Moontown

LONDON – Dr. Carl B. Roberts, the high commissioner for Antigua and Barbuda, signed a Tax Information Exchange Agreement (TIEA) on behalf of the Government of Antigua and Barbuda with Great Britain and Northern Ireland on 18 Jan., 2010.

Signing on behalf of Great Britain and Northern Ireland was Stephen Timms MP, financial secretary to the Treasury. Antigua and Barbuda’s high commissioner in the UK has now signed a total of three Tax Information Exchange Agreements on behalf of the Government of Antigua and Barbuda.

Other countries in the Caribbean Community, namely St. Kitts & Nevis, St. Lucia and St. Vincent & the Grenadines, which were represented by their high commissioners, also signed the Agreement.

The purpose of the Agreement is to promote international co-operation in tax matters through the exchange of information.  It was developed by the OECD Global Forum Working Group on Effective Exchange of Information.

The Working Group consisted of representatives from OECD member countries as well as delegates from Aruba, Bermuda, Bahrain, Cayman Islands, Cyprus, Isle of Man, Malta, Mauritius, the Netherlands Antilles, the Seychelles and San Marino. (Antigua Sun)

RICE AND PEAS; SHEPHERD’S PIE

MACARONI PIE; CHICKEN FOOT SOUP

STEW FOOD; BAKED CHICKEN

BAKED PORK; BBQ SPARERIBS

BBQ PIG TAIL; FRIED SNAPPER

FRIED STEAK FISH; GRILLED STEAK FISH

LAMB STEW; FISH GRAVY

STEAMED VEGETABLES

TOSSED SALAD; COLE SLAW

Juhel Browne jbrowne@trinidadexpress.com

Droughts can be experienced in Trinidad and Tobago due to climate change, says Prime Minister Patrick Manning as he noted his administration has already taken notice of the water shortages now facing several parts of the country.

Manning acknowledged the severity of the situation and revealed the Government’s planned response to it during a People’s National Movement (PNM) public meeting in Malabar on Tuesday night where residents there told the Express that water problems have been a regular feature in daily life there.

’As it now stands in 2010 the rainfall is already much lower than it is anticipated… and we believe it is El Nino, but it does not in any way negate our conclusion that as a result of climate change among other things we can experience droughts in Trinidad and Tobago,’ Manning said.

He reiterated the Government’s previous announcements that desalination plants are to be constructed in certain areas close to the sea at great expense to address the problem and provide more potable drinking water but added this would require new water distribution systems as some 50 per cent of the existing supply is now lost due to leaks.

Manning also disclosed that there was a shortfall of 97,000 houses that are yet to be built as part of the public sector housing programme which is costing taxpayers $1.5 billion a year.

He said his Government intends to clear that backlog by 2022, which is two years after his administration’s 2020 target date for having this country achieve developed country status.

Manning said the Government is ’moving now to complete all the outstanding houses’ by August for the latest and added that ’by the middle of the year ’ it hopes to ’initiate our construction programme again and to ramp it up in the shortest possible time to the figure of 8,000 houses a year from the public sector.’

’At that rate, with a deficit of 97,000 at 8,000 houses a year it would take you 12 years. It would take you 12 years to complete but that is assuming that things remain static…I am putting this to you ladies and gentlemen so you will understand the size of the problem and it costs $1.5 billion a year, to sustain a housing programme at that rate,’ Manning said.

Housing Minister Emily Gaynor Dick-Forde, who also spoke during the meeting said that ’between and 2007 and 2009, despite what you’ve heard 6,648 housing units were constructed and 2,064 units were allocated to homeowners’ as she assured the revamped HDC construction programme will yield better results. (Trinidad Express)

Dr Ralph Gonsalves, prime minister of St Vincent and the Grenadines. - File Prime Minister of St Vincent and The Grenadines Dr Ralph Gonsalves, has presented an EC$913.5 million (US$338.3 million) tax-free budget to Parliament that also proposes removing the value-added tax on wheat and raw chicken imports, as well as packaging for agro-products.

He described the fiscal package as the ‘most challenging’ since his Unity Labour Party (ULP) came to office in 2001, adding that his administration was focusing on the productive sector with a view to bringing relief during the hard economic times.

