“Salary will buy less amidst COVID-fuelled inflation — Finance Minister”, the headline of a news story carried by I witness News. It is disingenuous for the Minister of Finance to give the impression that COVID- 19 pandemic is the cause of inflation in St. Vincent and the Grenadines. The harsh economic reality that we are experiencing is due mainly through ill-advised policies by the government, mismanagement of the country’s economy and the lack of accountability by the Unity Labour Party (ULP) government.
The economy of St. Vincent and the Grenadines has been performing poorly since the ULP has been in power. Speaking on the New Times progamme recently, president of the New Democratic Party, Dr. Godwin Friday, made the following observation: “The economy was basically stagnated for the last five years leading up to the pandemic. In 2019, the growth rate was less than 1 percent, 0.5 percent according to the ECCB and the average growth rate from 2015 to 2019 was 1.4 percent.
The challenges have been magnified, exposed by the COVID -19 pandemic and the eruption of La Soufriere. Moreover, we have to ensure that the government is held accountable in any event for the mismanagement which led up to the point when we have to deal with this crisis. It limited the ability to respond effectively. And, also account for the funds that were received from various sources whether it was borrowed or monies that were given to the people of the country to assist with the volcanic eruption and the COVID-19 crisis. Those have to be accountable for as well.
There are other accountability issues that we have raised over the course of a number of years about how the government has managed the finances of the country how they have reported on it, completely unacceptable. When you have a poor country; when you have people struggling; when the government feel they could just come and put on new tax, whenever they want money and the rest of us just basically have to bear it. They have to tell us how they are spending the money.”
Further, the government in this year’s budget increased the Custom Service Charge. The increase in prices was predicted by Dr. Friday. Earlier this year, Dr. Friday said: “The government has increased taxes on Vincentians. This time it is in the form of an increase in the Customs Service Charge (CSC). The CSC has been increased from 5% to 6% — i.e. a 20% hike in the CSC. The Customs service charge is a tax paid on all goods imported into the country.
St. Vincent and the Grenadines is a small open economy. We import most of what we consume. Therefore, the CSC is included in the price of most of the things that we buy and use in St. Vincent and the Grenadines. So, its effect is very broad. Furthermore, the CSC increase will affect VAT as well. That is to say, the amount of money the government will collects on each VAT item will increase. This is because VAT is charged on the goods after the value of those goods has been raised by the higher customs service charge.
By raising the CSC from 5% to 6%, the price of most goods we buy in the store or bring into the country for ourselves will go up. In fact, some prices have already gone up. People have noticed it. We will pay more for almost everything we use, including foodstuff: e.g. cooking oil, corned beef, chicken and other meats, salt, rice, sugar, macaroni, juices, ketchup, seasonings, detergents, soap, shampoo, school supplies, clothing and shoes, and everything else that we get at the grocery stores and clothing stores.
Also, hardware goods: lumber, cement, galvanize, bathroom fittings, nails, screws, paint, etc. Other household goods: pots and pans, cloth, linoleum for your floor, light bulbs, plates, spoons, and heavy appliances such as stoves, fridges and microwave ovens will cost more. And motor vehicles of all kinds will cost more to import. The bigger the purchase, the more money the government will collect and the more you the consumer/taxpayer will notice the increase.
The government expects to collect $8 million directly from the increase in the CSC. This estimate does not include the additional amounts the government will also get from VAT (i.e. after VAT is charged on goods whose value has been increased by the higher CSC). In other words, the increase is expected to earn the same amount, or more than the government earned additionally when it raised VAT from 15% to 16%, five years ago.
We are the only government that is taxing its way out of a pandemic. Out of a volcanic crisis. The money to be given to people for La Soufriere relief is taken back in the increase in the Customs Service Charge.”
$95 Million Still an Issue
Over the period from 2010 to 2015, there was an amount of about $95 million difference between what the bank said was withdrawn as part of its overdraft account and what the Accountant General can present to the Director of Audit as the state of the overdraft account.
What this means, is not the fact that there was a discrepancy, but that that discrepancy must be explainable. When the Accountant General cannot explain that to the satisfaction to the Director of Audit, then it leads to all sort of questions. Were there inefficiencies? Were there losses? Or worse, was there misappropriation? These are questions that need to be answered.
It has been the way in which the government has been managing the affairs. For example, in her report of 2009, the Director of Audit said: Because of the significance of the matters described above, and comments mentioned otherwise in this report, I am of the opinion that the financial statements presented for audit did not in all material respects fairly represents the financial position of the government.