Neil Smith: Circumstances had prevented me from consolidating debt!
The Financial Secretary (FS) told the SFC that loans totaled $112 million as of December 31, 2011. He also said that the debt service of $19,490,600 covered principal and interest. Smith advised the body that the loans were fairly new, so the interest part of the payment would be fairly substantial.
Debt consolidation and reasons for not acting
When asked by the Minister for Health and Social Development Ronnie W. Skelton whether any consideration had been given to consolidating the debt, the FS responded by stating that was one initiative he had intended to pursue when he had commenced his tenure at the Ministry of Finance, but “circumstances had prevented him from doing so.”
Mr. Smith added that the prudent way was to consolidate the debt at a lower cost. He added that such a stance could result in the following, 1. Having more funds to do work, 2. Increase recurrent expenditure due to not having the debt payments to make, and 3. Maintain the recurrent expenditure at the current rate and increase the capital expenditure.
The Member for the first district Andrew A. Fahie asked the FS what had stopped him from consolidating the debt. In response Mr. Smith told the Committee that the main reasons were “data and time”. He stated that they had wanted to obtain a sovereign rating so that there would be no questions asked regarding the type of investment risk the Virgin Islands posed. He added that the “process had moved slowly because of data issues and then we were faced with the financial crisis”.
The Member of the first district Fahie explained that if government had consolidated loans it could have earned approximately $5,000,000 per year saving during the last seven (7) years.
The Former Education and Culture Minister Fahie suggested to the Premier Dr. D. Orlando Smith that in order for Government to attain this type of revenue initiative, it should not be the sole responsibility of the Ministry of Finance. He stated that he would continue to advocate for the establishment of an ad-hoc unit whose mandate would be task-driven and for the implementation of generating new revenues. The FS then informed that efforts had already commenced regarding the creation of such a Unit.
The Member for the third district Julian Fraser RA, referred to the consolidation of debt and queried which banking institution would Government approach to assume all of its debt, to which the FS responded that “we would not approach any institution but opt to sell the debt on the market in the form of bonds”.
Territorial At Large Member Archibald C. Christian noted that the largest contributors of Public Debt related to the Peebles Hospital project in the amount of approximately $90 million which was a loan from the BVI Social Security Board and Banco Popular. Hon. Christian sought confirmation as to whether the $79 million was still available to complete the project. The FS clarified that half of the $79 million had already been spent.
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