Grenada sits on top of the table in the OECS as it relates to Debt to GDP ratio. St. Kitts and Antigua are next in line. The government of Grenada informed the international community that it cannot meet its debt commitments under present arrangements. The country therefore entered into default mode and has experienced, since then, a precipitous drop in its credit ratings. The government then announced that it will implement a “Home Grown” structural adjustment programme. The country’s Prime Minister is now challenged to lead the country during what appears to be a difficult period. In his national address recently he said” not all decisions would be popular but I gave a solemn undertaking to always put Grenada first”.
Civil society has been engaged in an effort to work out a social contract. That effort has so far produced little as Dr. Mitchell does not trust some key players in the NGO community.
The lofty goal of achieving a “societal consensus on need for shared sacrifice” has been sacrificed by the actions of the government. The pay hike of 6% for ministers muddied the waters. They made a hasty retreat and it was announced that some 90% of ministers decided to forgo the increases. In a rather novel political move the Prime Minister said that he will defend the rights of the 10% who refused to forego the pay hike. Not all are on board with “shared sacrifice” it seems.
The Prime Minister in a press interview referred to some persons in the Committee of Social Partners as “morally bankrupt” because they opined that a ministerial pay hike was not prudent at this time. This is as ill advised a statement one can make if the stated goal is to achieve national consensus. The crude attempt to scapegoat the Trade Union Movement is yet another unfortunate faux pax.
One thing is certain; Grenadians accept that sacrifice is required and that everyone should “pay something”. The decisions to reduce the income tax threshold to $36000 per annum and an insistence that pensioner must pay, again shows that Dr. Mitchell cannot be serious. The fact is that these measures will ruin middle income earners and place undue pressure on our senior citizens.
At the political level, the governing NNP enjoys the required mandate to take far reaching decisions. However Dr. Mitchell continues to spew vitriolic verbiage about the opposition as if he was still on the campaign trail. The Congress does not have a single seat in the lower house. This situation affords the Prime Minister enough room to take the political high ground. His refusal to condemn a silly and aggressive intrusion into an NDC public meeting (at which the former prime minister was present) by a known supporter of the NNP indicate clearly his inability to provide the requisite moral leadership that is required at this time.
Recent report on the “Doing Business” index conducted by the World Bank showed a significant slide in Grenada’s rating.
In June 2002 a private sector study was conducted under the theme “A study of the enabling environment for private sector development in Grenada” This was during the prior tenure of the NNP under Dr. Mitchell.
The key conclusions were as follows:
• A lack of clear and unambiguous criteria for decision making in government operations
• A requirement that Cabinet level approval is required for mundane applications that could easily be dealt with at a lower level.
• A general lack of customer service orientation in the civil service
• A reduced emphasis on planning
• A lack of effective and adequate dialogue and communication within government departments
• The absence of a strong investment promotion institution
The reality is that these issues still haunts us. Reports indicate that nothing moves without the expressed approval of the Prime Minister. Public sector management is at its lowest ebb and the limited talent pool in the Ministry of Finance is insufficient to manage a successful Structural Adjustment Programme.
The three year lifespan of the adjustment is simply not enough. The projected 1% or 2 % increase in GDP for 2014 and 2015 is insufficient to address our chronic situation. Dr. Mitchell is clearly thinking about the next date for elections constitutionally due in 2018.
The post Ivan reconstruction levy approved in January 2006 effectively taxed income from $1001 per month upwards. That template should be used as opposed to setting the tax threshold at $3000 per month. One commentator opined that the support base of Dr, Mitchell is in the lower income working population. Why are they not in the tax loop? Here again politics considerations supersede prudent economic decision making. The nation awaits the finalisation of the letter of intent. The regime’s fixation with secrecy may have prompted the Permanent Secretary, Ministry of Finance to send a memo to curtail “leaks” on the details of the SAP from his ministry.
It is now documented history that the NNP administration demobilised the 1992-95 SAP when they came to office in 1995. Further, the letter of intent of March 2006 indicates that the current issues facing the country were addressed in that document. Dr. Mitchell and his NNP colleagues must have credibility issues with the international community. They literally abandoned their obligations under the arrangements negotiated with the IMF. What has changed since to restore confidence?
As it stands, the scorecard of the government and its leader does not auger well for the country going into a SAP. The message of the government appears to be an attempt to try to persuade Grenadians that all is well when all is far from well and to try to convince people against the reality of their own day to day experience.
The continued attempts to tip toe around taking serious decisions, lack of transparency, absence of competent management and corrosive politics does not engender hope in this attempt to sail through rough economic waters. A complete re-creation of Dr. Mitchell may be what is required. But that is hardly likely for a man approaching three score and ten.