This document is Prime Minister Kenny Anthony's address to the nation on Saint Lucia's fiscal challenges. He summarizes that the government is facing high deficits, debt levels, and unsustainable spending. While some measures have been taken to reduce the deficits, debt remains high at 73.6% of GDP. He argues that wages and salaries in the public sector, which account for 53% of recurrent spending, must be reduced to rein in expenditures and close the budget gap. However, critics argue that the Prime Minister's analysis ignores padding of figures and that expenditures would be better reduced by suspending untargeted social programs rather than cutting public sector wages.

1. “FACING THE OPTIONS”
ADDRESS TO THE NATION
BY
THE HON. DR. KENNY D. ANTHONY
PRIME MINISTER & MINISTER FOR FINANCE, ECONOMIC
AFFAIRS, PLANNING & SOCIAL SECURITY
Tuesday, June 10, 2014
Comment [G1]: Dr. the Hon.

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My fellow Saint Lucians, Ladies and Gentlemen,
Good Evening.
INTRODUCTION: THE CHALLENGES WE FACE
When I delivered my 2014 Budget Statement in
Parliament on Tuesday, May 13th, I set out to
explain, as clearly as I could, the challenges
confronting our country. If you recall, I stated then
that we are facing four, fundamental challenges,
namely (1) low economic growth rates, (2)
persistently high unemployment, (3) high
vulnerability to economic and natural shocks, and
(4) fiscal deficits and high debt levels. In that Budget

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Statement, I also stated the measures that our
Government was taking to address these issues.
Tonight, however, I want, in this address, to focus
on the fourth of these fundamental problems – our
fiscal deficit and our high debt levels. Both of these
issues impact the cost of the operations of the
Government.
GOVERNMENT OPERATIONS
UNSUSTAINABLE
For some time now, Government has been spending
much more than it collects in revenue. The result is

4. 4
that Government has had to borrow more and more
money to finance its operations. Unfortunately,
more of Government’s revenue has had to be
directed towards paying salaries to public servants
and repaying its debt. This, as most of you would
agree, is neither healthy nor prudent. Sadly, we have
now arrived at the point where the operations of
Government cannot be sustained in the long run
without some form of adjustments.
Our administration started to address this growing
problem last year with some strong measures. We
have had some successes but our successes are not
Comment [G2]: So what was the purpose for
making the fuss about a 6.56% OVERALL
DEFICIT that your government inherited in the
year ending 2011/12? Your government
created a much larger one in 2012 of 9.2%! Or,
are you seeking to show that we were
accustomed to current deficits as well? No sir,
it has been over 2 decades since this country
last suffered a current deficit. The $52M in
2012 was the first in a long time.

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enough to resolve our difficulties. As I indicated
during the just concluded Budget Debate, in 2013 we
were able to narrow the overall deficit, that is, the
difference between the money we make and the
money we spend, to $208.8 million, compared to
$328.8 million the year before. We reduced the
overall deficit-to-GDP ratio to 5.7% from a figure of
9.2% in the previous year. Additionally, we
significantly narrowed the current account deficit to
$1 million, from $52.6 million in 2012/13.
These adjustments were possible primarily because
we undertook a strict streamlining of capital

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expenditure. We reduced spending on Goods and
Services, Utilities, Supplies and Materials, and
Communication, in addition to decreasing transfers
and subsidies to statutory boards and other
government agencies. There was also a major
adjustment of $26.8 million in Capital Expenditure.
On the revenue side, we realized better revenue
performance due to a widening of the tax base,
through the implementation of the Value Added Tax
or VAT.
Despite these improvements, we are still outside of
the recommended ranges. Our overall deficit, which
Comment [G3]: You once said that due to
the credit crunch you could not borrow monies
to grow the economy. So why now are you
calling it streamlining of Capital Expenditure?
Comment [G4]: You just could not borrow
the monies. Same as comment G3
Comment [G5]: That is true, you collected
more tax even when Private Consumption
started falling from 2012 when you issued your
first budget. Private Consumption continued
to drop in 2013, this time by $51.6M.

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currently stands at 5.7%, needs to be in the region of
3% and lower. Our Debt-to-GDP ratio of 73.6%
should be no higher than 60%. Most of the studies
that have been done indicate that whenever the
debt-to-GDP ratio is higher than 55%, it hurts the
growth prospects of the country. Additionally, large
deficits and high, unsustainable debt mean that your
debt service needs are so large they restrict the
money you have available to spend on development
programmes. Also, they crowd out private
investment, and they bring with them an increased
risk of fiscal distress, which, in turn, increases the
cost of financing that debt. It is a vicious cycle that
Comment [G6]: Please don’t make a song
and dance over overall deficit. It was 7.10%
under your watch in 2005 and we did not have
a crisis or even a current deficit. Bringing
overall deficit down to 1% will not change our
lot cause you are going to continue to spend
heavily on social programs that will cripple the
economy AGAIN.
Comment [G7]: Thank God there was a
credit crunch otherwise it would have been
90% or more and you would have told us that
this is normal in post global recessionary
periods. Singapore went as high as 120% in
2010 when it sought to rebuild its economy.
Comment [G8]: That is not entirely correct
as many countries raised huge debts high
above 100% after the crisis and subsequently
achieved growth because they spent the
monies in the right places to get growth from
the correct expenditure of the debt money.
That rule/standard would certainly have to
apply in normal times.
Comment [G9]: Private Investment is NOT
being crowded out as we the banks are highly
liquid and local investors are not investing. The
problem with the domestic investors lies with
the perpetual drop in private consumption.
Their response is to hold lower stock levels and
reduced output, they are not calling for more
funds in this current situation. They want to be
convinced that your fiscal measures are going
to cause private consumption to rise again so
that they can make some money. They can’t
make money if people are not spending and
are losing their jobs!

