NIA CHARLESTOWN NEVIS (February 20, 2013) –Premier of Nevis and Minister of Finance Hon. Vance Amory told local media that reckless use of the island’s finances by the outgoing Nevis Island Administration (NIA) had almost crippled the island and had brought its reputation into disrepute with overseas financial institutions.
Mr. Amory made the disclosure at his first official press briefing on February 19, 2013 at the Ministry of Finance Conference Room in Charlestown when he spoke primarily about a report which spoke of the financial situation inherited by his four-week-old Administration. He said his government had made haste and had already begun putting measures in place to avert further loss.
“Over the past six years, the financial situation of the Nevis Island Administration deteriorated significantly. The Public Sector debt stock has nearly doubled, rising from $271.7 million in 2006 to $406.14 million in 2012.
During the same period overall balance deficits were generated every year giving rise to the untenable level of indebtedness which stands at present. There has been a deliberate mismanagement of government resources which reflected a lack of accountability and fiscal responsibility,” he said.
The Minister of Finance stated that a closer examination revealed that under the last Administration, many persons were employed on contracts or as temporary workers at inflated salaries without clear job descriptions and many advisors were employed and paid large salaries and there was no evidence of actual work.
Capital projects were undertaken without proper cost benefit analysis and in many cases the costs of the projects were questionable. He said it was an area that had increased the island’s debt exponentially and in time would be closely examined.
Also, Mr. Amory noted that new programmes were created simply to provide employment for party supporters with no regard to their impacts on the government’s finances.
According to the Finance Minister, there was also the matter of an overdraft at the St. Kitts-Nevis-Anguilla National Bank Ltd which would have doubled to over $120 million if $64 million had not been converted to a long term loan in 2008.
He further stated that the then NIA had also borrowed moneys to support its uncontrollable appetite for expenditure.
“Almost $50 million was borrowed from the Bank of Nevis to fund the government’s appetite for uncontrollable expenditure and $12.2 million was borrowed from the resources of the Social Security Board to fund Capital projects.
“I think the question there is not whether there should have been capital expenditure or to borrow and not being able to repay the debt. That I think, is a critical issue and that is why we have to emphasise that, as we look at the increases in debt which has crippled or has the Nevis Island Administration in a situation it finds itself today,” he said.
Mr. Amory said as a result of what he termed as reckless expenditure the NIA was on the verge of bankruptcy and was forced to take decisive action to improve its fiscal performance.
The Minister of Finance disclosed further that a structural adjustment International Monetary Fund (IMF) programme involved increased revenue and deep cuts in current expenditure.
However, revenue was boosted with the implementation of the Value Added Tax (VAT) but because of an unwillingness to control its current expenditure it continued to employ persons at inflated salaries or remunerative packages.
As for Capital Expenditure, an adjustment was made which adversely affected the economy, an outcome which did not find favour with the IMF.
The former Nevis Government along with the Federal Government he said had contracted a company of debt advisors from England to restructure the debt of both administrations.
“This resulted in the NIA agreeing to do land swaps as well as forcing financial institutions to take their hair cuts in principle repayments and reduction in interest rates from an average of 9 percent to 3.5 percent.
“This has in our view and in the view of our technical financial experts damaged the reputation of the Nevis Island Administration with many financial institutions and as a result we may find it difficult to raise loans especially externally to finance new development. This is not making an excuse this is placing the facts before the people,” Mr. Amory said.
In addition, they became increasingly reliant on the St. Kitts and Nevis Sugar Industry Diversification Fund (SIDF) for financing.
“It was successful in negotiating grants of $2.17 million and budgetary support of $5.5 million and loans of $13.084 million including…a $4.084 million for the acquisition of the airport lands from the family of the Yearwoods. This is a situation I think must cause all the people of Nevis’ eyebrows to be raised because for over 50 years and more we have occupied that land…”
“Those are the situations I think have brought us where we are and since resuming office the CCM Administration has taken immediate steps to stem the leakage so that we can restore financial and fiscal prudence to the island of Nevis and to our finances,” he said.