(MENAFN- Caribbean News Global)
By Caribbean News Global contributor
KINGSTOWN, St Vincent — Prime Minister of St Vincent and the Grenadines, Dr Ralph Gonsalves lays out his administration economic stimulus.
The global economy has been put into a debilitating tailspin because of COVID-19. The regional economy is ravaged. Our national economy has been undermined by COVID-19, an exogenous shock of unprecedented proportions.
Assessments of the global, regional, and national economies are at various levels of severe downturns. The travel and tourism sector has been dealt a devastating blow; airplanes are not flying; cruise ships are not sailing; yachting arrivals are at a trickle; airports are bereft of travellers; employees are being laid off and their incomes are falling.
Trade-in goods and services are in a slump everywhere; remittances are dwindling; investments are slowing or shut down; revenues of governments are falling sharply; external supports for developing countries, inclusive of small island developing states are limited. A difficult and extremely challenging period lies ahead for the island economies of the Caribbean, including St Vincent and the Grenadines. In our country, an appropriate recovery plan is being put in place and is being acted upon urgently.
This plan contains strategic and targeted measures for economic support and recovery; this plan provides help for the helpless, support for the disadvantaged, and for those who face urgent, though temporary, difficulties. Overall, this economic recovery plan is designed to lift our people, our nation; it will enable us to rise stronger from the feverish ashes of COVID-19.
Every single one of us in our small country has an uplifting role to play; each of us has to put his or her mind, heart and hands to it. Together we are at war against the COVID-19 disease and are enjoined as one to meet unflinchingly the challenges connected thereto.
The Cabinet and senior public servants have been engaged in consultations with stakeholders in tourism, banking, credit unions, industry, trade, commerce, and the trade unions, on the core elements of an economic recovery and stimulus package.
Our government will shortly be taking this package to Parliament in the form of Supplementary Estimates and a Supplementary Appropriation Bill. The total package of fiscal stimulus and tax relief will amount to more than EC $70 million or in excess of three percent (3 percent) of Gross Domestic Product (GDP) — a significant stimulus in all the circumstances.
The bulk of the revenue for the package is targeted to come from six sources: The World Bank, the International Monetary Fund (IMF), the Contingency Fund of the Government of St Vincent and the Grenadines, the United Arab Emirates (UAE), the Bank of St Vincent and the Grenadines, other financial institutions, and bondholders.
The monies from these sources are either in hand or at hand. Support will come, too, from the Eastern Caribbean Central Bank (ECCB), the National Insurance Services (NIS), the SVG Port Authority, the Agricultural Input Warehouse, and the Eastern Caribbean Group of Companies.
Additionally, the locally-based financial institutions (commercial banks, credit unions, and the other leading institutions), the Arrowroot Industry Association, the Central Water and Sewerage Authority (CWSA), St Vincent Electricity Services (VINLEC), the telecom companies, the private sector, the workers and their trade unions, the farmers and fisherfolk, all state employees, and all Vincentians are expected to play significant roles in our economic recovery.
We are hopeful, too, that our many international friends and allies will assist us in one way or another as we expand and consolidate our socio-economic recovery in the post- COVID-19 period.
The expenditure of the revenue garnered for the economic recovery and stimulus plan will focus on the following main items (and with approximate estimated spending for each):
- COVID-19 health initiatives (construction of Isolation Unit and associated facilities; equipment, supplies, materials, drugs; hiring of additional nurses and medical interns; accommodation, food transportation and associated expenses for 12 Cuban nurses and four doctors, specialists in handling infectious diseases): EC$10 million
- Immediate generation of jobs in public works (specifically-funded roads and buildings programmes; other physical facilities; second phase of PAVE; painting of some government buildings:EC$30 million
- Direct supports in the areas of farming, animal husbandry, fishing (additional monies for Farmers' Support Company; free seeds at AIW; subsidised inputs; provision of fishing boats and farm animals on generous terms): EC$9 million
- Support for the arrowroot industry: EC$3 million
- Social Supports for vulnerable and affected persons (widening the social safety net with Interim Assistance Benefits for persons not on public assistance nor in receipt of a pension, until December 31, 2020; providing supports for displaced workers in the hotel and tourism sector, including cruise buses and taxis, through a Displacement Supplementary Income for three months in the first instance; hiring an additional 20 Home-Helpers for the elderly; additional transport support for students, including from the Grenadines): EC$5 million
- Additional resources for grants under the Promotion of Youth Micro-Enterprises (PRYME): EC$1.0 million
- Additional supports for small businesses including in the field of culture and arts-: EC$2 million
- Medi-Vac Vessel:EC$0.7 million
- Additional Supports for St Vincent and the Grenadines Tourism Authority : EC$1 million
- Additional support for Argyle International Airport for five months: EC$2 million
- Communications Expenses:EC$0.350 million
The aggregate of this expenditure amounts to $64.05 million. Additional are the tax relief and other measures which are estimated to cost the revenue approximately $10 million. In total, therefore the fiscal stimulus amounts to $74.05 million or 3.4 percent of GDP.