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no Government wants to find itself in.
Unfortunately, this is where many CARICOM
countries presently find themselves. These problems
are magnified because of the size and openness of
our economies, our vulnerability to shocks, and our
very limited resource base.
Just look around us for a moment to understand the
scale of the problems.
In the past few years, many of our CARICOM
neighbors have not been able to pay their debts and
had to engage in debt restructuring. Debt
Comment [G10]: According to IMF data,
most Caribbean countries started a slow
recovery from 2009 and are doing much better
now save Saint Lucia. The CDB has projected
growth in Barbados, Dominica, Grenada,
Anguilla for 2014 except for Saint Lucia. They
know that we have a peculiar problem
grappling with which you have not yet
accepted. Stop looking for cover in the woes
of regional governments, they are moving on
and are leaving us alone in the economic
decline boat.
Comment [G11]: Sir this a shrub under
which you are seeking to hide. Our caricom
neighbors like the rest of the world were
reeling from the effects of the Global Financial
Crisis. No one is saying that recovery must be
fast. They, like Singapore, had to take huge
debts to resuscitate their economies after the
Crisis. Please put this into is proper
perspective. While they continue to improve
from 2009 albeit slowly; we messed up in 2012
by your new policies and programmes. We
were on a growth trajectory and you toppled
us over with your fear-mongering, VAT,
increased Recurrent Expenditure of $88.81 to a
figure which was $29M greater than the 2011
recurrent revenues. And yes, you high levels of
‘zero growth potential’ untargeted social
programmes.

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restructuring occurred in Dominica in 2004, Belize in
2007 and 2013, Antigua and Barbuda in 2009,
Jamaica 2010 and again in 2013 and St. Kitts and
Nevis in 2012. Grenada underwent debt
restructuring in 2005 and will undergo further debt
restructuring this financial year. Indeed, the
Government has indicated that investors in Grenada
will take a 50% “haircut”, meaning that they have to
accept a 50% loss on their investments.
These adjustments have led to a very high degree of
caution and wariness about investments in
Government Bonds and instruments throughout the
region. These anxieties are evident on the Regional
Comment [G12]: AW! Don’t lump those
country’s individual fiscal woes prior to the
Crisis with the post crisis realities. I know, you
are seeking to concoct the notion that your
2012 mess had its genesis in the regional
government woes! According to Lady Spice –
“It euh working so”. You made some blunders
in 2012 that messed up the fiscal equation,
killed borderline businesses and sent hundreds
of Saint Lucians home. Those are the facts.

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Government Securities Market, which is where we
have, in recent years, gone to raise most of our
financing. This factor is very important because 20%
of our debt portfolio matures in the current 2014-15,
Financial Year.
So, the most important and urgent question we have
to answer is how do we slow down the growth of
Public Debt?
THE COMPOSITION OF GOVERNMENT
EXPENDITURE
Comment [G13]: Wrong question. It is not
the growth of public debt that is the problem
per se; it is the utilization of those monies in
areas that don’t grow the economy which
would in turn finance their repayments. If you
are going to continue to borrow to finance
NICE/STEPS and free laptops; Interest
payments will choke your recurrent
expenditure much to the chagrin of a possible
surplus to help speed up the repayment of
your debts and finance your capital ‘growth
creating’ projects.

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To answer that question we have to look at the
composition of Government’s expenditure. For the
2014-15 Financial Year, Current Expenditure
accounts for 73% of total expenditure or $870
million, while Capital Expenditure is 27% or $315
million. If we break down Current Expenditure, we
will see that spending on Goods and Services
accounts for 19% or $167 million, while Interest
Payments on debt eat up 16% or $137 million.
Transfers to statutory entities make up 12% or $105
million, while Wages, Salaries and Pensions are the
largest expenditure item at 53% or $459 million. This
means the discretionary expenditure component of
Comment [G14]: In the assessment of the
pressure of the Public Service on recurrent
expenditure we never added ‘Retirement
Benefits or Pensions’ to Salaries and Wages
(See Table 32 Social/Econ Review 2013).
Retirement Benefits falls under ‘Current
Transfers’. During the budget speech you said
that the figure was 48%. When the opposition
in Guy Joseph raised the alarm you went in to
say that the 48% included pension even when
your script referred to the 48% referred to
‘budgeted’ figures for 2013 for Salaries and
Wages only. Sir it appears that you as seeking
to make us think in a twisted way that the
pressure of public servants’ salary on recurrent
expenditure has somehow jumped up of that
emotional figure of 53%. Now since you have
actually referred to that padding in this case; I
did an analysis from 2004 to 2013 and found
that ‘Wages and Salaries and Pensions’
averaged 53% with the highest 54% and lowest
51%. So there it is again Mr. PM Salaries ,
wages and pension at 53% of recurrent
expenditure is nothing new in our fiscal
formula. We have been operating safely with
that figure from 2004. BTW…the 2013 value is
actually $449M and not $459 according to the
Soc. Econ Rev. 2013.

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our Current Expenditure is relatively small and does
not give us much space to manoeuver.
The situation in Capital Expenditure is also very
tight. Tourism Marketing is the single largest item,
taking up 31% of our Capital Budget or $40 million.
We have had to reduce our allocation to
Infrastructure to a mere $10 million or 8% of the
total, which means the Ministry of Infrastructure
will be severely challenged to respond to the many
pressing infrastructure rehabilitation and
development needs like the repair of roads, bridges,
schools and other public buildings.
Comment [G15]: Ha. This is the problem. It is
your capital expenditures that largely drives
growth. It is those expenditures that will
FACILITATE the expansion of output by both
the private and public sectors. Recurrent
Expenditures deals with keeping the
government machine alive. Your government
would be operating basically on autopilot
without a health capital program. Your capital
program uses over $24M is areas that DO NOT
grow the economy – untargeted social
programs.

