St Kitts elevated to a ” high income” Country

How many of us are aware of this tiny Eastern Caribbean Nation, which has one of the highest  debt to GDP ratio of any country in the world.

CIA world fact book puts St Kitts & Nevis GDP ratio for 2011 (est) at 200%  but Global Finance put the GDP Ratio as follows

2008 2009 2010 2011 2012
131% 148.50% 163.60% 153.40% 151.20%

BASSETERRE, ST. KITTS, DECEMBER 21ST 2012 (CUOPM) – St. Kitts and Nevis has been upgraded to “a high income” country by the United States of America.

This action comes following official statistics by the World Bank that the St. Kitts and Nevis is now better off. St. Kitts and Nevis recently reduced its debt to GDP ratio.

http://www.cuopm.com/newsitem_new.asp?articlenumber=3441&post200803=true

St Kitts and Nevis  signed an IMF agreement on July 2011 having experienced a similar situation to what Jamaica was experiencing  given the very high public debt the country was facing the coming out of a recession .

See press release, which was issued back then.

http://www.imf.org/external/np/sec/pr/2011/pr11295.htm

One year after the deal was signed  the  government of Kitts and Nevis took some very tough decisions, which have so far reduced the debt/GDP ratio. This tiny nation has done what the government of Jamaica has failed to do and is now beginning to see some benefits as a result of support given to it by the IMF.

Prior to the deal with the IMF the Government of St Kitts and Nevis as a precondition to the IMF loan, was asked to impose Value Added Tax ( VAT) on most goods and services, with exemption being granted for basic food items. While this did result in an increase in the cost of most goods and services immediately after the change, for the most part prices in the country have remained virtually stable since then.

One of the main reason for this stability is due to the fixed exchange rate, which is used by St Kitts and Nevis as  part of the Eastern Caribbean Union, with a rate of US$1.00 = EC$2.70 and this has been in place now for well over 20yrs. The people of St Kitts and Nevis really never faced ” austerity” thanks to the low levels of inflation, which comes about mainly to to the fixed exchange rate, which is something the experts have said cannot work in Jamaica.

The IMF in its November review of the St Kitts and Nevis economy gave the government the thumbs up for taking bold steps to improve the fiscal accounts and reducing the debt to GDP ratio.

The IMF Press release stated in part:

“The St. Kitts and Nevis authorities have continued steadfast implementation of their Fund-supported program, despite the sluggish global environment and economic contraction. The near-term outlook for the economy is for a modest recovery.

“Significant progress has been made in restructuring the public debt. An important milestone was reached in terms of the debt-land swap with domestic creditors with the recent transfer of land to the land asset management company. In order to limit the impact on the financial sector and to further buttress the fiscal position through lower interest payments, it will be important to swiftly complete the restructuring of public debt, including with the rapid implementation and entry into operations of the land asset management company, and by finalizing negotiations with remaining domestic and external creditors.

Full release

http://www.imf.org/external/np/sec/pr/2012/pr12467.htm

Conclusion

The St Kitts and Nevis story is very similar to the situation here in Jamaica, however the former has decided to do something about it and is moving to make a difference, while the later government has been unable to even put together plan to secure and agreement and seems unprepared to do what is required to rescue Jamaica.

Just some additional information  for bloggers.

  1. There is no personal income tax in St Kitts and Nevis
  2. There is a SS security tax of 5% ( What we call NIS)
  3. There is a Social Levy of  3.5%. This was recently adjusted  3% on salary below EC$6500 per mth and 8% on earnings above EC$6500 per mth. The employer pays a fixed 3% in addition to what the employee pays.
  4. Vat is charged on all goods and services @ 16.5%.

Each company pays 1% of its employee earnings towards severance to the accountant general which  holds these funds on the behalf of the labour commissioner.  Should an employee be terminated from his or her company, he/she can claim severance payments from the labour commissioner .

The social levy would be similar to our payments to NHT, but theirs is a bit broader .It is a governmental measure geared towards assisting in the advancement of housing and social development programs.

Folks you may wonder how on earth a country with no income tax and so small and with a higher debt to gdp ratio than Jamaica, could be in a “better” financial position than Jamaica and could have a per capita income of over US$15,000 per annum.

The message is we are capable if  our leaders would STOP focusing on retaining power and begin the process of rebuilding Jamaica.

BTW the current party in power in St Kitts and Nevis the the Labour party lead by Denzil Douglas, whose party in now into its 4th consecutive  term in office.

Do you see the parallels with Jamaica 🙂

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2 Responses

  1. I know that St.Kitts has been elevated to a high income country. St.Kitts passes its IMF TEST. Jamaica’s leaders do not have political will. We need a competent capitalist technocrat.

    • I know that St.Kitts has been elevated to a high income country. St.Kitts passed its IMF TEST. Jamaica’s leaders do not have political will. We need a competent capitalist technocrat.

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