The details of these additional items of tax relief and supportive measures at a cost to the revenue are as follows:
- Distribution of 500,000 pounds of arrowroot starch to the school feeding programmes, hospitals, prisons, and others, valued at $1.5 million. I expect the Nutritionists in the ministries of health and education to provide creative recipes and advice on the use of this healthy product.
- A regime for duty-free barrels will be instituted from May 1st to August 31st in the first instance. Our diaspora is likely to be helpful to their families at home in St Vincent and the Grenadines in this traditional manner especially in respect of items required at the time of COVID-19 and the start of the academic year which begins in September 2020.
- There will be a waiver of duty and VAT on the following items, including electricity for domestic, hotels and guest houses' consumers, for the period from March 20, 2020, up to June 30, 2020, in the first instance:
- Bleach – Disinfectants – Liquid hand soap – Hand sanitizers – Rubbing alcohol – Oral rehydrating salts – Acetaminophen –Hydrogen peroxide – Glycerin – Soap dispensers – Bath soap – Toilet paper – Paper towels
This will result in an estimated revenue loss to the government of $3.8 million.
There will be, too, removal of the $2.00 license fee per box of bananas exported. The annual cost of this is EC$0.14 million.
- Relief to be granted to airlines, including LIAT and our local carriers, which operate in or out of St. Vincent and the Grenadines, in respect of certain taxes, fees and airport charges.
- The socio-economic recovery and stimulus package is being lodged within the framework of the public policies of the ECCB, OECS, and CARICOM. In this regard, from May 1, 2020, the departure tax for all holders of CARICOM passports will be reduced from US $40 to US $20 to facilitate intra-regional travel.
Further, the following policy initiatives touching and concerning the socio economic recovery are being advanced:
- The banks, credit unions, and other financial institutions have agreed to provide a six-month moratorium on the payment of principal and interest on home mortgages, business loans, personal and consumer loans, and credit cards.
All these financial institutions will further arrange specific customised packages of financing/refinancing for their clients.
- VINLEC and CWSA have agreed NOT to disconnect any customer, who is currently not in arrears for more than two months, for three months. Any indebtedness on those bills after this three-month moratorium period will be paid on an agreed incremental basis over a period up to two years. Any customer who has been in arrears, and who is currently disconnected, will not be required to pay the reconnection fee either to VINLEC or CWSA if the reconnection is effected within the next three months from today.
- The telecommunications companies are being asked to provide appropriate relief for hotels and business consumers on the delivery of the range of telecoms services.
- Special subsidies on animal feeds are asked to be provided by the Eastern Caribbean Group of Companies for a targeted number of farmers producing poultry, sheep, goats, and cattle.
- The NIS will provide a pre-payment of two months pension benefits for all categories of pensioners (contributory and non-contributory) so as to facilitate upfront costs of pensioners at this time. There are 7,406 contributory pensioners and 783 non-contributory pensioners.
The NIS will also provide $1.25 million in the form of temporary unemployment relief across economic sectors for active employee registrants.
- The St Vincent and the Grenadines Port Authority will engage the business community in respect of granting a measure of relief in respect of certain port charges with effect from April 2020 for a three-month period in the first instance. It is expected that any such relief would be passed on to the ultimate consumer.
- Price controls will be established on all items on which relief on duties and VAT are granted. Price gouging is being discouraged.
- The Department of Inland Revenue has decided to provide certain extensions of deadlines for citizens to file their Personal Income Tax Returns, for payment of motor vehicle licenses in respect of vehicles ending with the last digit 3, and for payment by persons paying second half-year licenses for motor vehicles with last digit 9, and for the payment of second-quarter 2020 liquor license fees. These deadlines range between 3 – 4 weeks; the Department will inform the public of these details accordingly.
- Workers and their unions have agreed to refrain from making demands for increases in wages, salaries, or related benefits for a one-year period in the first instance, save and except a few cases of current negotiations by unions and private sector entities. The unions have also agreed to an extension of the lay-off period in Section 27(1) of the Protection of Employment Act up to December 31, 2020 — an amendment with a sunset provision. I want to thank the workers and their unions for their support and cooperation.
This proposed socio-economic recovery and stimulus package is additional to existing initiatives and is specific to this time of COVID-19.
Clearly, the existing Estimates of Revenue and Expenditure for 2020 and the corresponding Appropriation Bill which were approved in January this year will require careful re-calibration in the implementation of both the revenue and expenditure estimates, recurrent and capital; the capital estimates for 2020 were set at $310 million.
To be continued … Part 3
* Thursday, March 26, 2020, members of the opposition were briefed on the details of this economic recovery and stimulus package.
Related: Rising stronger from the ashes of COVID-19: Part 1
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