Supporters of both the ruling ULP and the main opposition New Democratic Party (NDP) demonstrated outside the Parliament building late Monday, as Gonsalves, who is also the finance minister, announced a 20 per cent increase in the fees for citizenship, residency, and work permits, respectively, with exemptions for persons who become citizens by marriage.

“These are the only things we are increasing in the budget … and these affect foreigners,” Gonsalves said.

ULP seek a third term

The budget comes at the beginning of the year in which, political observers believe, the ULP administration will seek a third consecutive term in office, even though the polls are constitutionally due by March next year.

The budget is EC$162.6 million (US$60.2 million) or 21.7 per cent higher than the approved estimates for 2009 and the government will run a current account deficit of EC$20.5 million (US$7.5 million).

But, the Prime Minister said that this ‘manageable amount’ is a temporary situation necessitated by the global economic downturn.

He said several of the programmes contributing to the deficit were needed to safeguards the gains made in poverty reduction and the ‘education revolution’.

“As minister of finance, I could have contrived a current accounts surplus,” he told legislators.

“Had I done this, I would have acted contrary to the people’s interest, made matters worse, precipitated a needless crisis and put the country into a tailspin.”

Gonsalves said the exclusion of some of these programmes, such as social welfare benefits and education, healthcare, and public safety initiatives, would have resulted in a current accounts surplus of over six million dollars (US$2.2 million).

“I could have balanced the books but, in the process, I would have unbalanced the country,” he said, noting, however, that he was aware of the resulting financial imbalance of such a deficit and that his administration was “taking action to return to normalcy as soon as feasible, given the global economic situation”.

The budget is to be financed by project grants, funding from the European Union and ‘friendly governments’, supplier credit, and backed by US$20 million (EC$54 million) in Special Drawing Rights from the International Monetary Fund.

St Vincent’s national debt rose 10.2 per cent to EC$1.9 billion (US$400 million) in 2009.

“This is not an unreasonable rate of increase given the tremendous growth in physical, social and human infrastructure which we have achieved, and given the global economic situation and the virtual drying up of aid from most of our traditional donors,” Gonsalves said.

- CMC

Lavern Clarke, Business Editor

The Bruce Golding administration has called for a US$1-billion (J$90 billion) rescue fund for the financial sector, the size of which has sparked concerns about the health of Jamaica’s investment houses, including its smaller players.

The fund is more than double the initial US$400 million that financial houses were told would have been needed to shore up balance sheets, after stress tests were done on banks and securities firms by financial regulators to assess the likely systemic effect of Jamaica Debt Exchange programme.

One big bank said Tuesday that the US$1-billion fund captured in the memorandum to the IMF letter of intent was a surprise, and had not been disclosed to them by the central bank.

“BOJ didn’t consult with the banks,” said one top-level executive, who spoke on condition of anonymity.

Multilateral agencies donation

The IMF letter penned January 15 said multilateral agencies will “devote” an additional US$1 billion to the Financial Sector Support Fund (FSSF) to be operated by the Bank of Jamaica. Neither Financial Secretary Dr Wesley Hughes nor BOJ governor Brian Wynter returned calls querying why the fund was 2.5 times its original size.

Informed sources say, however, that the FSSF will open as a US$400-million fund, as initially announced, but could grow to US$1 billion over the life the of the 27-month special facility that the IMF is voting on today, January 27.

How much of the committed FSSF allotment gets used will be determined by the stress tests that financial houses will undergo. The IMF letter makes clear that those stress tests will be done repeatedly, at least once per month, or even more frequently “if circumstances warrant”.

The mention of the fund and stress tests captured in item 15 of the memorandum to the letter of intent, is meant to reassure investors that the JDX would not be allowed to hurt investments, sources say - or as the letter of intent puts it, “avoid jeopardising the stability of the domestic financial system” - but instead it has raised concerns that the initial stress tests might have exposed weaknesses that were not detected before the process of preparing for the IMF’s intervention.

“That sort of backing implies real vulnerabilities,” said another analyst who asked not to be named.

“Have to wait and see how this thing shakes out,” he said.

The letter of intent itself alludes to some of the problems, pointing to concerns of liquidity and market risk on the balance sheets of financial houses.

Some of that exposure flows, according to analysts, from the use of Jamaican government securities as backing for financing from overseas institutions, while some balance sheets are heavily skewed to government securities.

Indeed part of the reform includes a hold on licences for new firms whose business models rely heavily on repo trading until new financial regulations are in place to police and address the risk.