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Already, even with the significant cutbacks we have
made to our Capital Expenditure for the current
Financial Year, we have a financing gap of $205
million, made up of $129 million on the capital side
and $76 million on the recurrent side. In other
words, if we stand still and maintain the status quo
we will have to raise $205 million in new money for
this year. Comment [G16]: Sir who is advising you? I
shall repeat. You NEED CAPITAL EXPENDITURE
to help grow the economy. Your problem is
that you are spending them in the WRONG
places. We can’t afford your UNTARGETED
SOCIAL PROGRAMS at this point. You are
giving parents $500 and a laptop in households
that don’t need it. I saw the Prez of the senate
at an event where they were dishing out those
$500. I think his daughter had entered SJC that
year. You can’t get growth from such wasteful
spending?

14. 14
THE CASE FOR WAGE ADJUSTMENT
This means, unfortunately, that we have to reduce
expenditure in the area that is making the biggest
dent in our Budget – Personal Emoluments or
Salaries and Wages.
Personal Emoluments in the Public Service are
currently 13% of our GDP and 53% of Current
Expenditure. In effect, for every dollar spent by
government, 53 cents is used to pay salaries.
Consider a small contractor or a small business or
even a large business spending 53 cents on every
Comment [G17]: WRONG CASE sir. We need
one for the suspension of your UNTARGETED
social programs that are financed under Capital
Expenditure in favor of more expenditure in
the productive sector such as Agriculture and
Tourism.
Comment [G18]: WAIT! Are you forgetting
to your PADDING? The pads that you used to
inflate that figure to make it 53% of recurrent
expenditure. PENSIONS, sir pensions.
Comment [G19]: AIK!!!, I told you that you
forgot your PADDING in the last sentence.
Personal Emoluments OR ‘Salaries and Wages’
is NOT 53% and has NEVER been 53% of
Recurrent Expenditure sir. It has averaged 45%
over 2004-2013 with 2012 being 43% and last
year 44% of recurrent expenditure. We have
endured that pressure for decades sir, don’t
mess with the people’s salaries.

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dollar that it makes, on wages alone. The chances are
that business would not make a profit or for that
matter, survive for any length of time.
The harsh truth is that the growth in Wages and
Salaries in the Public Service over the last ten years
has not only been completely disconnected to the
growth in our economy, but it has far outpaced the
growth in wages in the Private Sector. Indeed,
between 1997 and 2013, a span of sixteen years,
public officers would have received an overall
increase of 39.5% in salaries and wages.
Comment [G20]: LOGIC is based on a false
premise. The 53% includes pensions which
would be ‘other payables’ in a business and
NOT a component of expenses that determines
profit. A wise business man would expense a
small amount for pension each month and
credit to ‘Pensions Payable’ to be paid when it
becomes due or invested outside of the
business.
Comment [G21]: I never knew that Salaries
and wages was a vehicle for ‘growing’ the
economy. Well I am never too late to learn.
Please send me the literature.
Comment [G22]: Oh oh Sir, that huge figure
of 39.5% almost convinced me as you know it
did to thousands of Saint Lucians that our
Public Servants are somehow overpaid. Well
sir, as a student of economics I ventured to do
a similar analysis for the growth inflation over
the same period and sir, the juxtaposing was
quite mindboggling. It might shock you to
know that the figure is MUCH larger than
39.5% and stands at 44.47% (See Table 1
below). It means sir that the purchasing power
of the public servants are still at the levels that
they were WAY before 1997 with NO real
improvement. Inflation was eating into those
salary increases at a faster rate than they were
being made.
Sir someone might think that you are seeking
to deceive the public servants.

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Against that background, I can now address three
issues that have been championed by some of our
citizens.
DO WAGE INCREASES STIMULATE ECONOMIC
GROWTH?
Some have suggested that there is an economic
benefit to these wage increases and that our
economy grows when we increase wages in the
Public Service. However, the data and the literature
suggest differently. Government spending on wages
is consumption and the consumption-to-import ratio

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is high in small open economies like ours. In other
words, when we increase consumption the only real
beneficiary is the external market and those who
import the items. Government does collect more in
Import Duties but the value added through this
process is minimal and there is no real production or
significant impact on our GDP. In fact, the studies
show that Government spending on consumption
has almost no impact on growth in small open
economies. Similarly, consolidation or restriction on
the investment side hurts the growth prospects of
the country and is not viable. Common sense
Comment [G23]: Are you serious? Then it
should be a MUCH BETTER preposition to
progressively cut their pay. Sir, your argument
is somewhat suggesting that there is greater
economic benefit in permanently freezing
public servants salaries?
One point is correct, that small economies like
ours suffer from large volumes of imports due
to the fact that we produce few of what we
need and use on a daily basis. The solution to
this problem is to bolster exports to counter it
so that we enjoy a net inflow of money and a
net outflow of products and services. That is
why we need to encourage buy local
campaigns and produce more for the export
market and FACILITATE the local production of
more of the vegetables that we import for the
tourists.
Comment [G24]: Which study Sir? And if we
don’t fix our export growth, that will be our
plight, but the permanent income earners
much spend more locally to help the economy.
An increase in their income will facilitate that
in a small measure. Besides, by your
argument an increase in public servants pay is
partly financed by import duties revenues.
It appears that we should JUST NOT PAY THEM
A SALARY AT ALL!!
Our issue is to increase productivity. But why
should public servants be productive when
inflation grows faster than their salaries?
Comment [G25]: ??? Where is the link to
investment restriction? ???????

