National budget lower than pre-pandemic years of 2018-2019 and 2019-2020 

St Lucia Prime Minister Allen Chastanet tabled an EC$1.12-billion budget in Parliament last week, declaring that St Lucians will be spared any new taxes this fiscal year.

In tabling the new budget for the 2021-2022 fiscal year, Chastanet said it represents the best estimate for both revenue and cost with the understanding that if the coronavirus (COVID-19) continues, it will impact revenue negatively and increase the cost.

Chastanet, whose ruling United Workers Party is gearing up for a general election later this year, pointed out that the new budget represents a 21.3 per cent increase over the revised estimate for the just ended 2020-2021 fiscal year.

However, it is still lower than pre-pandemic years of 2018-19 and 2019-20, in which revenue was recorded at EC$1.20 billion and EC$1.19 billion respectively. In a lengthy budget speech, Chastanet told legislators that the projected increase in revenue for this fiscal year is consistent with expectations for a gradual but steady recovery in the economy.

Rebound in tourism to drive economic recovery

The recovery will be driven by a confluence of factors including tourism, which is rebounding as a direct consequence of increased vaccination rates, opening of key source markets and rollback of some travel restrictions. Chastanet said that the estimates of expenditure are set at EC$1.639 billion, representing an increase of 6.8 per cent increase over the projected outturn for fiscal year, 2020-2021.

Recurrent expenditure is estimated at EC$1.360 billion or 83 per cent of total expenditure. Capital expenditure is estimated at EC$278.6 million or 17 per cent of total expenditure.

Notably, the allocation to meet the debt principal repayments in this fiscal year is set at EC$125.8 million, Chastanet said, adding that “as part of our fiscal strategy two expenditure lines, namely salaries and debt service payments have been identified as a top priority”.

The national budget of St Lucia is to be financed by a fiscal package based on recurrent revenue of EC$1.001 billion comprising tax revenue of EC$909.02 million or 90.7 per cent of total recurrent revenue.

Non-tax revenue will amount to EC$92.69 million while grants amounting to EC$121.26 million will come from friendly governments and multilateral institutions.

Proceeds from the sale of assets

Chastanet told Parliament that St Lucia intends to receive EC$6.04 million in capital revenue from the proceeds of the sale of assets, while government instruments, including Bonds and Treasury Bills will account for EC$240.86 million. This represents a reduction of 9.8 per cent or approximately EC$26.26 million compared to the approved estimates for 2020-2021.

Other loans totaling EC$268.72 million will come from various regional and international financial institutions. The prime minister made the point that, “there are not many of the usual tax breaks in this budget that some have grown to expect. I wish to remind this honorable House that these tax-related relief measures to targeted groups of households and businesses are being provided under the framework of the Economic Recovery and Resilience Plan (ERRP) and are ongoing in most cases”.

He said that despite the COVID-19 induced revenue challenges, his administration would be implementing policies aimed at assisting the general population and new measures to support the economy and help smooth out consumption of families as well as to increase revenue collection. He stated that during the new fiscal year, efforts will also be directed at improving tax administration through recovery efforts to boost revenue collection.

The official stock of public debt increased by 10.4 per cent to EC$3.773 billion by the end of 2020. Chastanet noted that although the year-on-year increase in the debt stock in 2020 when compared to 2019 is higher, this outcome, must be placed in its proper context  given that before the onslaught of the pandemic, the public debt stock grew by an average of 3.3 per cent during the period 2016 to 2019.

During the period 2012 to 2015, the public debt grew at an average rate of 6.3 per cent.