ST. VINCENT- Government holding talks on multi-million debt loan.

KINGSTOWN, St. Vincent, CMC – The St. Vincent and the Grenadines government says it is holding talks with Taiwan as the Caribbean country moves toward easing its “crushing public debt”.

Prime Minister Dr. Godwin Friday told a news conference that the Asian country has already signaled a “genuine willingness” to help deal with the debt-to-gross domestic product (GDP) ratio exceeding 113%.

He told reporters that his visit to Taiwan last week also provided an opportunity to discuss a US$345 million owed to Taipei and that his administration, which came to office following the November 27 general election after 24 years in opposition, will not allow St. Vincent and the Grenadines to become a “failed state” under his watch.

Friday said much of the US$345 million loan portfolio with Taiwan had already been drawn down, adding that the debt-to-GDP ratio was likely to rise above the current 113 percent without corrective action, even as he acknowledged that the government has “very little” fiscal space to fund social programs and growth-oriented investment.

“We inherited that on November 27. I’m not going to pass this on to a next generation. We have to fix the problem now. St. Vincent and the Grenadines will not be a failed state. We will take whatever measures are necessary to correct that problem.”

Prime Minister, who led a delegation to the Asian country, said the debt issue was placed directly on the table with one of the country’s most important lenders.

“We have had very serious conversations with all parties… the International Monetary Fund, World Bank, our friends in the region… and our own team here, because we’re earnestly looking for solutions,” he said, adding that given the size of the loan to Taiwan, the country had to be part of any credible plan.

“Of course, Taiwan… We must engage with them as well, to seek to find ways in which we can manage the debt better going forward,” Prime Minister Friday said, telling reporters that the response from Taipei has been encouraging.

“To our great satisfaction… we were greeted with real interest in seeking to understand our situation, and a genuine willingness to work with us to find ways in which we can resolve this,” he said, hinting that short-term relief measures are already in motion.

“A lot of this is still in discussion, but… the goodwill is there, and there are measures that have been performed which I think will very much help our situation in the near term,” he said, declining to disclose specifics, citing the ongoing discussions.

“Our efforts are yielding fruit; there is light at the end of the tunnel. You will hear more about those as we go along. Still, I can promise you the news is good news,” he told reporters, insisting that his administration would not be adopting the old model of simply negotiating more loans and presenting them as successes.

“We could go to Taiwan and come back and say they got US$125 million to borrow last time; we got US$200 million. But the problem is, how are you going to repay it?”

Instead, he said discussions with Taiwan have focused on two fronts and that the two countries discussed managing existing debt more effectively, including considering “other instruments, other mechanisms” for long-term sustainability.

He said the discussions also focused on maximizing value from undrawn and committed funds by reviewing funds that have been committed but not yet drawn down and re-examining how remaining resources linked to past projects can be used “most effectively” to support growth, rather than deepening the debt burden.

“We are now looking to find ways in which we can utilise the investments that were made with the money that was borrowed… and at the same time work with our partner in Taiwan to find ways to generate some fiscal space for this government,” Friday said, telling reporters that any arrangement with Taiwan and international partners must balance three competing priorities, namely stabilising and reducing debt; maintaining and even expanding key social programmes; and freeing capital for productive investment and growth.

“We are earnestly looking for solutions for us to be able to manage our fiscal situation, the debt situation,” he said, adding that this must be done “without sacrificing the necessary social programs… and at the same time also generating capital for investment in productive activities”.