Editorial

If anyone is in doubt about the uncertain future of Grenada then they should familiarise themselves with the latest report put out by Standard & Poor's on Grenada's economic and financial performance and outlook.

The report said just about everything that amounted to Grenada being on the verge of being declared once again as an uncreditworthy State.

The Keith Mitchell-led New National Party (NNP) government and not Hurricanes Ivan and Emily are the one to be blamed for the grave financial crisis facing the nation.

Since assuming office in June 1995, the government has embarked on a deliberate policy of heavy borrowing to finance a host of projects that have not been income generating for the island.

There is no need for GRENADA TODAY to list all of the ill-conceived and ill advised projects, as well as the amount of unfortunate financial guarantees amounting to millions of dollars that were given away to fly-by-night foreign investors.

The Levera project, Mt. Hartman with Miller, and the badly built first national sporting stadium at Queen's Park were all financial strains on the Treasury. The stark reality facing Grenadians is that the current size of the national debt is now around the 2 billion E.C dollar mark, as opposed to the small sum of 373 million dollars when Prime Minister Mitchell took over the mantle of government.

As Standard and Poor's told us in its latest report, the debt is estimated at 121% of GDP, the third largest among speculative-grade-rated countries. This is certainly not good for Grenada at a time when the island needs all the help it can get for its people.

 And what is even worst, according to Standard and Poor's is that, "the fiscal performance (of Grenada) has been worse than projected (despite cumulative real GDP growth of 14.5% in the 2005-2006 time period), attesting to the ongoing inefficiencies in tax revenue collection, declining inflow of grants, and difficulty of containing capital expenditure".

"This fiscal deterioration led to the increase in the general government debt to 121% of GDP in 2006 (109% on a net basis), up from 118% in both 2004 and 2005, raising concern over the future sustainability of Grenada's debt profile", said the report. It went on to say: "At the same time, rising fiscal pressures resulted in recurring delays in government debt payments, with the Grenadian government running intermittent arrears on domestic commercial bank debt. Although these arrears have been cleared, the government's precarious fiscal situation increases the risk of future arrears".

Any Standard Two student in this country would understand basic Mathematics: When you borrow you must pay back". What the Mitchell regime has been trying to hoodwink Grenadians with over the years is the boast that prior to Ivan the government did not have any problem with managing the debt.

This is so far from the truth. The NNP has been engaged in deception by not informing the people about all of the island's debt obligations.

It was only after Taiwan took legal action in a court in New York that the country got to know about the default on payments of millions of dollars owed to our once friendly ally. And the government admitted in correspondence that it did not want us to see that it was experiencing financial difficulties in

servicing these loans from Taiwan long before Ivan struck us in September 2004. GRENADA TODAY is not convinced that Prime Minister Mitchell and his NNP bunch have worked out a clear and definite policy to deal with the economic mess that the regime has placed this country in the past ten years.

The administration is again forced to suspend a critical component of what is clearly a Structural Adjustment Programme aimed at revenue generation for the ailing economy. This newspaper had always felt that Dr. Mitchell would not implement the controversial Value Added Tax (VAT) prior to the next general election out of fear of losing the poll.

The VAT and the other bitter pills that are sorely needed in light of the massive mismanagement of the Grenadian economy will only be put in place when and if the NNP is returned to power. It is our firm view that the current Prime Minister is not concerned with prudent management of the economy but more with winning elections at all cost.

It matters not to Dr. Mitchell how much money is spent on the upcoming poll by the NNP at the detriment of Grenada already precarious financial and economic situation. The eyes of the Grenadian leader is all about winning the general election to postpone the start of serious investigations into his stewardship of the country's finances including possible criminal proceedings emanating from the "Briefcase" scandal.

Our position is firmly backed by Standard and Poor's which concluded that measures including the re-introduction of a new look VAT that are so badly needed to reverse the situation in Grenada, could be adversely affected by the coming general elections.

In the words of Standard & Poor's, "Though these measures are important steps toward reversing recent fiscal slippage, risk to the fiscal scenario remains and includes the uncertain performance of a VAT, decreasing inflow of grants, pre-election spending pressures amid a polarised political situation, and ongoing large reconstruction needs.

Grenadians would have to "band their bellies" because things to come would not be sweet but bitter for all of us.