VI worst off due to previous Gov't's failure to take hard cost cutting measures – FS
This is according to Financial Secretary Neil Smith who explained the current status of revenue and expenditure in the Territory and the decision to cut expenditure during an HR Talk held yesterday January 10, 2012 at the Central Administrative Complex.
In June 2010, the then Virgin Islands Party Government had anannounced 14 cost-cutting measures which were expected to address the issue of growth of the public service and the effects of the global economic crisis and included measures such as a freeze on external hiring, sharing of human and other resources between departments and the discontinuation of annual increments paid to contract workers. The measures had taken effect on July 1, 2010.
Smith said at that time, when the Government implemented those cost cutting measures, it should have actually made “some significant decisions then and we did not”. “And what happen, it actually put us in a worst position today than we would have been then. So the cuts they would have made in 2010 would not have had to be as dramatic as these that we have to do in order to survive,” the Financial Secretary explained.
The Financial Secretary told civil servants that over the past five years and even before that there was a situation where the Territory’s revenues into Central Government have not kept pace with the expenditure growth.
“So revenue growth for us has stopped within the past four years, four three years ago with the financial crash that you had in the United States and the global recession that followed as a result of it and so every year we have been faced with an ever more increasing problem where the difference between the funds that have to spend and the expenditure expectations got ever more and more slim.”
However, he said within the past two and a half years or so, the VI has been “living on borrowed time” for some time now during the last few years and every effort has been made to insulate civil servants from that reality.
Plain hard facts: expenditure growing, revenue flat
“Plain and simple, whereas expenditure has been growing at a rate that operational expenditure, the cost of running the civil service has been growing of a rate of about 10 percent per year, our revenues have remain flat for the last three or four years, just the plain hard facts,” he bluntly stated.
This situation, the FS explained left the Government with two choices, either to continue the depend on existing cash balances as was done in the last few years and is steadily dwindling or whether to make a decision to reverse that trend and build up the cash reserves.
Smith further said he does not believe the VI is in hard times but rather that it is challenging stating that the highest the VI’s Gross Domestic Product ever fell which was in 2009 was to 12 percent which was lucky for the VI compared to the situation in other European countries whose GDP dropped to 25 percent and some Caribbean countries which had GDP’s fall over 20 percent.
The FS said this year 2012 will not necessarily be a better year in the global economy and unless the Virgin Islands do something different it can expect a difficult year.
The civil service comprise of approximately 3, 200 employees and the cost to operate the service stands at some 40 percent of the Territory's operating operating budget.
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