set interim reasonable targets for Debt to GDP
Ratio Ensure that these targets are achieved without
detriment to domestic financial sector
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Fiscal strategy Cont’d4) Making Government Expenditure More
Efficient and Effective Performance budgeting and evaluation Setting clear medium term targets for
Government expenditure Active cash management Policy for reducing expenditure on personal
emoluments Prioritization of the capital budget-projects
which contribute to economic growth
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Key Fiscal Measures - RevenueTax Reform
Enforce VAT Regulations
Streamline Discretionary Tax Exemptions
Improve Regulation of Duty Free Shopping System
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Key Fiscal Measures – ExpenditureWage and Hiring Freeze
Contain Expenditure on Goods and Services
Re-prioritize Capital Expenditure
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Fiscal Targets and Expected Outcomes Central Government’s fiscal targets over the
period 2010 to 2013 are:
Primary Surpluses in excess of 5% of GDP
A reduction in Central Government debt to 110% of GDP
Reduced Debt Servicing Ratios to sustainable levels
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Fiscal Targets 2011 to 2014
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Risk Factors
In setting the above fiscal targets and expected outcomes the we have envisaged an environment that is conducive to economic growth.
The forecast are also contingent upon growth projections for St Kitts and Nevis remaining unchanged in the short term.
These forecasts are also dependent on economic and political stability in the domestic and international arenas.
Additionally, substantive variations in oil prices or any natural disasters, such as hurricanes and floods, could have an adverse effect on these projections.
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THANK YOU