Prime Minister Phillip J. Pierre has presented a EC$1.84 billion (One EC dollar=US$0.37 cents) budget to Parliament, providing salary increases for public servants and improving the various social safety nets in the aftermath of the coronavirus (COVID-19) pandemic
The government said out of this amount, EC$1.349 billion is proposed to be spent on Recurrent Expenditure.
Pierre, presenting his first national budget since leading the St. Lucia Labour Party (SLP) to victory in the July 26, general elections last year, said that with the resurgence in economic activity that is expected during this fiscal year, the draft estimates have targeted total revenue and grants in the sum of EC$1.328 billion.
He said that at the projected level, total revenue and grants are forecast to increase by EC$248.1 million or 23 per cent per cent above the preliminary outturn for the fiscal year 2021-2022.
Pierre said that the Recurrent Revenue, inflows are projected to increase by EC148.6 million relative to the approved estimates for 2021-2022 to reach a total of EC$1.150 billion for the fiscal year.
He said the increase stems from slow but sustained recovery during the latter part of the fiscal year 2021-2022 and the continuation of the recovery anticipated in the tourism, construction, and agricultural sectors during the new fiscal year.
Pierre said that the total projected recurrent revenue comprised tax revenue of EC$1.016 billion and EC$133.9 million in non-tax revenue. Pierre said that tax revenue is forecast to increase by
9.5 per cent in comparison to the outturn for 2021-2022 while non-tax revenue is expected to increase by 34.2 per cent compared to the Revised Estimate for the preceding year.
Pierre said that the increase in tax revenue is influenced by the continuation of the recovery in economic activity resulting from the easing of the coronavirus (COVID-19) pandemic.
“The significant increase in non-tax revenue is projected as a result of the higher anticipated Citizenship by Investment (CBI) inflows expected to be deposited in the St. Lucia National Economic Fund pursuant to the St. Lucia National Economic Fund Act,” Pierre said, adding that he hopes the CBI programme does not suffer from any adverse international events, an apparent reference to moves by the European Union and the United States to have the programme terminated in the Caribbean.
Pierre said that taxes on income and profits are projected to amount to EC$256.1 million, up by EC$20.7 million reflecting expected increases in all the components of this category of revenue, namely income tax from corporations, income tax from individuals, withholding tax, and arrears.
He said the revenue from corporation taxes is expected to generate EC$73.1 million reflecting an upward trend as corporate profitability rebounds, as a result of the higher economic activity expected from relaxing and or adjusting the restrictions on social events, end of curfews, and discontinuation of confinement which have been implemented to manage and control the in-country spread of COVID-19.
He said the government is also expecting increased revenue from individual income tax, estimated at EC$114.8 million as the number of individuals projected to return to full-time employment is expected to increase, particularly in the tourism, and construction sectors.
Prime Minister Pierre is also projecting an increase in income tax arrears, which he estimates at EC$49.8 million, an increase of $10.9 million or 28.27 per cent from the outturn in 2021-2022.
“The projected increase in corporate profitability, along with the increase over the medium term in the employment rate and collection of arrears in Withholding tax will positively influence the revenue outcome for this line.”
Pierre said that taxes on international trade are projected to increase by 13.15 per cent to reach EC$236.4 million while taxes on domestic goods and services are expected to generate EC$515.7 million which is 8.43 pe rcent above the revised figure in 2021-2022.
He said regarding non-taxes revenue, the projection for the fiscal year is EC$133.9 million, or a 34.18 per cent increase over the 2021-2022 outturn.
“The main contributor to the increase in inflows during the current fiscal year is expected to be the contribution by the National Economic Fund, in-transit fees, and sale of goods and services.”
But Pierre said that the budget targets an overall deficit of EC$394.57 million and when added to the principal repayment for the year a financing gap of EC$505.1 is anticipated which will be financed by a blend of foreign and domestic financing resources.
He said in addition to total revenue and grants of EC$1.327 million, it is anticipated that the government will have to borrow a total of EC$505.12 million comprising $425.4 million, equivalent to 84.2 per cent of the total financing requirement for the year from external sources.
“Domestic financing is expected to be moderate given that much lower amounts are programmed from primary bonds. This is entirely in keeping with my government’s strategy of relying on external borrowing on concessional terms rather than the market debt which bears higher interest rates. “
Pierre said that the domestic financing requirement amounts to EC$79.7 million which is expected to be sourced through various means including Treasury Bills, Treasury Notes and Bonds.
Pierre also announced that employee compensation represents on average approximately 33.25 per cent of the annual total budget.
He said in this year’s fiscal package, a total provision of EC$590.7 million has been set aside for wages and salaries including EC$30.13 million to cover compensation and other benefits.
In addition, a sum of EC$108.55 million has been allocated to retiring benefits, of which $14.15 million is in respect of employer contributions to NIC.
“Overall, employee compensation is programmed to increase by 11.88 per cent relative to the outturn for the current financial year. The allocated amount also makes provisions for in-year promotions and other salary and wage allowances,” Pierre said, adding that public servants will be pleased to note that government will keep the promise made by the former administration and pay the increase in salaries by the end of April.
He said the increase to public servants will become effective as of April this year with the payment of the first tranche in arrears owed to them being paid in December, followed by the second tranche in March 2023.
Pierre said that debt service payments total EC$285.03 million for the fiscal year, a reduction of 5.3 per cent relative to the approved estimates for 2021-2022.
He said a total of EC$150.7 million has been set aside to service domestic debts while EC$133.83 million has been provided for foreign debt servicing.
“As the allocation programmes in this budget indicate we intend to tackle the challenges with boldness and confidence. We remain optimistic, assured and rooted in our resolve to maintain economic stability and chart a path to sustainable growth,” Pierre told legislators.
He said the budget is designed to “bring the economy into a state of recovery’ adding this year “we are trying to increase employment.
“However, what is important is that the spending in the budget is spending that is for projects that are going to increase the level of employment in the country, create wealth and most of all, there are expenses to improve the social safety nets so the underprivileged and people who suffered under COVID, they are going to get relief from this budget”.
Pierre said that his administration will pursue the initiatives and programmes funded in this budget “to bring transformative change that would impact lives and livelihoods for our people and put the people first”.
Opposition Leader Allen Chastanet is expected to respond to the budget later on Wednesday.