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suggests that growth should lead wages and not the
other way round.
SHOULD WAGE CUTS BE RESTRICTED TO UPPER
MANAGEMENT?
The other recommendation you hear is that a wage
reduction, if indeed it has to take place, should be
restricted to Ministers, Permanent Secretaries and
Senior Management.
Again, the reality paints a different picture. The
structure of the Public Service has changed very
Comment [G26]: That is not common sense
but subterfuge sir.
Sir, when public servants don’t feel adequately
compensated they are going to do nothing,
and when they do nothing; you can kiss
GROWTH good-bye. Now, given the fact that
inflation from 1997 has surpassed the
increases that public servants have gotten over
that same period; it is FAIR TO SAY THAT
PUBLIC SERVANTS ARE CURRENTLY UNDER
COMPENSATED. THERE ARE CURRENTLY
OPERATING AT PRE 1997 PURCHASING POWER
LEVELS.
We need to close that gap between overall
growth in inflation of 44.47% and overall
growth in Public Servants emoluments of
39.5%.
Comment [G27]: That is padding. Folks
know that the volume of dollars spent on
public servants are not concentrated at the
top. You are looking for sympathy on this one.
But go ahead, do your thingy Sir.
Comment [G28]: THAT IS A BETTER CASE
FOR THE INCREASE IN THE SALARIES OF
MINISTERS THAN ANYTHING ELSE sir.
Now you don’t have to go all across the corner
for it. Ministers of Government are grossly
underpaid and that is a FACT.
A minister should be making more than a PS as
a rule. So I will support you on this one. Low
salaries paid to public officials encourages
CORRUPTION. So when you pay your public
servants low salaries, they will become
corrupt….THERE WAS A STUDY ON THIS ONE
TOO…I forget the name of the researcher.

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little over the last ten years. Civil Servants account
for 31% of total expenditure, followed by Teachers at
20%, Public Service Pensioners at 19%, Police at 10%,
workers on wages at 9%, Fire Service Officers at 3%,
Nurses at 2%, Correctional Officers at 1%, Doctors at
1%, Top Management at 1%, and 3% categorized as
‘Other’. The ‘Other’ category is made up of officers
who are working on Projects, Members of
Parliament, Judges and Magistrates, District
Registrars, Special Police assigned to protect our
Judiciary, Officers in the Electoral Department, and
the so-called consultants, a total of 13 .

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Let us take the roughly $7,761 monthly salary paid
to a Minister of Government as a benchmark. As
explained earlier, between 1997 and 2013, Public
Officers have received salary increases amounting to
39.5%. However, the salaries of Ministers have
remained unchanged since 1998. This is why every
Grade 19 Public Officer, or everyone at the level of
Deputy Permanent Secretary, currently makes over
$10,000 annually more than a Minister. That gap gets
much wider when you compare the salaries of
Ministers and Permanent Secretaries. So the
suggestion that by taking a bigger chunk out of the
salaries of Ministers or reducing the number of

21. 21
Ministers we can solve or help solve our fiscal
problem is at best misguided and at worst,
innumeracy.
But let us go further. If we eliminate all of the
salaries from the level of Minister upwards, we
would save a grand total of $16.5 million. In effect,
we would send home all of the Ministers, all of the
Permanent Secretaries, Deputy Permanent
Secretaries, Doctors, Magistrates and Heads of
Department to realize a saving of less than $17
million. Clearly, the mathematics does not support
the political arguments. The facts show that

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employment in the Public Service is skewed toward
the lower grades, with Grades 3, 5, 7, 9, 10 and 12
accounting for the largest numbers.
WRONG TIME TO REDUCE DEFICIT
Then there are those who say that this is the wrong
time to reduce the deficit. This is the time to pump
money into the economy.
Surely, by definition, if a deficit exists it means
that you are unable to finance your expenses from
the money you make. Therefore, you may have to
borrow. The reality is twofold; firstly the
Debt/GDP ratio of Saint Lucia is already high.
Secondly, investors no longer have any appetite to
Comment [G29]: NO, no! That is not what
we are really saying. We are saying that we
need to concentrate MORE on growing the
economy as a means of dealing with the
deficit. In other words you need to spend
(Capital spending) more in the productive
areas at this time. Target those expenditures
in the productive sectors and suspend your
‘politically painted’ UNTARGETED SOCIAL
PROGRAMS. Sir, if you go ahead and cut
salaries, Private consumption will fall further
and so will revenues. Since your existing
capital program is largely social programs, the
economy will further contract as Private
consumption is key to growth in output. Sir,
the tough decision that you don’t want to take
is the suspension of the social
programming…..that is our door out of this
malaise and you don’t seem to have the
political temerity for it.

23. 23
lend Governments in the region on a long term
basis. In other words, it is no longer possible to
borrow from investors as in the past. We can no
longer borrow to finance our deficit; that is our
bottom line. So, we have no choice but to reduce
our current expenditure.
THE AVAILABLE OPTIONS
Therefore, unfortunately, the only way in which we
can get the reduction in Current Expenditure that
we need to put our fiscal situation back on a viable
path is to make a cut in salaries and wages across
the board.
Comment [G30]: No! Suspend untargeted
social programs, divert funds to more
productive sectors (which will grow output and
private consumption and revenues to fix the
deficit). Cutting salaries now and maintaining
the social programmes will take us back to
square one and you will ask for another pay
cut?
Use a small sunset levy on electricity as Peter
Alexander has suggested (not VAT) to get you
some more revenues to inject into more
productive, high multiplier, capital programs
which will set us back to the growth trajectory
that you inherited in 2011. The levy should be
fixed at an equitable levy that would also
finance an increase in the public servant’s
salaries so that they can contribute to a
improvement in output. You can ensure that
most of their increase is spent locally by
providing them with incentives like low
mortgage rates at the SLDB and SMFC and use
some NIC funds to finance Lease to own
Homes as Stephenson King suggested.

