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Gonsalves proposes tax-free budget, but raises fees

Published:Wednesday | January 27, 2010 | 12:00 AM

Dr Ralph Gonsalves, prime minister of St Vincent and the Grenadines.
- File

Prime Minister of St Vincent and The Grenadines Dr Ralph Gonsalves, has presented an EC$913.5 million (US$338.3 million) tax-free budget to Parliament that also proposes removing the value-added tax on wheat and raw chicken imports, as well as packaging for agro-products.

He described the fiscal package as the 'most challenging' since his Unity Labour Party (ULP) came to office in 2001, adding that his administration was focusing on the productive sector with a view to bringing relief during the hard economic times.

Supporters of both the ruling ULP and the main opposition New Democratic Party (NDP) demonstrated outside the Parliament building late Monday, as Gonsalves, who is also the finance minister, announced a 20 per cent increase in the fees for citizenship, residency, and work permits, respectively, with exemptions for persons who become citizens by marriage.

"These are the only things we are increasing in the budget ... and these affect foreigners," Gonsalves said.

ULP seek a third term

The budget comes at the beginning of the year in which, political observers believe, the ULP administration will seek a third consecutive term in office, even though the polls are constitutionally due by March next year.

The budget is EC$162.6 million (US$60.2 million) or 21.7 per cent higher than the approved estimates for 2009 and the government will run a current account deficit of EC$20.5 million (US$7.5 million).

But, the Prime Minister said that this 'manageable amount' is a temporary situation necessitated by the global economic downturn.

He said several of the programmes contributing to the deficit were needed to safeguards the gains made in poverty reduction and the 'education revolution'.

"As minister of finance, I could have contrived a current accounts surplus," he told legislators.

"Had I done this, I would have acted contrary to the people's interest, made matters worse, precipitated a needless crisis and put the country into a tailspin."

Gonsalves said the exclusion of some of these programmes, such as social welfare benefits and education, healthcare, and public safety initiatives, would have resulted in a current accounts surplus of over six million dollars (US$2.2 million).

"I could have balanced the books but, in the process, I would have unbalanced the country," he said, noting, however, that he was aware of the resulting financial imbalance of such a deficit and that his administration was "taking action to return to normalcy as soon as feasible, given the global economic situation".

The budget is to be financed by project grants, funding from the European Union and 'friendly governments', supplier credit, and backed by US$20 million (EC$54 million) in Special Drawing Rights from the International Monetary Fund.

St Vincent's national debt rose 10.2 per cent to EC$1.9 billion (US$400 million) in 2009.

"This is not an unreasonable rate of increase given the tremendous growth in physical, social and human infrastructure which we have achieved, and given the global economic situation and the virtual drying up of aid from most of our traditional donors," Gonsalves said.


"I could have balanced the books, but in the process, I would have unbalanced the country."