Got TIPS or BREAKING NEWS? Please call 1-284-442-8000 direct/can also WhatsApp same number or Email ALL news;                               ads call 1-284-440-6666

Gov’t $240M in debt; @ brink of borrowing capacity- Claude O. Skelton-Cline

Central Administration Complex: There are concerns that the possible blow to the financial services sector of the Virgin Islands, due to beneficial owners of trust companies having to be made public, will weaken the capacity of the Virgin Islands to repay its debt for hurricane loans. Photo: VINO/File
Leader of the Opposition and First District Representative Honourable Andrew A. Fahie, right, and commentator Claude O. Skelton-Cline, left, on the Tuesday May 1, 2018 edition of the Honestly Speaking show aired on ZBVI 780 AM Radio. Photo: Facebook
Leader of the Opposition and First District Representative Honourable Andrew A. Fahie, right, and commentator Claude O. Skelton-Cline, left, on the Tuesday May 1, 2018 edition of the Honestly Speaking show aired on ZBVI 780 AM Radio. Photo: Facebook
ROAD TOWN, Tortola, VI- It was on the Tuesday May 1, 2018 edition of the Honestly Speaking show, aired on ZBVI 780 AM, that the Leader of the Opposition and First District Representative Honourable Andrew A. Fahie and commentator Claude O. Skelton-Cline shared with listeners their views on the financial position of the Virgin Islands (VI).

With the recent decision of the United Kingdom UK) to force selected Overseas Territories (OTs) to make public the beneficial owners of offshore companies and the possible negative impact on the economy of the VI, there is a need to have good financial management.

The Protocol for Effective Financial Management was signed and enacted to ensure that our economy remains financially stable. However, it is now evident that the stipulated borrowing cap may need to be revised in order for us to not only recover from the natural disasters of 2017 but also the possible economic fallout from the Financial Sector, which contributes 60% of the Territory’s annual income.

In explaining the principle behind the protocol, Hon Fahie stated that the Protocol for Effective Financial Management signed by the National Democratic Party (NDP) Administration in 2012 was a guide of how the UK wanted the finances to be dealt with. "In that document it stated clearly that the government of the Virgin Islands could only borrow up to 80% of their recurring expenditure, in terms of their annual recurring expenditure, which roughly calculates to 250 million dollars.”

In light of this the recent borrowing by the government is a cause for concern to many. Former Managing Director of the BVI Ports Authority Mr Skelton-Cline highlighted the present position of the Government as it relates to its recent borrowing.

“125 million we have on the books right now in debts. Last year, December 14, we borrowed another 65 million, just last week the government passed to borrow another 50 million. That’s 240 million in debt right now. Which brings you up against the number that you [Hon Fahie] just mentioned, 250 million or there about at its 80% threshold. So, we are already on the brink of our borrowing capacity," he explained.

It was at the ending of 2017 that saw the approval to borrow $65M from the Caribbean Development Bank (CDB) to offset recovery and development expenses. The budget estimates of 2018 revealed that the expenditures this year is more than the revenues, which has resulted in a deficit. In order to address this deficit, the Government intends to borrow from CDB a loan not exceeding $50 million to be used as budgetary support for 2018.

What is to become of the VI?

Coupled with the recent UK vote, the high level of borrowing is worrisome for many. Questions like ‘How will we repay our debts if our revenue is cut by almost half? Will the UK impose direct rule if they have to bail us out as our debts or will they lift the borrowing cap to allow us to borrow more?' are being frequently asked.

The Premier and Minister of Finance, Dr The Honourable D. Orlando Smith (AL), has since met with other government officials to discuss a way forward. In a press conference held at the Office of the Premier on May 2, 2018, Premier Smith had assured the people that the VI Government will “continue to work to make sure that financial services continues to be relevant.”

11 Responses to “Gov’t $240M in debt; @ brink of borrowing capacity- Claude O. Skelton-Cline”

  • wize up (04/05/2018, 14:03) Like (16) Dislike (0) Reply
    This thing call money: when I personally sit and reflect from the late 60s(as a child) where the abundance of cash flow was basically non existent: the territory grew and I recall Great Britain removing this Dependent Territory from Granting Aid under the late Willard Wheatley: I don’t recall the actually time period by I will say it’s was under the Late CB Romney(80s) the dollar became more lucrative: the territory flowed through the 90s: come 20s we ran off the highway and now slammed head on into the brick wall....reflection is needed because we came out of the darkness and got blinded by the lights:
  • trrefdrfds (04/05/2018, 14:31) Like (22) Dislike (3) Reply
    we are dead under the NDP
  • E.Leonard (04/05/2018, 16:31) Like (14) Dislike (3) Reply
    The BVI may be open for business but the reality is it is in a national/financial crisis, needing strong leadership, coupled with sound policies, procedures, practices, programmes,.........etc management to navigate its way out of the crisis. It needs to make some strong, structural and sound financial adjustments. The way forward and the way out of crisis will definitely require some prudent, wise borrowing. The question is how much can it borrow?