24. 24
Three different scenarios were developed. The first
seeks to achieve a savings of $37 million, which, if
you will recall, is slightly less than half of our
Recurrent Financing gap. To realize these savings,
we would need to make a 10% reduction in salaries
and wages across the board or send home a total of
990 Public Officers. The second option, which would
give us savings of $26 million, would require a 7%
reduction in salaries and wages or the retrenchment
of 696 workers. However, it would still leave a
financing gap of $50 million. The third option is for a
5% adjustment in salaries and wages, which gives
savings of $18.5 million, but leaves a financing gap

25. 25
in Recurrent Expenditure of $57.5 million. If the
decision is not to embark on a 5% wage adjustment,
we would have to terminate the employment of 495
workers.
We have said to the Unions and Associations that
Government does not want or intend to retrench any
workers unless it is placed in a position where it has
no other option. We already have a high
unemployment problem to deal with and sending
workers home only worsens that situation. We think
this is a time when all should be willing to make a
Comment [G31]: Sir, this is largely math. No
wonder PIP called it a mathematical budget!
Lol
As I have said before, your interventions NEED
not to deal with the mathematical aspect of
the deficit per se; but rather, to deal with
permutations to grow the economy and output
which would eventually stabilize the fiscal
operations of the government.
You must use existing funds in capital
expenditures that would grow the economy.
Please this is the way that we should go.

26. 26
small sacrifice to preserve the jobs of their fellow
workers.
A SPIRIT OF ENGAGEMENT
My fellow Saint Lucians, these are the realities that
our Government has been explaining to our Civil
Society partners in a series of meetings over the last
month. These are also the facts that we have been
sharing with our Public Sector Unions in the several
meetings that have taken place in the Conference
Room of the Ministry of Infrastructure.
Comment [G32]: Retrenchment is not
necessary. The public service has been
operating at 45% of recurrent expenditure for
a while now….the size is not the problem. The
decisions that you took in 2012 that created
our mess. You told the country that you
inherited a messed up economy and wanted all
to make sacrifices to help you fix it. The
country was no such state. You got a healthy
$236M in the banks. There was growth as
early as 2010 albeit small, but good given it
was the year after a global recession. The
people listened to you and cut private
consumption down by about $207M in 2012
and a loss of revenue of $22M. The cut in
private consumption also sent borderline
businesses into mortality followed by a
procession of disasters such as ; loss of jobs,
current deficit of $52M, economic decline of
1.3% and private consumption continues to fall
each year. Sir, your current intervention MUST
have the effect of at least stemming that
decline in private consumption. Cutting pay is
surely not going to achieve this.
Comment [G33]: A mea maxima culpa is
owing to the public servants on this one.
Incorporating the proposed cut in the
estimates in an addendum to what the
opposition used to prepare is a MORTAL SIN
for which penance is outstanding.

27. 27
I know that these discussions are not easy. They
cannot be, necessary as they are!
I want to thank the Public Sector Unions and
Associations for the spirit in which they have
engaged our Government in these discussions. So
far, the meetings have been free of rancor and full of
constructive discussion. We have looked at ways in
which we can stimulate growth in our economy in
the long run. We have discussed ways in which we
can reduce expenditure on electricity,
communications, and the operations and
maintenance of our vehicles and we have shared

28. 28
with the Unions and Associations the steps and
programmes that we have already undertaken in
these areas.
Similarly, when we met with the National Youth
Council, the Media Association and the National
Council on Public Transportation, we had lively,
constructive dialogues on all of these issues. We
spoke about stimulating agriculture and creating
new spheres of economic activity. This week we will
meet with the Industrial and Small Business
Association to continue the discussions.

29. 29
I wish to reiterate that together with the team from
the Ministry of Finance, my cabinet colleagues and I
are available to any Civil Society Group that wishes
to be similarly briefed on the economy, once
appropriate arrangements could be made. Indeed, I
intend to continue these discussions on a regular
basis with all our social partners to report on our
progress on the economy and of course, to seek their
advice and counsel.

30. 30
THE NEXT STEPS
At our Meeting on Friday June 6th with the Public
Sector Unions and Associations, I presented the
Government’s proposals to reduce the fiscal deficit.
We have agreed that the Unions will take these
proposals back to their membership, obtain their
feedback, and our meeting will reconvene on Friday
June 13th to receive the formal responses and
reactions of the Unions and Associations.
At that meeting, I informed the Unions and
Associations that consistent with the process we

31. 31
have embarked on in apprising Civil Society of the
current situation, I would be addressing the Nation
tonight to extend the conversation to the wider
public. Initially, I grappled with the dilemma of
whether I should share with you the proposals the
Government made to the Unions and Associations
or whether I should at least give their leaders an
opportunity to engage their workers before putting
these proposals in the public domain. I did not want
to be accused of preempting the consultation process
or muddying the waters for the Union leaders.
However, I felt that this matter could not be
confined solely to the Government and Public Sector

32. 32
Unions and Associations. It had to embrace the
entire public because all of us are called upon to
make a sacrifice of some kind. In any event, I knew
that Government’s proposals, as outlined in the
letter to the respective Union leaders, would be out
in the public domain. Already, I have heard at least
one media outlet present these in detail in their
news broadcast. Therefore, the debate over whether
or not I should state them tonight is, for all practical
purposes, now moot.

33. 33
GOVERNMENT’S PROPOSALS
Let me now turn to the proposals which the
Government has formally tabled to the Public Sector
Unions and Associations. The Government has
proposed the following:
1. A reduction of 5% in the wages of Public
Officers and all other employees of the Crown,
from Grades 4 to 21. This reduction will be
levied on gross salaries that is, basic salary plus
allowances. The reduction will not apply to the
judiciary or the Governor General.
2. The introduction of a wage freeze to cover the
current triennium of wage negotiations.
Comment [G34]: No Sir, don’t go there!
Comment [G35]: Yes, and there to.