Income streams

The Jamaica Debt Exchange offer, which closed Tuesday, replaces bonds priced at 20 per cent or more with 24 issues, whose coupon rates average 12.25 per cent. The income streams from those bonds will be reduced, as a result, potentially affecting the liquidity of financial firms and draining capital.

BOJ has in the past stepped in to shore up companies facing credit squeeze in difficult times, the last time in 2008 when the global financial collapse resulted in margin calls on Jamaican brokers as Government bonds used to back accounts overseas lost value.

BOJ then set up a US$300-billion fund that securities dealers could tap for funds in the form of loans. Subscriptions to that fund totalled only US$168 million, or less than one-fifth the size of the current US$1 billion fund, which is to be coordinated by the BOJ-led Financial Regulatory Council.

While not as sizeable, the new FSSF is reminiscent of the scope of the J$140 billion that it ended up costing government, back in the 1990s, to rescue the collapsed financial sector. Jamaica, at the end of the process, ended up with fewer financial firms and banks.

The IMF standby facility is expected to generate inflows to Jamaica of just under US$2.4 billion - comprising US$1.25 billion or 802.5 million of Special Drawing Rights and another US$1.05 billion of multilateral funding - but the boosted financial fund would grow that support closer to US$3 billion.

The bonds being exchanged under the JDX represent J$701.4 billion of Jamaica’s domestic debt, which is the equivalent of 65 per cent of GDP.

Government has said it will save $40 billion to $42 billion per year from the debt exchange, but net of taxes foregone, savings will more be around $32 billion. (Jamaica Gleaner)

lavern.clarke@gleanerjm.com

Jamaica should hear the good news, today, that the International Monetary Fund (IMF) has approved its request for a US$1.25-billion standby arrangement.This should open the doors for the country to get a further US$1.1 billion in loans from multilateral agencies.

The IMF executive board is slated to meet this morning to decide on Jamaica’s request, but with the success of yesterday’s $700-billion debt swap and the Government’s agreement to meet the many demands of the fund, it is expected that the standby loan will be approved.

Agreement in principle

The IMF had previously announced that it had an agreement in principle with Jamaica on the loan.

Two weeks ago, Dominique Strauss-Kahn, managing director of the IMF, announced that, subject to final approval by the executive board, the loan would be approved under a 27-month standby arrangement.

“Jamaica has been hit hard by the global financial crisis, and has been suffering from years of sub-par growth. Strong policies and an ambitious reform agenda are necessary now to start a process of transformation in the Jamaican economy,” he had said.

“By streamlining public expenditure and reducing interest payments, Jamaica will have more resources available for investments in education and infrastructure. This will increase growth potential, reduce the vulnerability to external shocks, and put the country in a position to reap the benefits of a recovery in global growth,” Strauss-Kahn had added.

The IMF managing director had said at the time that protecting the most vulnerable Jamaicans was a key concern of this programme.

“To help soften the impact on the poor, the programme allows for at least a 25 per cent expansion of the social safety-net spending, in particular the Programme of Advancement Through Health and Education, and the school feeding programme.”

ANOTHER WEAK 12 months has been predicted for the Barbados economy.

Texas-based investment analyst Mark Scott, in a review of the global economic outlook last Monday at the Grande Salle, Tom Adams Financial Centre, said: “I don’t have great news to say that there is a huge bounce back in tourist business in the next couple of years.

“I think the Barbados Government is being very proactive to be prepared for whatever the future brings but I suspect that it is going continue to be fairly weak for at least the next 12 months at least until we get down some of the debt.”

Scott, who was hosted by the CFA Society of Barbados, said his predictions were not cast “in stone” and he expected central banks around the world to keep credit as easy as they could and rates would remain low.

The senior vice-president of Morgan Keegan & Company Inc. in Austin said consumer spending could be stimulated by workers earning more money or having access to United States government funds or loans from banks.

“That’s [bank loans] going to be a tougher one to get through because banks are being told we are not going back to the type of loose lending standards that we had before we got into this mess. And I don’t think that the solution to a credit problem caused by too much credit is to create more credit.”

Scott noted that the economic fortunes of Barbados, Trinidad and Jamaica, being largely dependent on consumer-based products, would be heavily dependent on the United States and other international economies in the coming months. (SR)