A bleak economic situation in Grenada and even bleaker outlook for the future have many worried citizens wondering whether there is a way out of this.

Every bit of mental and intellectual resource at our collective disposal is obviously necessary if we are to have a chance of arresting this downward economic slide.

Executive Director of the Grenada Chamber of Industry and Commerce, (GCIC), Mr. Christopher De Riggs thinks we as a government and people have to come up with innovative and practical ways of dealing with our fiscal deficit problem which is a serious one because it has very direct implications on the state of the economy including the state of business.

“Constraints on our ability to service our very large public debt are one of the implications-the fact that a lot of the money we earn as revenue has to be split between welfare, expenditure (education and health) and on public debt.”

This then creates some tension on the governance responsibilities and the public debt issue.

De Riggs, a student of economics, views with concern the consequences of our present inability to service our public debt.

“This will have negative implications for our credit rating and the rate at which we borrow money”

He said if we have serious fiscal deficit then we will attract loans on the international capital market at higher interest rates and this is a law of international finance.

He continued, “the ability of any government to drive a serious social development program could be seriously constrained if it has a serious fiscal deficit.”

Tax reform he is convinced is necessary to correct this fiscal imbalance, but how to realize this he admits is a challenge.

Tax reform becomes paramount. “We need a system of taxation he said that is fair and equitable to correct this deficit because this has dire implications for the business of government, one that yields revenue but does not stifle economic growth. Of course we also need greater efficiency in tax administration and revenue collection.”

De Riggs went on, “we need a stable and predictable track for investors to run on: the Investment Act needs to be finalized so that fiscal incentives do not remain at the whims and fancies of cabinet and there is no discrimination between the conditions which local and foreign investors face. In fact, more should be done to encourage local investors to take risks.”

The chamber director said Value Added Tax will constitute the center piece of fiscal and tax reform. This tax was expected to be passed in 2007.

He said the GCIC had not consulted with government as when to introduce the VAT but had asked that its members and the wider private sector be forewarned so they could prepare both in terms of the administration of VAT and also when because businesses have to know whether to stock up or stock down.

De Riggs described government’s approach to taxation and fiscal reform as ‘schizophrenic’ because one year they identified VAT as the centerpiece of tax reform and in the following year the new Minister of Finance makes no reference to VAT in his budget speech.

This he thinks does not bode well for planning and the private sector cannot plan in an unstable fiscal environment. He thinks VAT will in great measure solve the revenue needs.

“In addition, government should identify and actively support the development of lead sectors i.e. the sectors which will lead the way in providing jobs, public revenue, foreign exchange etc. and will help to pull the other economic sectors. In other words the sectors which will make the most macro-economic contributions.”

 

De Riggs calls for engagement and partnership, the return of the planning culture, a fresh new approach to rural development; accelerated work to rehabilitate nutmeg and cocoa, (especially in light of nutmeg’s importance as a product base for agro-industries) and a serious and sustained food security program.

He also wants to see special programs to revitalize agriculture; farm support services like equipping and outfitting of groups of youth to do jobs like clearing of agricultural plots, ploughing of fields etc.

Dr Riggs said there are no quick fixes to economic turnaround and any government or members of civil society who profess to have a quick fix do not understand how serious and how complicated the problem is.