34. 34
3. The introduction of agreed benchmarks to
govern further wage increases. To ensure and
maintain sustainability, it is proposed that wage
adjustments beyond the current triennium
should be related to broad macro-economic and
fiscal indicators. These should include:
(a) GDP Growth Rate of 2.5%;
(b) Achievement of a Current Account Surplus
of 3% of GDP;
(c) An agreed level of inflation;
(d)The unemployment rate;

35. 35
(e) The level of wages in the overall economy
as measured by the wage index; and
(f) Agreed productivity gains.
4. A Memorandum of Understanding to be signed
by all parties to the Agreement to reflect the
points of agreement.
5. The establishment of a Monitoring Committee,
made up of representatives of the Government
and all Public Sector Unions and Associations,
to monitor the implementation of the
Agreement between the parties.
6. The establishment of a Commission, to be
known as a “Spending and Government
Comment [G36]: Okay, I have been
advocating for something like this but a bit
differently. You cannot peg salaries with such
broad indicators. That is because the public
servants can be penalized or rewarded for
situations beyond their control. This case is a
good one. The PM went on an unnecessary
fear mongering that sent private consumption
and revenues cascading the entire stack of
fiscal dominoes. Those actions would have
caused the public servants to suffer under this
proposed formula. Here is my alternative.
1. Set Revenue Collection and Expenditure
Benchmarks for government departments that
are in keeping with the government’s fiscal
needs for the given year. Their reward should
be in that sphere with a constant of the year’s
inflation rate added to the formula. So it
would look something like a linear equation:
mx+c = Income. m=rate of achievement of
targets.
2. Since the Ministers are the policy drivers for
the whole economy with the mandate to
deliver good life to ALL; it is their salaries that
should be pegged to those proposed broad
macroeconomic indicators.
3. I am however leaning to the addition of a
small constant in suggesting #1 to cover macro
economic trends. So it can be #2 plus (y % of
the adjustments to the Ministers Salaries only
in the positive direction).
So the highbred should look something like
Mx+C2+C1
Comment [G37]: Not necessary. Existing
protocols can take care of that.

36. 36
Efficiency Commission”, to advise Government
on the most efficient and cost-effective
government organizational structure and
governing processes. The Commission shall:
(1).Review, assess and propose changes to
Government and Government corporate
bodies and agencies with respect to:
(a) the adequacy of the structures in
place;
(b) operations; and
(c) processes for governing;

37. 37
(2) Review, assess and propose a redesign
of the organizational structure of
Government in such manner as the
Commission may deem appropriate, which
may include streamlining or consolidating
agencies, authorities and other bodies that
have overlapping missions;
(3) Identify operational improvements
aimed at cost-effectiveness and improved
service quality, which may include shared
services, enhanced use of information
technology and changes in service delivery
mechanisms;

38. 38
(4) Identify inefficiencies;
(5) Identify actions that can be privatized or
outsourced;
(6) Identify targets and other means for
measuring efficiencies; and
(7) Do all things the Commission may deem
necessary to achieve the objectives of the work
of the Commission.
The idea of a “Spending and Government Efficiency
Commission” is not original. In fact, we have
borrowed the idea from Bermuda, an island that had
to undergo structural adjustments, including wage
adjustments in its Public Service.
Comment [G38]: Actually, when I proposed
this on FaceBook I thought that is was original.
Silly me, you are now telling that Bermuda was
your inspiration. I remember sitting with a
particular government minister on this. No
credit to me fine…not required…lol. Can we
proceed with other items in my FaceBook
suggestion viz. the downsizing of the Ministries
of Government.
https://www.facebook.com/notes/amatus-
edwards/an-idea-for-growth-make-the-public-
service-more-efficient/10151554689566031
https://stluciastar.com/an-idea-for-growth-
make-the-public-service-more-efficient/

39. 39
NEED FOR STRONG SIGNALS
Fellow citizens, ladies and gentlemen, what we do
next as a country will be very critical. All around us
we are seeing the carnage that the global Economic
Crisis has left behind. There is scar tissue in many
areas that will take a long time to fully heal. While
we are starting to see evidence of recovery in some
sectors, the situation is still very fragile and
precarious. We must send the correct, strong signals
to the market and to potential investors that we are
serious about restoring our economic fundamentals.
We cannot ask investors to trust us with their hard-

40. 40
earned capital if we are not prepared to put our own
financial house in order.
In my message in our 2011 Elections Manifesto, I
stated “the goal of nation building is a long-term
exercise” and “we understand there are no quick
fixes to several of the problems facing (our
country)”. We must without fail, summon the will
and courage to resolve our problems.
Comment [G41]: Nice words Sir, But you
need to confess your fiscal mismanagement of
2012 that got the wound of our recovery
patient septic again. Open confession is good
for the soul. Well you know that this will end
your political life, but guess what? It can start
a brand new spiritual life for you. Speak with
Este about a new spiritual outlook.
Comment [G42]: Ah. I remember the
caption was ‘Blueprint for Growth’. But you
served us Decline in 2012, Decline in 2013, and
given your obstinacy about those proposed
fiscal measures; if you have your way, we will
be served another year of decline. CDB is not
optimistic about your ability to return growth
in 2014. They are optimistic about almost the
entire Caribbean, but Saint Lucia.

41. 41
WHY SUCH A POLITICAL RISK?
Many people have asked me why are we taking
such a huge political risk? Why are we embarking
on a course of action that may ultimately weaken
our Party’s chances at the next General Elections?
There are many who believe that we should not
invest so much in correcting our economy. They
reason that there is no certainty that the economy
will crash if we continue as is, and in any event,
given that it is our political future that is at stake, it
is a gamble our Government should not take.
Comment [G43]: Nice one Sir. You had me
rolling on the floor. You are NOT taking a risk
here, you are managing the political risk in
your favor very well Sir.
1. You and your ministers have blamed the last
admin for our present estate while in the same
breath appearing to say that it was an ‘act of
god’. The country does not know as yet that
this was all your fault. So what risk? You are
painting yourself as a heart surgeon saving
Helen’s life.
2. The tough political risk would be the
suspension of your untargeted social programs
that was sold in part as your vehicle for
creating JOBS, JOBS and JOBS. That is the
surgery that the IMF WILL MAKE IF THEY ARE
TO COME INTO THIS THEATRE WITH FAIR
HELEN ON THE TABLE. Ask Dr. Reginald Darius
whether this would not be his
recommendation if he was serving on a
mission to a foreign country in our situation.
Sir, this is the political risk that you refuse to
take! You know full well that Fair Helen will
not return you to the helm when she
discovered that it was you that dealt her that
life threatening blow in 2012.
Those interventions of yours are not going to
solve the problem. It will come back next year
at the same time.
Comment [G44]: Come on, you are looking
for false sympathy. No one ever said that. I
challenge you, name that person and I will
recant.

