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Last Updated: May 23, 2020 - 11:50:13 AM |
 GOVERNMENT'S PROPOSAL RE: SHORT-TERM SALARY ADJUSTMENTS
As you know, the Government of Saint Lucia, through a Cabinet-appointed Ministerial SubCommittee (with support from the Department of Finance), has been engaged in numerous discussions with the Trade Unions since 2nd April, 2020. This was in an attempt to arrive at a consensus position on the issue of the proposed reduction in the monthly cash outlay by Government for salaries of civil servants in the face of reduced revenue collection and contraction in the economy, directly caused by COVID-19.
Prior to those discussions, the Government had taken steps to meet with all key stakeholders in the Private Sector to prepare for the anticipated unprecedented realities of dealing with the economic fallout from this global pandemic. As you would no doubt have seen or read from international news reports, the COVID-19 pandemic is wreaking havoc on all economies, whether small or large, and the economic outlook worldwide is bleak.
Although we have had consistent growth over the last four years in our economy and a substantial reduction in debt (which has no doubt accounted for our ability to respond as well as we have to this crisis), our initial projection of a contraction in our GDP for the fiscal year 2020/2021 was 10%. This estimate has now been revised downward by the Eastern Caribbean Central Bank (ECCB) to be 20%. If accurate, this means that tax revenues will be reduced by a further $150 million. Compounding this situation is the fact that under normal circumstances we would expect all our bonds and Treasury bills to be rolled over, but due to the impact of COVID-19, some bond and Treasury bill holders urgently need their monies now. Of the approximately $700 million in bonds and Treasury bills which are to faJI due this year, we expect about 25% of these will be redeemed (requiring an additional $175 million). The impact of the two situations described hereinabove will result in an unbudgeted shortfall of $325 million.
The most recent revised projections show that the pickup in tourism will be further delayed and the projected economic faJlout will be worse than initially thought, which will result in a further reduction in revenue. The scaling down and in some instances, the complete shutdown of commercial activity on island, has meant that the Government has had to take certain immediate actions in order to protect the health, safety and security of the citizens of Saint Lucia, all of which have come at a cost, which you will appreciate was not provided for during last year's budget allocations. These costs include increased healthcare costs, the food and accommodation arrangements for the quarantine and isolation facilities which were established, the provision of free medical attention for those infected with the virus, free testing for persons suspected to be infected, the costs associated with the accelerated opening and continued operations of the Owen King European Union Hospital, the "retrofitting" of the Victoria Hospital as a respiratory clinic and the expenses of maintaining and operating two hospitals simultaneously, along with all other ancillary expenses associated with this pandemic.
The Government of Saint Lucia recognises its obligation to public sector workers and to all in the civil service who play an enormous role in the functioning of Government and in many cases, in providing essential services critical to our daily living. In fact, this pandemic has highlighted just how valuable our civil servants are to us all, in particular, our frontliners such as doctors, nurses, police and fire officers, customs agents and also our teachers, who are trying to keep our children on pace with their school curricula, in spite of very challenging circumstances. However, we as a Government also have a responsibility to all our citizens, including those in the private sector as well as those who are retired, unemployed and those who are on the poverty list. Thousands of persons all over the island have been adversely impacted - some have lost their jobs entirely, in many cases without pay, others have been given reduced working hours and are now receiving less pay and the majority of the working population have generally realised reduced earnings from March 2020.
In an attempt to meet our obligations for the safety and well-being of our citizens, the Government has embarked upon a Social Stabilization Plan, which includes the Income Support Program, undertaken in collaboration with the National Insurance Corporation (NIC), to provide relief to persons who have lost their jobs or source of income. The Government has also renewed its efforts to creating an enabling environment for economic activity, in particular, job creation, so that persons can resume employment and take care of themselves. This income and consumption will also create jobs and opportunities for other service providers and in tum generate revenue for the Government.
In the recent budget presentation, the projections for the fiscal year 2020/2021 included total recurrent revenue of approximately $1.019 billion (with a tax revenue of $925 million) and total expenditure of approximately $1.697 billion, leaving a financing gap in excess of $560 million. In anticipation of the economic fallout, and prior to the budget presentation, the Minister of Finance and his team worked with the Caribbean Development Bank (COB), the World Bank (WB), the International Monetary Fund (IMF), the ECCB and our local banks, as well as the Government of Taiwan, and negotiated approximately $500 million in loans to fund this gap
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