BASSETERRE, ST. KITTS(CUOPM) – St. Kitts and Nevis’ Prime Minister the Rt. Hon. Dr. Denzil L. Douglas says the introduction of the Value-Added Tax, the restructuring of the Housing and Social Development Levy, the elimination of exemptions from Customs Service
Charge and the adjustment of the electricity tariff, as well as the wage and hiring freeze, corporatization of the Electricity Department, the comprehensive debt restructuring programme and prioritized capital expenditure to focus on those projects that would stimulate growth in the economy have had a positive impact on the 2011 fiscal position.
"We realised a Recurrent Account Surplus of $46.6 million as well as Overall and Primary Surpluses of $70.6 million and $171.7 million respectively," Dr. Douglas, who is also Minister of Finance.
He told the Budget Session of the National Assembly on Tuesday, he expects this trend to continue and are in fact expecting to confirm a Recurrent Account Surplus in the region of $100.2 million at the end of December 2012 as well as an Overall Surplus of $102.7 million and a Primary Surplus of $199.1 million.
Dr. Douglas said the 2011 and 2012 results are a significant improvement over the outturn for 2010 when deficits were recorded for the Recurrent Account, the Overall Balance and the Primary Balance.
"The attainment of surpluses in all categories of our fiscal accounts in 2011 and 2012 is a most noteworthy achievement that I expect will draw commendation from all members of this Honourable House, since the issue of fiscal deficits has occupied much of the attention of Honourable Members of this House in previous debates. Indeed, it symbolizes the tremendous resolve and sacrifice of our people as we strive to break free from the limitations of fiscal imbalances and debt accumulation," said Prime Minister Douglas.
He told lawmakers and the nation during his near three-and-a-half hour address that the improvement in the Government’s finances in 2011 was seen in Recurrent Revenue which amounted to $530.5 million, 26.4% over what was collected in 2010 and 22.5% in excess of the 2011 budget.
"This outturn was mainly due to the strong performance of Non-Tax Revenue which surpassed the amount collected in 2010 by 48.0%. VAT yielded $115.0 million during its first full year of implementation representing an increase of approximately 58% over the various taxes that it replaced. The success of the VAT contributed to an expansion of 95.5% in Taxes on Domestic Goods and Consumption and a 4.0% increase in Taxes on International Trade and Transactions over the previous year. Taxes on Income, however, declined by 9.5% when compared to the amount collected in 2010," said the Prime Minister and Minister of Finance, who noted that in this category, the gains realized from an improvement in Withholding Tax and the restructuring of the Housing and Social Development Levy were insufficient to cover the continued decline in Corporate Income Tax.
He said also that the positive impact of the implementation of the various measures, the fiscal position for 2011 was also aided by the receipt of budgetary grants totalling $61.3 million primarily from the European Union (EU) and the Sugar Industry Diversification Foundation (SIDF).
"Our focus during 2011 was not only on improving our revenue collection, but also on containing expenditure. To this end, we were able to curtail Recurrent Expenditure to $483.9 million, 4.6% below what was incurred in 2010. In addition to being attentive to the use of our scarce resources, the reduction in Recurrent Expenditure was also associated with the removal of the cost of running the Electricity Department from Government’s books. This materialized a few months after we had envisioned and for that reason Recurrent Expenditure for 2011 exceeded the budget by 20.6%," said Dr. Douglas.
He disclosed that funds expended for Capital Expenditure amounted to $45.9 million or 2.3% of GDP. During 2011, the concentration of Capital Expenditure was on Economic Infrastructure which accounted for 43.4% of public investment and General Administration which represented 37.8% of the capital projects. The Social Services Sector consumed 15.6% of Capital Expenditure while 3.2% of the capital resources was spent on Economic Services.
"Some of the major undertakings in 2011 for Economic Infrastructure related to the West Basseterre By-Pass Road and the Hurricane Lenny Rehabilitation Project. The latter entailed the construction of a rock armoured sea defence wall at Half Way Tree and Bourkes in Sandy Point, a guard rail at Half Way Tree as well as other works to address the issue of soil slippage," said the Prime Minister and Minister of Finance.
He mentioned several projects that were executed under the General Administration Sector including the Information and Communication Technology for Improving Education, Diversification and Competitiveness (ICT4EDC) Project, the E-Passport Project and the Border Management System.
"The capital projects that were executed in 2011 were primarily financed from revenue and, to a lesser extent loans and development aid. For the most part, loan disbursements for capital projects did not involve the contraction of new loans but rather were previously arranged for projects that were already in the pipeline. We were aware of our level of indebtedness and the difficulties that it was posing especially at a time when fiscal space was needed for us to be able to better respond at a national level to the economic crisis. We realized that we needed to have a sound fiscal base and a manageable debt level which would then create avenues for sustainable growth.