42. 42
However, the Government that I lead does not
believe in gambling with the future of our country
and its people. We were elected to lead, to govern
and to take decisions that are in the best interests of
the entire country, not just a few, even if those
decisions are uncomfortable and painful. The men
and women who serve with me in the Cabinet are
not selfishly motivated to put their own political
interests over the interests of the country in which
they live, their parents lived, and their children and
grandchildren expect to live prosperously.
Comment [G45]: That is not true. See below
for the right things to do (Exhibit 2). Those are
the things that may damage your political
career. Remember you have NOT taken
responsibility for the decisions that you took in
2012 that brought us to where we are today.
Please find a piece below about How we got
here and the part that your administration
played. See Exhibit 3.

43. 43
This is why we are prepared to trust in the people of
Saint Lucia. This is why we are inviting our Public
Sector Union leaders and our Public Officers to do
the right thing, to do what is in the best interest of
our country.
We believe in the integrity and the reasonableness of
our people.
I am confident that if we do what is right, our
country will emerge from this stronger, more
focused, more resilient and with a determination to
never find ourselves in such a situation again.

44. 44
I pray that God may bless each and every one of us
and grant us the strength and the courage to
confront these problems squarely and put them
behind us.
Thank you and good night.

45. 45
EXHIBIT 1
Table 1-Inflation from 1997-2013
1997 0.00%
1998 2.80%
1999 3.50%
2000 3.55%
2001 2.09%
2002 -0.20%
2003 1.00%
2004 1.47%
2005 3.91%
2006 3.60%
2007 2.80%
2008 7.20%
2009 1.00%
2010 3.25%
2011 2.80%
2012 4.20%
2013 1.50%
44.47%

46. 46
EXHIBIT 2
Here is what the government needs to do to fix the
economy.
1. Review some of the new political appointments that were made in 2012 in
the missions and elsewhere. Since those people have hardly grown
accustomed to their new and improved salaries, they should be more
amenable to a pay cut.
2. Suspend NICE/STEPS and the Laptop untargeted social programs. You
can’t be asking for public servants to take pay cuts and are buying laptops
for some students who already have large home computer networks.
3. Government needs to concentrate more on spending in areas that could
grow the economy and so the monies going to the social programs can be
directed to more growth areas.
4. If there is a cash flow problem, a sunset levy on electricity (cut ozone
emission can be the sales speech) could be implemented across the various
sectors of the country so that we all share in the sacrifice and not only the
Public Servants.
5. The levy in #4 should be large enough to be able to finance a 5%
increase in Public servants pay as it is the expenditures of permanent
income earners like public servants that is need to increase Private
consumption which has been falling since 2012. You need to encourage
public servants to spend and so should include in that package incentives
for public servants to invest that increase in salary in concessionary
mortgage loans through government agencies such as the SLDB and St
Lucia Mortgage Finance Co.
6. Government should reinstate the Airport tax for the HIA and place it into a
sinking fund to help meet governments its short term monetary obligations
so that we can continue to sell bonds and treasury bills. The government
has indicated that it has substantially dug into the existing sinking funds
that it inherited in 2011. The sinking fund will be liquidated when the HIA
project is ready and hopefully current surpluses would be available to
rebuild the sinking funds.
7. The construction industry can get a shot in the arm if the government
implements the Stephenson King’s idea of building homes for citizens on a
lease to own basis. The NIC should find this venture to be a very profitable
one to fund.

47. 47
8. There are too many folks who can meet their rent and would never be able
to satisfy the banks on the usual mortgage terms. Those people can be
accommodated in the lease to own programme which would do well to boost
the construction sector.

48. 48
EXHIBIT 3
HOW DID WE GET TO WHERE WE ARE AND WHAT MUST WE DO TO GET OUT OF IT
It is all well and good for the Prime Minister to be admitting that the country is
in dire straits and needs to make the necessary changes to solve it. But it will
be a whole different story when his government blames the previous
administration for what was obviously a case of his government’s
mismanagement of the economy. This is what happened to the economy
according to data and narrative from the Social and Economic Review 2012-
2013.
1. The years of 2008 and 2009 were bad for every country owing to the Global
Financial Crisis. Saint Lucia suffered a huge drop in Private
Consumption/Spending over those two years by a whopping $392M. That
drop in consumption resulted in a drop in recurrent revenues of $45.44M.
However, those blows did not create a current deficit as the then
administration was prudent with its spending, keeping recurrent
expenditures below recurrent revenues at all times. Instead, the country
recorded a current surplus of $72.79M in 2009 in the midst of the Global
Financial Crisis. With a current surplus you are able to pay your recurrent
expenditure with recurrent revenues with the excess going towards assisting
with the financing of your capital programs.
2. In 2010 the country’s recovery was almost immediate with an increase in
Private Consumption of $327M accompanied by an increase in recurrent
revenues of $28M. The Cost of the interventions that helped the recovery
process had the effect of a drop in the current surplus from $72.79M the
year before to $45.06M in 2010 but would continue to increase in 2011 to a
figure of $59.33M.
3. 2011 saw a continuation in the increase of Private Consumption and the
general recovery of the economy, which again was accompanied by an
increase in recurrent revenue of $48.18M. The increase in household
spending or Private Consumption grew that year by a huge figure of $248M.
A current surplus larger than the previous year was achieved at a level of
$59.33M. That financial year ended with the SLP in power after having won
the November 2011 general elections. No current deficit was recorded that

