Gov’t revenue up 8% but debt interest jumps 25%

The Government of St. Vincent and the Grenadines registered an 8% increase in revenue during the first five months of 2024 even as debt interest payments rose 25% year-on-year.

Total revenue and grants at the end of May was EC$295.8 million, compared to EC$319.5 million year-on-year, Prime Minister Ralph Gonsalves said.

However, during the same period, debt interest, which stood at EC$28 million by May 2023 rose by a quarter to EC$35 million this year. 

“… $28 million last year is now $35 million because we have had to pay more interest because of the expenditure on the capital side,” Gonsalves said Wednesday on NBC Radio as he gave an update on the government’s fiscal situation.

“… because when you go to the capital expenditure …, capital expenditures increased by 95%. And that is financed significantly by loans, soft loans 90-odd per cent, but loans nevertheless for which you have to make payments,” he said. 

The current balance was a deficit of EC4 million, which Gonsalves described as “not bad”, adding that the overall balance of EC$64 million is financed through the loans on the capital side.

“The fiscal outturn is reasonable, but it’s in line with what the IMF report had said, that the outlook is favourable,” Gonsalves said.

“But we have to balance, clearly, Miss Enterprise with Miss Prudence,” the prime minister further stated, referring to what he said are the two principles that guide his government’s fiscal management. 

He said current revenue — the various taxes the government collected — was up 11.3% from last year, at the end of May, moving from EC$278.9 million in 2023 to EC$310.3 million this year.

“And all of the main tax heads we have seen improvements, even though the tax relief given by the Ministry of Finance in the budget gave away far more, as I’ve shown more than one time, than was imposed,” he said.

“For instance, taxes from individuals were down slightly from 38.8 million to 38.2 million,” he said, noting that this year the tax threshold has moved from EC$22,000 to EC$25,000 annually.  

“But the fact that it is not down much would tell you that a lot more people are employed and are employed above $25,000 annually,” Gonsalves said.

He said corporate taxation is up, as is the case with non-resident taxation, levied on people’s overseas income. 

“But if you’re coming here and you provide a service, before you go out you have to pay your withholding tax on what you have earned here,” the prime minister said, noting that this ranges between 10 and 20%.

Taxes on goods and services have also increased, with domestic VAT rising 6.3% though import VAT was up by 19.6%. 

“But all the major tax items — taxes on goods and services, taxes on international trade, sales of goods and services… — [have increased],” Gonsalves said, adding that the data for some items had not yet been recorded.

Among these was the interest levy, which is usually collected half-year, he said.

Meanwhile, total expenditure was up 14%, a “significant increase” from EC$336.8 million to EC$384 million, the prime minister said, adding that current expenditure had risen 4.4%. 

“A significant increase is the wages and salaries have gone up by 6%. Not only did you have the increase at the beginning of the year — the negotiated increase for the public servants — but then the minimum wages went up,” Gonsalves said, adding that there were also more employees.  

“The overall picture is that as I always say, we are holding our own. But we are not yet out of the woods, meaning, always, we have to address the question with prudence and enterprise,” Gonsalves said.

“Can’t be profligate but you can’t be austere. You can’t impose austerity, but you can’t be a spendthrift,” Gonsalve said.

“There are two wonderful young ladies or two wonderful ladies to be kept in tandem: Miss Prudence and Miss Enterprise. Because the enterprising part is to facilitate economic growth and economic activity and things which are not of direct economic benefit but of other value,” Gonsalves said.

“Because I said all the time, there are some people who know the price of everything and the value of nothing. They can’t really lead. You have to know the value of things in addition to the prices of things.”