I want to address a number of factual points on the loan guarantee offered by the United Kingdom Government and what this means for the British Virgin Islands.
The loan guarantee was first offered in November 2017 as part of a package of support to help BVI recover and to build back even better than before the hurricanes.
UK support included military, police and humanitarian support in the immediate aftermath; technical expertise and donations, including 107 tonnes of humanitarian supplies and numerous UK donations from shelters to generators. The cost of this amounted to around $80m across the three hurricane-affected Overseas Territories (with TCI and Anguilla), of which BVI got the largest amount of support. The UK then donated a further $17m to support early recovery projects, including funding linesmen from Canada to help to restore electricity, new water reservoirs, technical assistance to restore key public service infrastructure, support to the Red Cross to assist vulnerable families, trucks for the fire service and other agencies, vital repairs to the prison and police stations and much more.
On top of this immediate support the UK and Virgin Islands Governments discussed how best to support the Territory’s longer term recovery and development. Both were clear that the Government of the Virgin Islands retains management of the Territory’s finances and the policy direction of Government as per the Virgin Islands’ Constitution. There is no change to this. The agreed approach was for the UK Government to underwrite and guarantee loans of up to £300m to support the Territory’s recovery – offering to stand with the Virgin Islands in negotiations with lenders, backing the ability to repay and deliver a BVI-led recovery. The UK Government set conditions around such support to ensure that all recovery measures are accountable and represent value for money and that the additional borrowing is sustainable. The conditions are linked to international financial best practice. By adhering to them, the Government will simply be ensuring financing to the RDA is well managed. Similarly, any banks offering loans will want to set conditions on their use and repayment. This is good financial practice, ultimately ensuring value for money, accountability and transparency for the people of the Virgin Islands.
The total cost of the hurricane damage was sadly more than £300m, but both the UK and Virgin Islands’ Governments want the Territory to retain control of its own finances and not be reliant on handouts, ensure a sustainable level of investment, and use BVI’s successful economic track record to stimulate the private sector recovery and leverage wider donor and investor funds.
The Government of the Virgin Islands established the Recovery and Development Agency to ensure that Government could continue to run Government, and that a dedicated agency, based on international best practice, would focus on the recovery. The RDA Act was introduced in April 2018 and the UK has since then been ready to take forward the loan guarantee. The UK Government in addition provided a further grant of £10m for the technical and administration costs (such as salaries) of the RDA to ensure as much money as possible goes towards recovery priorities.
There has already been much discussion between the Governments of the UK and the Virgin Islands. To clarify:
1. The loan guarantee does not take control of public finances away from the Government, nor change arrangements as set out in the Constitution. The UK Government has no intention that control of the management of public finances be transferred to the RDA. The RDA is an agency of the Government of the Virgin Islands, established by legislation passed by the House of Assembly for a precise purpose, set out in the Recovery and Development Agency Act, 2018. The RDA operates with Ministries, to regulations agreed by the Virgin Islands’ Cabinet, such as those designed to protect and build the capability of local contractors and suppliers. I assented to the Virgin Islands Recovery and Development Agency Act on 12 April 2018, as the Virgin Islands Government’s legal view was clear that it does not conflict in any way with the Constitution.
2. The UK conditions do not mandate that Government’s fiscal management (revenue or surplus), nor money from insurance settlements, must be deposited in the Recovery and Development Agency Trust. Government fiscal management and proceeds from insurance and other government revenue is for the Government of the Virgin Islands to decide how best to spend. The UK has only specified that investments and contributions (borrowing and donations) for recovery are financially managed by the RDA. This is clearly reflected in the Recovery and Development Agency Act, 2018.
3. The expectation is that any money borrowed under the UK loan guarantee will be used to fund BVI’s Recovery to Development Plan. The plan is not the UK’s plan. The plan was developed by the Premier’s Office in consultation with each of the Ministries and with the public, and has been agreed by the Cabinet of the Virgin Islands and the House of Assembly.
4. Loans would not come from the UK Government, they would likely be from private banks. Under the UK guarantee, banks will offer BVI lower interest rates, saving BVI vital money. Depending on how much the Government chooses to borrow, this difference in interest payments could amount to tens of millions of dollars.
5. The UK Government has acknowledged that any new borrowing could cause the Government of the Virgin Islands to remain temporarily out of compliance with the existing borrowing ratios under the Protocols for Effective Financial Management. The very offer of a loan guarantee is an indication by the UK Government that if the Government of the Virgin Islands’ analysis shows that it will breach the borrowing ratios, the UK Government would consider proposals for an extended date to return to compliance and it has made clear that there are already arrangements under the Protocols for Effective Financial Management to do just that.
The UK Government’s loan guarantee offer is part of a package intended to help BVI recover in the most cost effective and sustainable way possible, for the benefit of all people in the Territory. As the two year anniversary of Hurricane Irma approaches, whether the Government of the Virgin Islands decides to take, or not, the offer of a loan guarantee, I am pleased that the Premier is prioritising the resolution of this issue.
I applaud the recovery work that has been undertaken already by the public service, businesses, communities and voluntary organisations and hope that the Territory can now make even more much needed progress. The Territory and its people continue to have my unwavering support as we recover and develop.