49. 49
year, no economic down turn. Economic growth of 1.3% was recorded with
optimism from international agencies of further growth for 2012, albeit
sluggish. The year ended with a current surplus of $59.33M and an overall
deficit of 6.56% of GDP something that is not unusual. In fact in 2005 the
overall deficit was 7.10% of GDP and we did not suffer a crash in 2006. And
yes, government’s deposits at local banks stood at a healthy $236M at the
close of 2011 (the treasury was not empty as the official propaganda
claimed).
4. Enters the year 2012. What was different about that year that would
change the course of this country in the downward direction for another two
years with a third being projected by the CDB? Was there a 2012 regional
or international crisis different from what the previous administration was
confronted with?
Here are the known changes in 2012:
a. New SLP policies and programmes – huge expenditures in social
programmes that don’t grow the economy and create real jobs.
b. The Implementation of VAT as a Revenue Generating Tax – not all
services attracted indirect taxes before VAT.
c. The New PM started a campaign of fear in the country saying that he
had inherited a messed up economy that he has to fix. He called for
sacrifices from everyone because the UWP had messed up the
country. The facts presented above which came from the Social and
Economic Review of 2012 and 2013 did not corroborate that claim by
the Prime Minister.
d. Increase in recurrent expenditures by $88.81M which represented a
figure of $29M more than the recurrent revenues recorded in 2011. It
means that the PM was expecting an increase of at least $29M to
avoid a current deficit. With recent revenue growth figures of $28M
and $48M over the past two years, a $29M growth would surely be
reasonable. With all things remaining equal, a $20M current surplus
could have been expected. BUT WHY DIDN’T it happen? Why instead
did we suffer a drop in recurrent revenues of $22M? Was the
external environment any worse than it was over the three previous
years? In fact the SLP boasted of record Tourist Arrivals in 2012.
Jadia Jn Pierre was all over FaceBook boasting. So, the external
environment COULD NOT be the culprit. So what went wrong?

50. 50
Compatriots, the only thing that could reasonably explain the 2012 fiscal mess
is the Prime Minister’s fear-mongering. With all of his experience in the
leadership of the country; he should have known that you don’t ask
households to make sacrifices; you don’t instill fear into your local economy.
That has the selfsame effect of a recession! Households willfully cut spending
in those circumstances that is why governments must create stimulus
packages to reinvigorate economies that are so affect. But you, as a
government, must never create fear in your local economy. SLP supporters
were all over FaceBook advising each other to eat less, party less and
ultimately spend less so that the Prime Minister could ‘FIX’ the economy.
You can’t grow an economy if people are not going to spend! The people of this
country took heed to the PM’s call and started to cut on spending which
explains the $207.5M drop in Private Consumption in 2012. But that would be
exacerbated by the implementation of VAT in that same year sending several
borderline businesses into mortality along with a procession of economic woes
such as increased unemployment, reduction in government revenues of $22M,
a current deficit of $52M and 1.5% economic decline.
2013 was a bit better with a growth in recurrent revenue which WAS NOT
accompanied by a growth in Private Consumption. Private consumption
continues to fall, this time by $51.6M. That eventuality is explained by an
improvement in general tax collection which was also cited in the narrative of
the Social and Economic Review of 2013. It means that while people are
spending less, government is able to milk every drop of tax from them.
Going Forward
On the basis of the foregoing, it would be very unfair for the public servants to
be the ones to suffer in the correction of this problem. The claim that the
public service is bloated cannot be a good excuse for wanting to cut their pay.
The fact of the matter as represented by the Social and Economic review of the
past 15 years is that Salaries and Wages as a percentage of Total Recurrent
Expenditure has hovered around 45%. In 2012 it was 43% and in 2013 only
44%! So while we have, for the past decades, been lamenting about the growth
of the public service; its pressure on the current fiscal platform is not unusual
and does not constitute a crisis!

51. 51
Here is what the government needs to do to fix the economy.
1. Review some of the new political appointments that were made in 2012 in
the missions and elsewhere. Since those people have hardly grown
accustomed to their new and improved salaries, they should be more
amenable to a pay cut.
2. Suspend NICE/STEPS and the Laptop untargeted social programs. You
can’t be asking for public servants to take pay cuts are is buying laptops for
students who already have large home computer networks.
3. Government needs to concentrate more on spending in areas that could
grow the economy and so the monies going to the social programs can be
directed to more growth areas.
4. If there is a cash flow problem, a sunset levy on electricity (cut ozone
emission) could be implemented across the various sectors of the country so
that we all share in the sacrifice and not only the Public Servants.
5. The levy in #4 should be large enough to be able to finance a 5%
increase in Public servants pay as it is the expenditures of permanent
income earners like public servants that is need to increase Private
consumption which has been falling since 2012. You need to encourage
public servants to spend and so should include in that package incentives
for public servants to invest that increase in salary in concessionary
mortgage loans through government agencies such as the SLDB and St
Lucia Mortgage Finance Co.
6. Government should reinstate the Airport tax for the HIA and place it into a
sinking fund to help meet governments its short term monetary obligations
so that we can continue to sell bonds and treasury bills. The government
has indicated that it has substantially dug into the existing sinking funds
that it inherited in 2011.
7. The construction industry can get a shot in the arm if the government
implements the Stephenson King’s idea of building homes for citizens on a
lease to own basis. The NIC can find this venture to be a very profitable one
to fund. There are too many folks who can meet their rent and would never
be able to satisfy the banks on the usual mortgage terms. Those people can
be accommodated in the lease to own programme.