Mister Speaker, I would like to provide Honourable Members, and by extension the public, with an update on the work being done by your Virgin Islands Government to access the offer by the UK Government of Guarantees for Loans to facilitate recovery and development work following the devastating hurricanes of 2017.
This update is due because firstly, as Premier, I have promised to keep the public informed on matters of national importance, but also given certain recent developments including reckless and misleading statements coming from certain individuals who seem to be intent on inciting the population against your democratically elected Government, and who seek to profit by sowing distrust between Virgin Islanders and their Government.
Update on Loan Guarantee Process
Mister Speaker, as you are aware, the BVI Government and its technical team have been engaged in discussions with officials of the UK Government to advance the process for accessing the Loan Guarantee Offer. These discussions included meetings that took place when, as Premier, I led a team of BVI officials in meetings with the UK Government officials last September in London.
Coming out of those meetings, it was agreed that the BVI Government would submit a revised Recovery to Development Plan (rRDP), which was done. Additional information was requested of the BVI Government and this was also provided in a prompt and timely manner.
Thus, the Government of the Virgin Islands was recently advised by the, now former, UK Minister of State for the Overseas Territories, Lord Ahmad of Wimbledon, that, having received the necessary submissions from the BVI Government, the UK Government’s technical team is evaluating the Contingent Liability Checklist which will be used by Her Majesty’s Treasury to determine whether the UK would go ahead and give the guarantee for the loans.
This, in layman’s terms, is equivalent to assessing the BVI’s credit worthiness – our ability to meet our obligations to the population, to repay existing and new debts, among other things.
It is important for citizens to understand that the Loan Guarantee is not guaranteed at this time. It never was. And this is something that your Government has been saying constantly while some persons were trying to drown us out saying, “Hurry up and take the money.” There is no money sitting down idly waiting for us to just grab up and spend.
What is actually before us is an offer by the UK Government that if the BVI passes the UK’s Contingent Liability tests and fulfils other stipulations, it would consider providing the guarantee for the BVI to access bank loans which the BVI taxpayers will have to repay.
The possibility exists that if the UK Government is not satisfied with the BVI’s credit worthiness or with the rRDP, they can come back and say that they are not going to give the guarantees for the loans. On this, we wait.
The Revised Recovery to Development Plan
Mister Speaker, the revised Recovery to Development Plan. With respect to the rRDP, let me say that the original Recovery to Development Plan (RDP) that was prepared by the former Administration was too bulky and would have definitely place an undue financial burden on the people of this Territory way beyond what we can afford. Had your Government proceeded blindly with the former Administration’s plan, the risk was very high for Virgin Islanders to lose their political and economic autonomy. That is why the plan had to be revised and adjusted to a scale that the people of the Virgin Islands can manage without risking our future.
Apart from our concern about what would happen to the Territory if we find ourselves being unable to service our debts, your Government was also concerned that with the old RDP our BVI businesses, industries and economy would have lost out on potential opportunities for revenue and growth. Under that plan, the bulk of opportunities would have gone to persons and companies outside of the BVI and the money would have quickly passed in and out of the Territory’s system with temporary and limited domino financial effect.
The rRDP will allow greater opportunities for local participation, and for more of the money to remain in the local economy where it will work for the benefit of the people of the Territory.
Some persons have found this to be inconvenient and have been trying to fight your Government on this. But, your Virgin Islands Government will not allow ourselves to be bullied, coerced or misled into binding the people of this Territory and our generations yet-to-be-born in debts that will be beyond our ability to repay, and which we will be saddled to repay after those persons and their friends have filled their pockets and left our shores. We will not enrich others to the detriment of our people.
Mister Speaker, our discussions with the UK officials also focused on trying to find common ground with respect to the terms and conditions attached to the Loan Guarantee offer. Your Government has accepted all the conditions and requirements put to us by the UK Government, except three terms which we remained concerned about.
There can, thus, be no doubt over the level of cooperation that your Government has been demonstrating throughout this process since taking office. To accuse your Virgin Islands Government of doing otherwise is blatant dishonesty.
