STATEMENT BY PREMIER AND MINISTER OF FINANCE
HONOURABLE ANDREW A. FAHIE
DURING THE SEVENTH SITTING OF THE FIRST SESSION OF THE FOURTH HOUSE OF ASSEMBLY
Thursday, 17th October, 2019
Establishment of Virgin Islands Borrowing Committee
Mr. Speaker, my Government continues to put the necessary structures in place to restore hope and prosperity for all of the people of the Virgin Islands.
I am pleased to say that on 3rd October, 2019 Cabinet approved the establishment of a negotiating and borrowing committee on behalf of the Government of the Virgin Islands to secure funding under the UK Loan Guarantee once the terms and conditions are agreed by the Government of the Virgin Islands and the United Kingdom Government, and subsequently approved by the UK Government, and all requisite agreements to activate the Loan Guarantee come into force; and for all other borrowing for recovery and development.
The establishment of the Borrowing Committee plays a strategic role in ensuring that the conditions and terms of the assumed debt instruments under the proposed United Kingdom Guarantee offered by the UK Government, and any other borrowing are favourable, and are in line with the Laws of the Virgin Islands and international best practices for debt management. Also, the Borrowing Committee may also consult with UK Officials on best practices to source funds under the Loan Guarantee in the best interest of the people of the Virgin Islands for the recovery and development of the Territory.
The catastrophic weather events of 2017 resulted in over $2.6B in damages and losses to the Territory’s infrastructure as reported by the United Nations Economic Commission for Latin America and the Caribbean using its Damage and Loss Assessment methodology.
Significant work, inclusive of public and stakeholder consultation, was carried out in the development of a revised Recovery to Development Plan to document Government’s strategies and priorities relative to the recovery towards the development of the Territory’s social, economic and physical infrastructure. The revised Plan details an estimated total financial cost for the recovery and also development projects of approximately $187M.
At present, Government does not have the capacity to borrow at this level while supporting its normal programmes, and therefore proposes to accelerate the recovery by funding the recovery through a combination of Government spending, loans secured under the Guarantee or otherwise, proceeds from insurance claims, and grants, along with Non-Governmental Organisations, donor support, and private sector partnerships. Notwithstanding the funding mechanisms, the Government realises that a debt financing strategy with borrowing under the Guarantee, or otherwise, would be its primary option of financing the recovery.
Through collective consultations between the United Kingdom Government and the Government of the Virgin Islands, an offer was made for the United Kingdom Government to guarantee up to £300M towards the Territory’s recovery and development. The main component of the debt financing strategy was to raise debt guaranteed by the United Kingdom Government to support the Plan.
The Guarantee would increase the amount the Government of the Virgin Islands can borrow while reducing the debt servicing and other related costs. The debt instrument options under the Guarantee would allow the Government of the Virgin Islands to arrange debt that best meets the financing needs of the Territory.
It will also allow flexibility to match debt drawn to actual funding requirements which would minimise debt servicing costs.
The debt options used would enable the Government of the Virgin Islands to manage its debt stock. For example, refinancing periodically to take advantage of new credit market opportunities or changes in the Government of the Virgin Islands’ fiscal position, or to free up room within the debt envelope for new funding.
Prior to the catastrophic events of 2017, the Government of the Virgin Islands only used the standard loan debt instrument. However, under the Guarantee, the Government of the Virgin Islands would be open to several sophisticated debt options that were not a part of our debt history.
The Borrowing Committee, given its expertise would be tasked with supporting and assisting the Government of the Virgin Islands with sourcing and negotiating the most favourable terms and conditions to access financing in accordance with international best practices.
The Borrowing Committee will consist of members who have the relevant knowledge, expertise, background, and experience in financial assessment, banking, and negotiations to provide the best collaborative advice to the Cabinet on the most financially viable and sustainable loan facilities to be obtained under the Guarantee.
The Borrowing Committee will:
- be the sole entity authorised by the Cabinet of the Virgin Islands, in collaboration with the Ministry of Finance, to source and negotiate loans under the UK Loan Guarantee pursuant to the implementation of the revised Recovery to Development Plan as amended by the Cabinet and the House of Assembly, and all other borrowing for recovery and development;
- review the terms and conditions of loans offered by lending institutions to the GOVI under the Guarantee and all other borrowing as presented to the Minister of Finance (the “Minister”);
- recommend to the Minister any amendments to the terms and conditions of loans offered by lending institutions under the Guarantee and all other borrowing within the limits of the Debt Sustainability Indicators and in accordance with the international standards for debt management as stipulated by the International Monetary Fund Guidelines for Public Debt Management;
- recommend to The Cabinet, through the Minister, the most appropriate loan or loans with the most favourable terms and conditions under the Guarantee and all other borrowing;
- be guided by the Virgin Islands Public Finance Management Act and any other relevant legislation and regulations of The Virgin Islands; and
- perform any other duties as may be assigned by the Minister.
The Borrowing Committee will consist of the following members:
- Financial Secretary or designate – Chairman
- Permanent Secretary/Premier’s Office or designate – Member
- Attorney General or designate - Member
- Member nominated by the current Leader of the Opposition - Member
- Member of the BVI’s Business Community – Member (Appointed by the Premier & Minister of Finance
- External Regional Member – Member (Appointed by the Premier & Minister of Finance)
- Representative from the BVI Banking Association – Member
- Member from the Premier’s Office – Secretary
I look forward to the successful formation of the committee as we all work together for the benefit of the British Virgin Islands.