A close look at the real economic and market situation suggests that with the current level of economic activity at a stalemate, and market declines in some areas, coupled with the sluggish growth in our main source market The United States, there is increasing fear that the future may not be so rosy for us here in Anguilla.
I genuinely believe that for the first time in our nation’s history, we will default on our debt payments. Now this might infuriate some people. To borrow a quote from John Adams, he states, “Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence.”
So let us look at the facts. The Government of Anguilla is said to have entered into an agreement to borrow EC$214 million dollars from Social Security. This is on top of an existing national debt of over EC$250 million dollars, this means our national debt will double in less than a year, and this puts tremendous strain on the islands treasury, not just to repay the principal, but also the interest payments as well.
Today in Anguilla, economic activity is very flat, the Tourist industry is under performing, businesses are struggling, unemployment is rising; consumer spending is down. Residents and citizens are leaving and increasing taxation, out of control and ever expanding national debt with no visible evidence of efforts to curtail the cost of Government.
Anguilla therefore is not well positioned to ride out any storms. Less so, in fact, than we were in 2008 when we had lower national debt and higher fiscal reserves. Yet we ended up slumping to negative 17% growth. As an island, we are still very attractive to foreign investors but as we have seen, foreign direct investment has all but dried up. Private capital development is largely non-existent, and Government capital development is minimal. All of these issues conspire to wreak havoc on Government’s finances and paints a very dismal picture of the path ahead.
The Government of Anguilla is said to have agreed to an ambitious set of reforms with the British Government, yet months later, despite his assurances to Minister Duddridge, the Chief Minister still has not told the people of Anguilla what these reforms are, and how they will affect ordinary Anguillans.
We still do not have a clear picture of what went wrong with the banks or how much it will cost the people of Anguilla. Why is all of this important information being withheld from the people?
People have now resorted to burying their heads in the sand in the hope that when they take it out, everything is magically “fixed”. This is clearly not the solution. We need to demand more transparency and more accountability if we are to truly dig ourselves out of this mess. People are more willing to help when they can appreciate the level of difficulty ahead of us, it builds consensus and it builds trust.
Let me be clear, The Government of Anguilla is in no position to bail out the banks; we have to be honest with ourselves. Anyone who thinks that we have seen the end of the banking crisis has another thing coming, the only way to fix the banking problem was through shared sacrifice, open and honest dialogue with all the stakeholders to reach a consensus on the way forward.
Withholding information, protecting those who may have contributed to the problem and excluding key stakeholders from the process was not the way to go.
You cannot burden generations of Anguillans with unsustainable debt and not even afford them the courtesy of knowing what it is that really went wrong, so that we can ensure it never happens again. The best thing we can do to ensure NCBA is successful is to level with the people and tell them the truth; after all we are expected to pay for it. The secrecy only breeds distrust and fuels a conspiracy theory that there is some sort of cover-up.
The Government introduced a raft of new taxes in this budget cycle, despite campaigning to do just the opposite. It has long been established that higher taxes often leads to lower growth, so finding the right balance is essential. Higher taxes puts both consumers and businesses in a worse position: the price that consumers pay after increasing taxes is higher and the price that businesses get is lower than before the increase in taxation. This leads a narrowing of the market because lower quantity of goods and services are being exchanged. I often say to people it is how often you sell something (Turnover), not what it is being sold for (Margin) that is more important. Turnover is key to success. Government must understand this relationship.
There has been little or no good news about the future, save for the announcement of Cap Juluca being sold; again, we have heard that story before. My sources indicate that there are several difficult hurdles to overcome and that a successful resolution, though possible, is anything but assured. But even that we had to read about in the foreign press, makes me think that the Chief Minister had to dig real deep to find something positive to say about what is happening on island.
By understanding the history and economic context of today’s turmoil, it is clear that things will get worse. I am not saying this to be a scare monger, or using fear tactics as I know some may say. I am simply commenting about the fact that we have had very little to be hopeful about. It has now been almost 14 months since coming to office, yet The Government has not laid out any sensible plan of action to tackle the very real issues that are staring us in the face daily. Growth is slow or non-existent worldwide. The new taxes has forced consumers to cut back on spending, hence lower than expected taxes collected, this means our only option left is cost cutting. A double whammy.
I hope that I am proven to be wrong, but in the face of all that is happening, I think it is important to sensitize Anguillans as to what are the very real possibilities in the near future if the status quo is maintained. This is against the backdrop of absolute silence from Government or an apparent inability to cope with the magnitude of the challenge before them. We need to hear about sensible plans that inspire confidence in the market and the Anguillan people. The Plans should fact-based, data-driven and market-disciplined. The process of developing and implementing the plans should be inclusive, collaborative, and transparent. The secrecy must come to an end, failing that, we are doomed to failure.
(Published without editing by The Anguillian newspaper.)