Your Government has given the UK everything they have demanded in these discussions, but the UK has not compromised in our direction on any of the major points of concern with the conditions. We are not unduly troubled by this, except that we remain with three outstanding issues that for us are non-negotiable.
Those issues are:
- Proper definition of the scope of public projects that shall be managed by the Recovery and Development Agency (RDA),
- The meanings of certain ambiguous terms, and
- The financial performance ratios to be applied and maintained with respect to the Loan Guarantee.
Allow me to briefly explain the significance of these issues and why your Government cannot compromise on them.
The scope of public projects to be managed by the RDA
This brings me to the scope of public projects to be managed by the RDA. Some persons are insisting that the RDA must be responsible for all government development projects – not just those associated with the recovery from Hurricanes Irma and Maria.
Your Government’s disagreement with this has nothing to do with like or dislike of the RDA. We have always said that we value the RDA as a valuable asset for delivering public projects. But the RDA cannot be the only agency for project execution because the Public Service and the other agencies also have their roles. These units have employees who are already being paid to do some of this work and therefore we cannot just farm out those functions to other agencies at additional cost to taxpayers.
The alternative would be to terminate the staff in those agencies and hand the work to the RDA, and your Government has no intention of putting our people on the breadline for foreigners to come in and take over their work. While the RDA does have a valuable contribution to make to the recovery to development of the BVI, we have to be careful that we do not create a parallel Public Service that circumvents the Constitutionally established bona fide Public Service and renders the latter and its employees redundant.
Putting Virgin Islanders into unemployment would do tremendous damage across the length and breadth of the BVI economy, and this not something that your Government would want.
Mr. Speaker, your Government welcomed the loan guarantee facility. However, the conditions put forward by the UK Government include some very ambiguous terminology that can have very broad meaning and varying interpretation.
This includes wording such as “other measures” and “other mechanisms”, which can be imposed on the BVI under certain conditions. Before we can accept these conditions, we need to know what those measures and mechanisms mean. We have been asking for these definitions to be expressed in black and white, and will continue to do so.
Another very vague area has to do with public assets that, in the words of the UK Government, would “better sit in the private sector”. In the first instance, we need to know what public assets are being referred to here, and what criteria would be used to determine whether an asset would have to be divested.
The other major issue is what would happen to the Virgin Islanders who are working in those State-owned companies if we are made to divest them?
So, you can see why this issue is considered to be a serious one by your Government.
Financial Performance Ratios
The High-Level Framework for UK support to the BVI Hurricane Recovery is the framework that will govern the Loan Guarantee arrangement. It sets out conditions that the BVI must abide by and the consequences if we are unable to comply with our obligations.
One of the conditions in the framework is that the Protocols for Effective Financial Management, which was signed by the then BVI Government in 2012, must be abided with. These Protocols stipulate certain ratios with respect to debt and debt servicing against revenue.
The Territory’s revenue has been increasing since the devastating hurricanes of 2017. However, given the volume of work that needs to be funded and other pending obligations, it would be difficult, if not impossible, for the BVI to stay within the present ratios.
The effect of this is that the BVI will either find itself in violation which will have far-reaching consequences that can adversely affect our citizens, or we will simply be limited in how much we can borrow through the Loan Guarantee because that borrowing would put us in violation.
The latter scenario would render the whole guarantee useless to the BVI’s recovery and development, while still binding the people of the Territory to the conditions of the High-Level Framework.
In short, we would not be able to borrow any money, but yet, we would still be put under the constraints as if we had borrowed the full £400 million.
Now, some persons may say this is far-fetched.
But, when your new Government took office last year, the BVI was in breach of the Protocols for Effective Financial Management. And, to correct this situation, we had to pull together $27.9 million and deposit it into the Reserve Fund to bring us back into compliance. This was $27.9 million that could not be made available to spend on public infrastructure and programmes for you the people.
But, even if the Loan Guarantee was approved at that time, the BVI would not have been able to put it to use. We would not have been able to access any loans under the guarantee because we were in breach of the Protocols. So, this scenario has already happened within the last year.