    The PEFM stipulates a limit of 80% of current expenditures, which is currently estimated at $240M. Further, some major financial institutions suggest a prudent debt to GDP ratio of 1)60% for developed countries or 2)40% for developing/emerging countries. However, in working with these limits, a cushion/capacity for adverse shocks must be considered. Assuming a GDP of $1B, the territory’s working debt is approximately $400M. The MoF will have to reconcile the delta b/w the PEFM and debt to GDP ratio with the UK. The territory’s debt load is approaching the PEFM limit but below the suggested prudent debt to GDP ratio so it (VI) may need to work close up with the UK for some relaxation of the PEFM, due to the current crisis.

    Moreover, if the UK adopts registry of beneficial ownership legislation, the BVI economy, along with government revenue intake and service delivery will take a big hit. As such, the territory will have to plan and brace itself for some major structural adjustments. It will take sacrifice, struggle, patience, understanding, strong solutions, urgent action ......etc to stop the hemorrhaging, dig itself out of the hole and put the territory back on a steady and rising course. This will require national unity, all hands on deck and rowing in unison.
    • Diplomat (05/05/2018, 11:23) Like (4) Dislike (1) Reply
      @E. Leonard, though you make the case about the borrowing need and the territory’s borrowing position, qualifying for a loan does not mean you can afford it. Stop encouraging the territory to borrow beyond its means and capability. The BVI has not demonstrated effective financial stewardship. Successive governments have squandered the opportunity to effectively managed its financial resources. The territory needs to reboot its financial management approach. Its financial position is dangling precariously off the financial cliff.
  • Hmm (04/05/2018, 17:51) Like (1) Dislike (1) Reply
    This is how vip got out ndp once state ndp sellling out land n business to chines and this same old Gov in dept and going borrow money. Lol so if the country broke the next gov have to borrow money too
    • wize up (04/05/2018, 21:48) Like (6) Dislike (0) Reply
      @ Hmmm: can the blind lead the blind(yes!!) but to where: I personally believe our administrative train ran off the track some 20 years ago: over the years this territory generated a set of money; now what(the same people who branded us a bird sanctuary are now back to steal our birds!!!) full circle and this situation began years ago: third party needed or a collation government(the one party membership not working) those in favour!!!
  • jokers (04/05/2018, 19:46) Like (7) Dislike (1) Reply
  • The Chosen 1 (04/05/2018, 23:04) Like (3) Dislike (1) Reply
    Why not stop being in a hurry to build back; Why not rebuild the economical damages. For instance, fixing the roads to the tourist attractions.

    Then focus on what’s remaining after you have secured the economy’s source of income. Y’all know financial was plunging anyways.................
  • suggestor (05/05/2018, 09:02) Like (4) Dislike (0) Reply
    Stop spending money at Dominican Republic women to have their hair and nails done. That might help a few million.
  • Windy (05/05/2018, 09:27) Like (2) Dislike (1) Reply
    Nice work Orlando. LOCK HIM UP
  • Turn (06/05/2018, 07:30) Like (2) Dislike (0) Reply
    You all were mad at turnbull . but he was right . more to come

Create a comment

Create a comment

Disclaimer: Virgin Islands News Online (VINO) welcomes your thoughts, feedback, views, bloggs and opinions. However, by posting a blogg you are agreeing to post comments or bloggs that are relevant to the topic, and that are not defamatory, liable, obscene, racist, abusive, sexist, anti-Semitic, threatening, hateful or an invasion of privacy. Violators may be excluded permanently from making contributions. Please view our declaimer above this article. We thank you in advance for complying with VINO's policy.

Follow Us On

Disclaimer: All comments posted on Virgin Islands News Online (VINO) are the sole views and opinions of the commentators and or bloggers and do not in anyway represent the views and opinions of the Board of Directors, Management and Staff of Virgin Islands News Online and its parent company.