– The Policy-Based Loan (PBL) to the government of Saint Lucia information flow continues in Part 2, with an understanding of policy-based lending, debt management and the (in)distinct squabbles.
By Special contributor
- USD42,7M Policy-Based Loan (PBL) from Caribbean Development Bank (CDB)
- The primary fundamentals are government modernization and land acquisition
- The political squabbles over the CDB-PBL loan leapfrog valued narratives
- The government of Saint Lucia has legal liability to land owners of approximately XCD100 million, excluding interest that extends over 15 years
- The (in) distinct squabbles transmit impetuous and incoherent attributes
CAP ESTATE, St Lucia – Saint Lucia has recovered from COVID-19. The objective moving forward is sustainability and growth, buttressed by fiscal responsibility, efficiency, cost containment and increased revenue.
“The strategic choices for the 2023/2024 budget focus primarily on three areas: health, national security, and economic sustainability, …”
The Policy-Based Loan (PBL) supports a framework of reforms/institutional changes – specifically targeted and triggers one policy after another in sequence formation. The requirements of eligibility from external institutions mandate a borrowing country to have a sound macroeconomic policy framework. The USD42,700M – PBL depends on the country’s financing needs and compliance with policy conditions. Inclusive of this PBL, additional inclination could have encompassed an investment component and further enhanced a Hybrid Loan.
In the cogent of the government of Saint Lucia, the instruments of the PBL is provided by section 63(1) of the Public Finance Management Act, Cap. 15.01 (the Act).
Budget 2022/2023 noted Saint Lucia’s public debt at – 90.6 percent of GDP or XCD$4.13 billion. The debt stock included central government debt, government-guaranteed debt, and public sector debt. Treasury bills portfolio were reported “ in excess of XCD$420 million.”
In budget 2023/2024: “There was a deceleration in total stock of public debt, with the country’s Debt/GDP ratio down to 69.8 percent in 2022 from 85.9 percent in 2021.”
Debt Management: “The government will set aside some of the proceeds from the zero interest Covid bonds issued, under the CIP programme, to settle high-coupon interest bonds, ranging from 5 to 7.5 percent, when they become due in 6 to 10 years. This strategy will reduce the cost of servicing the government’s debt.”
For business and government to flourish, the collaboration of public-private partnerships (PPP), and MSMEs is paramount to enhancing their operations for improved profitability and delivering real results.
It is not unwarranted for the government to enhance revenue to improve service delivery, economic advancement, and development goals. The proportionality demands reasoning in the present genuineness of social, economic, and policy performance.
Is there present and future value for taxpayers and Saint Lucia in delivering better outcomes through government modernization and land acquisition? Will the implementation of new technology and methods improve frameworks and service performance?
Can a modern data analytics platform help leverage data for informed decision-making? Can innovation drive actionable insights in real-time analytics? Does a modern operational platform that supports connectivity and provides vital resources for self-service governance offer exploratory on-demand services?
Performance and efficiency are no longer a matter of just on-demand services. Therefore, can an enterprise platform support better financial decision-making and policy implementation for the public good?
If the above is empirically accurate (observation, experiment, or experience) then the PBL represents value for money.
Fulfilling the prerequisites for obtaining PBL and breaking down barriers to opportunities, through frameworks that protect tax revenue and stabilize demand referenced by Finance Minister Pierre’s – Prior Policy Action:
“To enhance tax revenue and support fiscal sustainability, the government has (i) introduced the Health and Security Levy at a rate of 2.5 percent on goods and services except food items, medicines, selected building materials, medical equipment, and security equipment, and (ii) increased the Excise Tax on Tobacco Products.”
“To unify and enhance legislation related to public debt management, the government has (i) approved, through its parliament, the Public Debt Management Act, and (ii) approved the annual publication of the medium-term debt strategy, starting in 2023, consistent with the policy framework of the Public Debt Management Act.
“ The government, through its cabinet, has approved the Public Procurement Regulations to promote and enforce the new Public Procurement Act.
“ The government, through its cabinet, has approved Public Financial Management Regulations to promote and enforce the Public Finance Management Act.
“The government approved the updated National Energy Policy to promote renewable energy and energy efficiency.
“ To respond to the current and future risks and impacts of climate change, the government has submitted the Climate Change Bill to parliament.
“ To address distressed businesses and the management of non-performing loans, the government has submitted the Bankruptcy and Insolvency Bill to parliament.
“ To improve MSMEs’ access to finance and expand the types of collateral available for MSMEs, the government approved the Security Interest in Moveable Property Act, aligned with the UNCITRAL Legislative Guide on Secured Transactions.”
The (in) distinct squabbles
The key to the origins of the political squabbles focuses in a limited capacity on the 2.5 percent health and security levy, (1) A tax revenue to support fiscal sustainability and (2) increased the Excise Tax on Tobacco Products.
A more substantive policy and directive that needs to be addressed is the social and economic well-being of the country, public spending and the capability of Saint Lucians to optimal tax levels, per capita income, (PCI).
Further, the underlying political squabbles in certain circles in Saint Lucia over the CDB-PBL loan contradict the optimal tax theory. A substantive conversation and practical guidance towards tax policy is yet to surface on the integration of tax revenue with the optimal level of government expenditure.
More resourceful to background noise is the efficacy of obtaining the PBL and keeping VAT and the levy below 17.5 percent, (the prerequisite per external institutions).
The protracted view beyond 17.5 percent VAT for Saint Lucia is not far-fetched without policy, legislative, and institutional reforms.
Discrete and continuous (mathematical) optimization components carry decision variables, objective functions, and constraints. Data sets and functions together help solve optimization problems and stimulate further interaction in areas of shared interest – not impetuous and incoherent attributes.
Related: Part 1