Also, the amount of money we will be able to borrow would be limited. Because the ceiling of how much you can borrow is limited by the ratios.
You can only borrow up to the point where you remain in compliance, and if we only have a little wiggle room between where we are and what the maximum is, then we really cannot borrow much.
The most recent correspondence from Lord Ahmad indicated that while the ratios cannot be dispensed with altogether, which is not what we have been asking for, the UK Government would be willing to hear proposals for alternative methods for calculating the ratios. This, we are looking into at the Ministry of Finance.
Please bear in mind also that breaching the Protocols will trigger consequences such as those ambiguous penalties I have mentioned above.
So, your Government has been asking for flexibility with respect to the application of the ratios, perhaps for a period of time to allow the Territory’s revenues to recover and normalise.
Again, Mister Speaker, you can appreciate that it is not as simple and easy to “go and get the money” as some persons were making it out to be.
Our continued resolve
Notwithstanding these three major concerns which remain outstanding, your Government remains committed to working with the UK Government to finding a solution that can satisfy all parties.
Lord Ahmad has given the assurance that these issues can be discussed after Her Majesty’s Treasury returns a positive verdict on the Contingent Liability Checklist and we are able to move to the next step of the Loan Guarantee process.
Based on the substance and quality of the work that is reflected in the BVI Government’s 2020 Budget and the Medium-Term Fiscal Plan, your Government is optimistic that we will successfully pass the Contingent Liability stage and move to the next step.
The Partnership Agreement
Yes! There is still another stage in the process. Passing the Contingent Liability test is not all.
If we are successful at the Contingent Liability evaluation, then there is a Partnership Agreement that has to be worked out between the Governments of the BVI and the UK.
These days, I find myself wondering whether those members of the former Administration – especially those who have been going around saying, “Hurry Up,” and “Take the money,” truly understood what they were rushing into. Or whether they knew these things but are deliberately and dishonestly omitting them in their public conversations just to score cheap political points.
Mister Speaker, the Government of the Virgin Islands is anxious to complete this process and to access the funding to accelerate the recovery and development work for the benefit of our people and our Territory.
Overtures were made by your Premier to the UK Government asking for us to bring those outstanding issues to a resolution by the end of 2019 so that the process can be pushed forward in the New Year. For the moment, the process is out of the BVI’s hands and I am certain that the UK Government officials are working as fast as they can.
The so-called delay is justified
Mister Speaker, critics of this Government have blamed the non-completion of the process on the new Administration taking too long to engage the UK Government on the subject.
Let me say, firstly that shortly after your Government’s assumption of office in February last year, we came under pressure from several quarters to “sign off” on the terms and certain requirements. Out of caution, your new Government decided to conduct a review and comprehensive analysis because we could not sign off on something as major, and with far-reaching consequences for generations present and unborn, as this agreement, without fully understanding the obligations and consequences.
In that review and analysis, your Government discovered several concerns including the three outstanding ones previously mentioned. This alone justifies the caution that was exercised.
One other major concern that was discovered, raised and remedied by this action had to do with the source of the funds that would have to go into the RDA Trust Fund. Some persons were insisting that monies such as the proceeds from insurance settlements to State Enterprises after the hurricanes must go into the fund and be controlled by the RDA. Your Government challenged this misinterpretation of the Act and raised the matter in our London meetings, where it was confirmed that our position was the correct one.
Citizens must understand that persons appointed in the Territories by the UK Government are there to prioritize UK interests, not the interests of the Territories or the citizens of the Territories. Throughout this process, it has been constantly emphasized that the conditions of this Loan Guarantee are to assist the BVI, but an overriding consideration is that UK taxpayers are taking on this as a contingent liability, so – as in all matters of similar nature - the UK Government must protect the interest of the UK taxpayer first. In this regard, it is the role of the Territory Government to protect the interests of its people especially where there is a conflict with the interest of the UK.
We respect this role that the UK is playing for the UK taxpayer, and we are doing likewise for the interests of Virgin Islanders.
