Brantley: Gov?t Borrowing Puts National Bank at Risk
By Sheena Brooks
National Bank, downtown Basseterre
Opposition Leader Hon. Mark Brantley says the government?s reliance on the St. Kitts-Nevis-Anguilla National Bank (SKNANB), and others, to finance their borrowing is exposing the banks to great risk.
Brantley was at the time addressing a large gathering of businesspersons at the St. Kitts-Nevis Chamber of Industry and Commerce?s 28th Annual Private Sector Banquet, held on Saturday (July 10).
According to Brantley, the mounting national debt was hindering the federal government?s ability to borrow from sources outside of the country, resulting in it turning to local banks.
?The IMF Report also highlighted that the surging debt burdens made it more difficult for our government to access foreign loans and as a result, government has turned to the domestic banks and other financial institutions, or the issuance of government debt instruments to finance their borrowing. As a result the IMF tells us that ?gross public sector exposure is high and concentrated in local banks?. Of these local banks, the St. Kitts-Nevis-Anguilla National Bank is the bank of choice for both the federal government and the NIA for much of its domestic debt,? he said.
Brantley indicated that this could spell disaster for the SKNANB and other financial institutions should the government not be able to meet its financial obligations to the lending institutions and other creditors.
?This creates a further dimension to the debt crisis in that any risk of default by the government directly impacts the largest financial institution in the country. When we consider that the National Bank is also the primary depository for the Social Security Funds, the potential for difficulty is exacerbated. The domino effect of any such crisis throughout the financial sector in St. Kitts-Nevis is perhaps too frightening to contemplate,? he asserted.
Brantley said a government policy of ?borrow and spend? on a wanton basis was the root cause of the approximately $3 billion dollar public debt, and has led to an abysmal 15-year financial record under the Labour administration.
?I regret to say that the fiscal record of St. Kitts and Nevis over the past 15 years has been tragic. Unrestrained borrowing by the government over the last decade and a half has led us to the brink of fiscal ruin. The lack of restraint in borrowing has been exceeded only by the complete absence of restraint in spending. There has been no saving for a rainy day and now that the rains have come, we have been left drowning in an ever surging flood of debt,? the Opposition Leader posited.
Main Opposition Party on St. Kitts, People?s Action Movement (PAM), has questioned the financial status of the National Bank, saying failure to produce the audited accounts for 2009 could be an indication that something is amiss.
?Is our National Bank in trouble? The national economy is experiencing significant difficulty and the last thing anyone would like to contemplate is trouble in our largest indigenous bank. It is reported by sources close to the bank that the Annual General Meeting has been postponed without a date set because the auditors have refused to sign off on the accounts that should be made available to shareholders at the AGM. Information is scarce about the precise objections being raised by the auditors, and this lack of information is fueling ever wilder rumors,? a PAM press statement claims.
PAM alleges mismanagement of the National Bank?s funds on the part of the government as well as the top echelon of the institution.
?With speculation rife about the status of the National Bank, its own payment policy in December 2009 is coming under intense scrutiny. For Christmas the employees of National Bank, from Sir Edmund Lawrence himself right down to the lowest paid, carried home the equivalent of three (3) months? salary in bonuses and holiday payments. This amounted to a significant expenditure on the part of the bank, while many shareholders are still waiting for their long overdue dividends,? said the statement.
Hon. Prime Minister Dr. Denzil Douglas maintains that his administration is committed to reducing public debt, curtailing expenditure, increasing revenue and preserving fiscal stability.
He recently highlighted several measures being undertaken to achieve these lofty aspirations, saying: ?The new belt tightening and revenue-generating policies include the introduction of VAT; streamlining of the discretionary tax exemptions, which is expected to yield EC$15.2 million; closing the loopholes in the Duty Free Shopping System to the tune of $7.2 million in revenue; implementing a wage and hiring freeze to save $11.1 million; adjusting the Base Tariff for electricity to yield $14 million; containing expenditure on goods and services which will yield $17 million; prioritizing of the Capital Expenditure program to yield $34.9 million; revising the structure of the Social Services Levy which would yield $8 million; increasing license fees for casinos and implementation of race track fees to yield $500,000; and expanding the Environmental Levy on vehicles to earn $500,000?.
Dr. Douglas said the measures have been prepared by the Ministry of Finance and reviewed and supported by the International Monetary Fund (IMF). He also called on citizens and residents to be ?supportive of the efforts of my government?.
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