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Posted by: Kisha Nicholas kishanice@hotmail.com

The Prime Minister stated: “There has been significant reduction in arrears (as represented by the value of unpaid cheques) from EC$31.0 million at the end of June 2005 to EC$12.1 million at the end of June 2006 at Tuesday’s presentation of the 2006 Financial Statement and Budgetary Proposals under the theme, “Enhancing the Investment Climate�?.

“It is noteworthy to mention that unpaid cheques to the Dominica Social Security have declined in value from EC$28.3 million in June 2005 to $7.7 million in June, 2006. As at 30th June 2006, all Government balances were
positive. This means that the overdraft balances at the commercial banks in respect of Government of Dominica accounts had been completely eliminated.�?

This dramatic turnaround in the public finances can only be fully understood and appreciated in the context of the situation which existed before the Government decided to embark on a programme of Fiscal Stabilization and Recovery in June 2002.

As at December 31st 2001, the Government overdraft was $62.5 million, which included an overdraft balance of $36.9 million at the National Commercial Bank, more than treble the legal limit of $12 million. The Value of Unpaid Cheques stood at $55.9 million on December 31st 2001, compared to the present balance of $12.1 million.

The Prime Minister also reported a projected primary surplus for the 2005/2006 fiscal year of $14.4 million. The primary balance is the critical fiscal target of the ongoing arrangement with the International Monetary Fund. The primary surplus is defined as total revenues minus total expenditures net of interest payments.

A critical plank of the Fiscal Stabilization and Recovery Programme is the debt restructuring programme. In 2003, Dominica’s Debt/GDP ratio had reached over 115 %, significantly higher than the prudential norm of 60% recommended by the Eastern Caribbean Central Bank.

In his 2006/2007 Budget address, Prime Minister Skerrit told the House that in fiscal year 2005/2006, further consolidation of central government debt had occurred.

“Total Central Government Debt now stands at EC$677 million (excluding arrears) of which EC$457.2 million or 67.5 % percent is external, and EC$219.8 million or 32.5% is domestic. The ratio of central government debt to GDP stands at 86.2 percent which is a reduction of 1.5 percentage points from 87.7 percent at the end of June 2005.�?

It was revealed that in the 2005/2006 fiscal year, current revenues performed better than budgeted. The amount budgeted for the FY 2005/2006 was EC$234.3 million. It is now anticipated that revenue will exceed projections. The Prime Minister also told the nation that in 2005 the economy continued to grow, with real GDP growing at about 3.5 percent to yield the second straight year of above-average growth.

The return to fiscal health is one of the fruits of the success of the stabilisation programme. In 2002, the then Prime Minister, Hon. Pierre Charles, warned that “economic growth would be forever compromised if we allowed a poor fiscal situation to continue unattended�?.

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