In light of the choice by Mr Paul Bayley to resign from the post of Chief Executive Officer of the RDA last month, allegations have been circulated that “the RDA has not fully been given the opportunity to realise its potential” and that your Government is somehow responsible for this. The purveyors of these mischievous, inciteful statements even imply that the future of the RDA and the BVI’s recovery and development now hang in the balance because of Mr Bayley’s choice.
Firstly, on behalf of the Government of the Virgin Islands and all the people of this Territory, I wish to thank Mr Bayley for his service to the Territory.
Secondly, it is untrue to say that the Virgin Islands Government has not been supporting the RDA. RDA has always enjoyed the full support of this Premier and my Ministers within the scope of its responsibilities.
Up until the end of October 2019, the Government and people of the Virgin Islands have paid more than $11.887 million to the RDA for administration, operations and projects.
The UK would have contributed approximately £2.84 million (US$3.7 million) up to the same time. The Government of the Virgin Islands paid $10 million to the RDA in 2018 for project funding. The BVI Government, through the Ministry of Finance, is committed to providing a minimum of $300,000 per quarter to the RDA for administration; and if the cost exceeds this limit, according to the Memorandum of Understanding between the Ministry of Finance and the RDA, signed exactly one month before the February 25, 2019 General Elections, the BVI Government is obligated to provide further funds. There is no limit, so this is a blank cheque that was signed under the previous Administration. To date, the BVI Government has contributed in excess of $1.887 million to the RDA for administrative and operational expenses.
In terms of the workload directed to the RDA, I have already explained that where the paid staff of the Ministries and Para-Statals is equipped to execute work, they should be allowed to do so instead circumventing them and directing that work to another agency that has to hire extra staff and resources at extra cost to the taxpayer. There are instances where Public projects were directed to the RDA.
But, from inception, it was envisioned that the bulk of the work for the RDA would come from the Recovery to Development Plan which is to be funded by loans secured through the UK’s Loan Guarantee offer. Since the process for approval of the Loan Guarantee offer is still underway, and part of that process involves the rRDP, and bearing in mind that the funds for these projects depend on the Loan Guarantee offer, how can anyone expect the Government to authorise the commencement of those projects without the loan funding coming into place?
May I also state that it would be irresponsible for your Government to manufacture a workload, at the expense and jeopardy of the Territory and the citizenry, for short term contract workers just to justify their hiring after the fact. That is not good, responsible, prudent governance.
Notwithstanding this, your Government inherited the RDA as a Unit in the Government when we took office and we will continue to do our best to maximise the value for money from this organisation.
With the anticipated approval of the BVI for the UK Loan Guarantee, your Government will be able to access funding and increase the rate of funding to the RDA as well as the volume of work that will be directed to it.
If the UK decides it will not grant the guarantee then we will have to re-examine the situation. But we are optimistic that it will not come to this, and if it does, it would not be due to the fault of this Administration.
It is also necessary to point out that while Mr Bayley is possessed with a wealth of professional talent and we are saddened by his resignation, his departure does not signal the collapse of the RDA. Your Government is certain that a suitable candidate can be found to competently lead the RDA, and we are also certain that such talent can be found within the population of Virgin Islanders and I publicly challenge the Board of the RDA to bring this to fruition.
Your Government will provide the fullest support to the process for selecting and appointing a suitable CEO for the RDA in the shortest possible time. We are also certain that intermediate measures will be put in place to ensure that the work of the organisation is not severely disrupted by the recent developments.
Mister Speaker, I trust that the above information helps the population to better understand what has been taking place over the past few months, and that it rectifies any misinformation that may have been causing citizens to worry.
Your Government prays for a speedy and favourable outcome to the evaluation of the BVI’s Contingent Liability assessment in the UK and then a speedy completion of the Partnership Agreement discussions. We look forward to being able to access loan funding with the UK’s Guarantee and the acceleration of the recovery and development in the Territory so that we can build back Stronger, Smarter, Greener, and Better - this we pledge, as always, to do by operating to the highest standards of transparency, accountability and good governance, in all our endeavours.
May God continue to bless and protect these Virgin Islands and the people of this Territory.
I thank you.