Chief Minister and Minister of Finance, Hubert Hughes.
Anguilla’s Chief Minister and Minister of Finance, Hubert Hughes, has painted a bleak picture of the island’s fiscal position and wants urgent measures to be taken to get the economy moving again.
“We promised to account to you, We are your servants. You are our masters,” Hughes told a public forum here this week to update citizens and residents of Anguilla about the current financial position.
Accompanied by a technical team including the permanent secretaries in the Ministries of Finance and Economic Development, Investments an Tourism, Hughes and his three ministers presented an overview of the work that has been done so far since taking up of the reins of government following the February 15 general elections here.
The Minister of Finance said at the end of December 2009, recurrent revenue collections totaled EC$145.65 million, a 30 percent decline from 2008 recurrent revenue collections of EC$203.74 million.
” To put the situation truly in context, 2009 recurrent revenue collections were not only lower than 2008 but lower than 2007 and 2006 collections as well. Consequently it is no exaggeration to say that the recurrent revenue situation in Anguilla has been set back five years,” according a statement on the fiscal position released by the Ministry of Finance.
Key revenue heads such as Customs Duty Other, Stamp Duty and Accommodations Tax were down by 33%, 54% and 25%, respectively from 2008 collections. It should be noted that revenue collections of EC$246.92 million was budgeted for 2009.
Recurrent Expenditure for the year ending December 31, 2009, on the other hand, was EC$204.17 million, marginally lower than recurrent expenditure of EC$206.87 million in 2008. A retrenchment in public sector salaries and wages and a partial freeze on hiring were key to cutting expenditure from the budgeted amount of EC$241.81 million for 2009.
It should be noted that there were some EC$14.25 million in unpaid invoices as at the end of December 31, 2009 which will be accounted for in 2010 as they are paid. These include: Anguilla Social Security Board EC$6.88 million (Benefit Contributions), Civil Service Pension Board EC$1.57 million (Pension Contributions) and Anglec (Anguilla Electricity Company) EC$1.32 million.
The recurrent balance, which is the difference between recurrent revenue and recurrent expenditure, for 2009 was a deficit of approximately EC$58.52 million. This translates to an average monthly recurrent deficit of just under EC$5 million. This is clearly unsustainable.
Hughes said that in terms of capital expenditure this was approximately EC$10.58 million, a fraction of the EC$98.12 million budgeted for 2009. The Capital Budget bore the brunt of the austerity measures imposed by Government.
Given the situation with respect to the recurrent and capital accounts Government’s overall balance for 2009 was a deficit of EC$69.10 million. This deficit was partially financed by the drawing down of Government’s fiscal reserves in the amount of EC$39 million. The remaining deficit was financed by borrowing from the local and regional banking system.
As a result of the deficit on Government accounts Central Government Debt increased to approximately EC$172.1 million in 2009, up from EC$149.65 million at the end of 2008. The government has found itself in a position where it has been borrowing money each month since October 2009 to fund Civil Servants salaries and other obligations. This practice is unsustainable and cannot be continued indefinitely. This will even prove to be more difficult because of the financial crunch where Banks and other lending institutions are finding it difficult to lend to government because of liquidity issues and the borrowing guidelines that the British Government has agreed with the Government of Anguilla.
The current Fiscal Position as at March 11, 2010 is as follows:
· Overdraft position: deficit of EC$13.7 million
· Payables: Unpaid bills: EC$16.3million
The financial position will temporarily improve with a grant of approximately EC$16 million expected from European Development Fund (EDF 9 4th Tranche). These funds will be used to repay a short-term loan of $12m from Eastern Caribbean Central Bank which is due and payable by April 1, 2010.
The Caribbean Technical Assistance Centre (CARTAC) has been providing ongoing support to the Government of Anguilla in a number of consultative and training initiatives. As part of this support the government is benefiting significantly from the expertise of Economic Consultant Dr. Eliahu S. Kreis who has been in Anguilla from 28 February, and leaves on 18 March 2010. He has been working with technical staff in the Ministry of Finance assisting with GDP and Fiscal projections for the period 2010 to 2014.
As a result based on the data compiled it is projected that revenue for 2010 will be approximately $148M while expenditure is expected to be around $237M.
This will result in a recurrent deficit of over $89m. Therefore, the Government of Anguilla will have to limit its Capital Expenditure significantly which is normally funded by a recurrent surplus, according to the Ministry of Finance document.
With this revelation the Government of Anguilla will have to find ways and means to narrow the gap between expenditure and revenue as the Ministry of Finance puts together the budget for 2010. The Government of Anguilla has been operating on a Provisional Budget in the absence of an Approved Budget for 2010. This arrangement cannot continue beyond 31 April 2010. However, the Ministry is confident that a budget will be finalized before the deadline.
Hughes said that the gloomy position that government has find itself in means that serious measures will have to be implemented in order to stabilize the deteriorating financial position of the government.
Both Permanent Secretaries in the Ministry of Finance have been mandated along with other technical staff to put together a recovery plan that will assist the Government of Anguilla in closing the Gap identified. This will be completed in a short period of time in order to be reflected in the 2010 budget. When the recovery plan is completed the General Public will have an opportunity to review it.
One of the main revenue generators Customs Duty has experienced a leakage of over $ 113 million for the period 2005 – 2009. Government has therefore committed to the implementation of a new policy to address this practice.
Every effort will be made to cut out all wastage. In addition, the following areas have been identified and are being considered for review.
· Rental agreements for office accommodation
· Allowances
· Freeze on hiring of new Staff
· Redeployment of staff as oppose to hiring of new staff
· Reduction in Electricity usage
· Limiting the use of Governments vehicles after working hours
· Training
· Duty free concessions
· Overseas travel not funded
· Restructuring of Boards and Committees
The outgoing administration of retired Chief Minister Osbourne Fleming declined the present a budget for 2010. The budget is normally presented in December. Fleming and his Finance Minister Victor Banks explained that because general elections were scheduled for March 2010 it would not be prudent to present a budget and that this should be left to the new government to do. This explanation drew widespread criticism on the island and was featured prominently on the campaign trail by the opposition parties and independent candidates in the run up to the February 15 general elections.
Hughes is scheduled to leave here on Tuesday for Brussels and London where he will outlining the government’s bleak fiscal position to European and British officials. The Minister of Finance says he intends to ask to the UK government to among other things relax its borrowing guidelines to help kick start the battered economy. Hughes will be accompanied by Deputy Chief Minister and Minister of Social Development Edison Baird and Legal Counsel Josephine Gumbs-Connor.
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