Home' Trinidad and Tobago Guardian : February 19th 2015 Contents FEBRUARY 2015 • WEEK THREE www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG3
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On Monday, as T&T was
playing mas, the people
of St Kitts and Nevis
were voting in their gen-
eral elections. Although
as at this writing the offi-
cial results had not been
announced, the three-party opposition coali-
tion called Team Unity claimed seven of the
country s 11 parliamentary seats and Denzil
Douglas, who served as prime minister between
1995 and Monday, conceded defeat on behalf
of the St Kitts and Nevis Labour Party late
Most politics in this region is local and it
may be Dr Douglas made a mistake in attempt-
ing to force through a proclamation for new
constituency boundaries on January 16---a
move that was reversed by the Judicial Com-
mittee of the Privy Council last Thursday, just
five days before the poll.
And it could be that the die was cast in St
Kitts and Nevis back in January 2013, when
Douglas fired one senior minister and saw
another resign in sympathy, mostly as a result
of dissatisfaction over the country s debt-for
land swap. This involved transferring 1,200
acres of state-owned lands to a St Kitts bank
in exchange for writing off a loan of US$250
In this space in the October 26, 2014 edition,
debt-for-land swap was described as "inno-
vative, but highly controversial" as it gave the
government the opportunity to reduce the
mountain of debt that threatened to damage
the island s future in the way that debt has
damaged Jamaica s future.
I was told by International Monetary Fund
staffer, Judith Gold on the margins of at an
IMF conference in Montego Bay in October
that the land that was swapped for debt was
The debt-for-land arrangement, along with
the St Kitts Citizenship-by-Invitation, con-
tributed to placing the St Kitts economy on
a growth path with the retirement of debt
providing fiscal space and the sale of passports
facilitating a flow of revenue into the govern-
ment s coffers.
Alejandro Werner, the director of the IMF s
Western Hemisphere Department told the
conference that for St Kitts and Nevis "prudent
management is key to containing the risks
associated with these programmes as large
and volatile CBI inflows may increase macro
vulnerability" leading to: economic overheating
that creates risks of Dutch Disease; reduced
fiscal discipline leading to increased dependence
on the inflows; and higher external vulnerability
with risks of sudden stops.
After describing how growth in many of
the Eastern Caribbean countries has been con-
strained by their high debt burdens, soft
tourism arrivals and the high cost of energy,
Werner said the Citizenship-by-Invitation
inflows "have already led to a robust recovery
in St Kitts and Nevis and could help support
an economic recovery and improve macro-
balances in a few other economies."
What s more the economy in St. Kitts and
Nevis has been so strong that the nation was
able to repay its debt to the IMF under its
three-year Stand-By Arrangement for about
US$84 million ahead of schedule in June 2014.
The decision by the Douglas administration
to pay down its IMF debt early led the insti-
tution to state the following in a press release:
"The authorities are to be commended for
their economic achievements under the pro-
"There has been a significant improvement
in fiscal and debt sustainability and a strong
economic recovery. St. Kitts and Nevis ability
to repay the IMF ahead of schedule reflects
the improvement in its macroeconomic bal-
ances that reflect both policy efforts and the
strong inflows under the Citizenship-By-
"This is the first time that a payment of
this magnitude has been repaid early to the
Fund by a Caribbean nation.
"This early repayment will reduce the out-
standing obligations of St. Kitts and Nevis to
the IMF to SDR 36.3 million (about US$ 56
million) or about 408 per cent of quota and
reduce its debt to GDP ratio by about 2 per
cent of GDP. This outstanding balance is pro-
jected to be repaid during 2014-2018."
That was the first early repayment.
St. Kitts and Nevis made a second early
repayment on October 30, 2014 and a third
on January 29, 2015.
In reporting the most recent repayment,
the IMF said: "These early repayments reflect
the improvement in the country s macroeco-
nomic situation. This repayment covers a por-
tion of the obligations falling due in the second
half of 2015.
"It reduces the outstanding obligations of
St. Kitts and Nevis to the IMF to SDR 30.7
million (about US$43.4 million) or about 345.5
percent of quota from 376.7 per cent, and fur-
ther lowers its debt to GDP ratio by about half
a percent of GDP to about 80 per cent. The
outstanding balance is projected to be repaid
The fact that the country s debt-to-GDP
ratio has been lowered to about 80 per cent
in 2015 is a remarkable achievement given the
fact that, in the original announcement of the
country s Stand-By Arrangement in July 2011,
the St Kitts and Nevis debt was placed at
about 200 per cent of its GDP.
In the ninth and final review of the island s
three-year, stand-by arrangement, the IMF
said: "The programme began in July 2011 amid
an exceptionally deep crisis with large fiscal
and current account deficits, very high debt
and concerns about financial stability."
In the three years between July 2011 and
July 2014, St Kitts and Nevis was able to turn
a fiscal deficit of 7.6 per cent of GDP at the
2010 into a fiscal surplus of 12.3 per cent in
2013 and lowered its debt-to-GDP ratio from
159.3 per cent to 103 per cent, according to
the IMF document.
No only did the island nation lower its debt
through the land swap and increase its revenue
through the Citizenship-by-Investment pro-
gramme, it also embarked on a three-year hir-
ing and wage bill freeze (which would have
led to a reduction in expenditure over the
It is significant for Caribbean leaders that
Denzil Douglas could have led his country
through what economic experts describe as
an economic miracle yet still be rejected by
his people at the polls.
What accounts for this ingratitude?
It could be that the appeal of the opposition
coalition proved irresistible to the people of
the twin-island nation, as was the case in
T&T with the People s Partnership led by
Prime Minister Kamla Persad-Bissessar.
Or maybe the It s the economy, stupid,
sentiment that is true in the US is no longer
true in the Caribbean, which would explain
why Freundel Stuart was reelected as the Prime
Minister of Barbados in February 2013,
although he leads a country that has under-
performed its neighbours for years.
Or it could be that the people of St Kitts
and Nevis simply got tired of Dr Douglas after
20 years of his rule, just as many people here
tired of Patrick Manning in the run up to the
2010 general elections.
What does the defeat of Dr Douglas mean
for the region?
It certainly means that running your econ-
omy in a lean and efficient way is no guarantee
of electoral success. Where does that leave
Mrs Persad-Bissessar, one wonders?
Is St Kitts/Nevis a harbinger
for the Caribbean region ?
Former St Kitts and Nevis Prime
Minister, Denzil Douglas
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