Despite the country’s severely constrained fiscal headroom, the government can only cut back so much, according to a Cabinet minister.
State Minister for Finance Michael Halkitis said some expenses are difficult to reduce like debt servicing.
“The government is legally bound to make these payments and must do so fully and in a timely manner if it is to maintain its current good standing in domestic and international capital markets,” he said.
Debt servicing comprises interest charges and debt redemption, forecast at $121 million in the upcoming fiscal year, $55 million higher than what was budgeted in 2011/2012.
Overall debt servicing is projected to total $328 million or just over 18 per cent of the 2012/2013’s recurrent expenditure.
“Furthermore, we are bound by recurrent expenditure commitments entered into by the previous government that carry over like promotions, back pay, salary increases, new insurance benefits totaling about $22 million,” Minister Halkitis added.
These total some $21.5 million.
According to Prime Minister Perry Christie, the government is working toward implementing a modern Debt Management Strategy.
In fact, Mr. Christie said a Debt Management Committee has already been established, comprising representatives of the Ministry of Finance, the Public Treasury and the Central Bank, to develop and put into action a strategy that will lead to lower borrowing costs while minimising risks incurred.
This is being done with technical help from the International Monetary Fund (IMF).
The government is expected to report on the progress made in terms of structural fiscal reforms during the mid-year budget statement in early 2013.
“The restoration of fiscal discipline is absolutely necessary if the government is to fully implement its agenda for change and play its rightful role in promoting private sector development, new sustainable job opportunities and higher standards of living,” the prime minister said during the budget communication last month.
“We will as a priority restore our public finances to a healthier and more sustainable position.”
