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NATIONAL CONSULTATION ON THE ECONOMY Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda” St Kitts Marriott Resort 8 th September 2011

NATIONAL CONSULTATION ON THE ECONOMY Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

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NATIONAL CONSULTATION ON THE ECONOMY Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”. St Kitts Marriott Resort 8 th September 2011. Ministry of Finance SHORT TO MEDIUM TERM FISCAL STRATEGY. Overview of Presentation. - PowerPoint PPT Presentation

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Page 1: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

NATIONAL CONSULTATION ON THE ECONOMY

Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of

our Economic Growth Agenda”

St Kitts Marriott Resort8th September 2011

Page 2: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

Ministry of FinanceSHORT TO MEDIUM TERM FISCAL STRATEGY

Page 3: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

Overview of PresentationRecent PerformanceHistorical PerformanceShort to Medium Term Fiscal StrategyKey Fiscal and Other MeasuresFiscal Targets and Expected Outcomes 2010

to 2013Selected Projections 2011Other OptionsRisk Factors

Page 4: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

Recent PerformanceEconomic Developments:By the end of 2010 economic activity in St. Kitts

and Nevis declined by 4.2%

The Construction Sector contracted by 28% while the Manufacturing Sector declined by 15%

GDP at market prices for 2010 is estimated at $1,821.76m

The inflation rate was 0.7%

Page 5: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

Recent PerformanceFiscal Performance:Overall consolidated fiscal position of St. Kitts and

Nevis deteriorated at the end of 2010 with an Overall Deficit of 6.6% of GDP compared with a deficit of 0.9% in 2009

Consolidated Primary Surplus of $7.5m (0.4% of GDP) compared with $108.5m (5.8% of GDP) in 2009

Central Government Overall Deficit of $88.8m recorded (4.9% of GDP)

Central Government Primary Balance of $24.2m (1.3% of GDP)

Page 6: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

Central Government Fiscal Performance EC$m:

Fiscal IndicatorJan – June

2011(1) 2010(1) 2009 2008Current Revenue 254.54 419.77 449.93 432.71Current Expenditure 255.96 465.21 440.09 428.28Current Account Balance (1.41) (45.44) 9.84 4.43Capital Revenue and Grants (incl. land sales) 11.14 62.82 84.87 90.05Capital Expenditure & Net Lending 23.36

106.20 74.69 82.86

Overall Balance (13.63) (88.81) 20.02 11.62Primary Balance 41.01 24.22 127.62 122.94(1) Preliminary

Page 7: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

Central Government Fiscal Performance in % of GDP 2005 2006 2007 2008 2009 2010Item            

Total Revenue and Grants 25.69 26.77 25.78 26.17 28.74 26.49

Recurrent Revenue 23.44 22.72 22.28 21.66 24.18 23.04

Recurrent Expenditure 25.11 23.68 21.96 21.44 23.65 25.54

Recurrent Account Balance (1.67) (0.96) 0.32 0.22 0.53 (2.49) Capital Expenditure & Net Lending 4.41 5.43 3.89 4.15 4.01 5.83

Overall Balance (3.83) (2.34) (0.07) (0.58) 1.08 (4.87)

Primary Balance 1.85 4.32 5.27 6.15 6.86 1.33

Debt Service/Recurrent Revenue 38.53 43.27 41.23 41.94 38.87 42.76

Page 8: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

Central Government Fiscal Performance – Recurrent Revenue

Page 9: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

Central Government Fiscal Performance - Debt

Page 10: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

Total Public Sector Debt to GDP

Page 11: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”
Page 12: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”
Page 13: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

Medium Term Fiscal StrategyThe medium term fiscal strategy of the Government

is geared towards meeting the targets agreed to under the IMF Program. This includes: Minimizing budget deficits

Improving revenue generating capacity

Reducing expenditure levels

Reducing debt level and large debt service payments

Page 14: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

Fiscal Strategy Cont’d

1) The Government’s fiscal strategy is designed to support its wider economic growth objectives

Stable, consistent, and predictable economic policies are essential to promote confidence and investments by the private sector:

Releasing lands for development purposes Fostering partnerships with the private

sector Privatization of entities that are suited for

commercial activities

Page 15: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

Fiscal Strategy Cont’d 2) Structuring Government Revenue More Efficiently and Equitably

On the revenue side, the Government will continue to expand the tax base to improve equity and simplification of the tax system.

Continue to implement Value Added Tax New Income Tax Act enactedContinue to implement new unincorporated

business Tax ActContinued modernization of the Customs

and Inland Revenue Department

Page 16: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

Fiscal Strategy Cont’d3) Reducing the Public Debt Retire high interest rate debt and replace with

debt carrying lower interest rates. In particular restructure the debt based on the advise of Debt Advisors

Possible medium term objectives towards the achievement of debt sustainability

Define benchmark sustainable debt targets Set an interest to revenue target Set interim reasonable targets for Debt to GDP

Ratio Ensure that these targets are achieved without

detriment to domestic financial sector

Page 17: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

Fiscal strategy Cont’d4) Making Government Expenditure More

Efficient and Effective Performance budgeting and evaluation Setting clear medium term targets for

Government expenditure Active cash management Policy for reducing expenditure on personal

emoluments Prioritization of the capital budget-projects

which contribute to economic growth

Page 18: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

Key Fiscal Measures - RevenueTax Reform

Enforce VAT Regulations

Streamline Discretionary Tax Exemptions

Improve Regulation of Duty Free Shopping System

Page 19: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

Key Fiscal Measures – ExpenditureWage and Hiring Freeze

Contain Expenditure on Goods and Services

Re-prioritize Capital Expenditure

Page 20: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

Fiscal Targets and Expected Outcomes Central Government’s fiscal targets over the

period 2010 to 2013 are:

Primary Surpluses in excess of 5% of GDP

A reduction in Central Government debt to 110% of GDP

Reduced Debt Servicing Ratios to sustainable levels

Page 21: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

Fiscal Targets 2011 to 2014

Page 22: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

Risk Factors

In setting the above fiscal targets and expected outcomes the we have envisaged an environment that is conducive to economic growth.

The forecast are also contingent upon growth projections for St Kitts and Nevis remaining unchanged in the short term.

These forecasts are also dependent on economic and political stability in the domestic and international arenas.

Additionally, substantive variations in oil prices or any natural disasters, such as hurricanes and floods, could have an adverse effect on these projections.

Page 23: NATIONAL CONSULTATION ON THE ECONOMY  Theme: “The Architecture of an Efficient and Sustainable Public Sector in Support of our Economic Growth Agenda”

THANK YOU