Premier Smith.

"My fellow Virgin Islanders, the situation is grim, the financial state of the Territory, to put it bluntly, is not good. Fellow citizens it is far worse than we anticipated. The grim reality is that on assumption of office we met a running deficit of some fifty one million dollars ($51 million) that had been incurred by the previous administration despite their full knowledge that revenue collections were down during the same period," the Premier said in a radio broadcast this evening, Tuesday December 6, 2011, as he divulged the status of the Territory's finances.

According to him, the running deficit indicates that there are unpaid bills for capital projects to the tune of some $19.8M.

“As we peeled away the layers on this commitment we have to date identified some $14.8M in individual contracts signed, a large portion of which were petty contracts signed by my predecessor in the waning hours of the last administration,” the Premier stated.

Coupled with this, he added, are numerous project overruns and variation orders that made a mockery of budgetary allocations, compromised the execution of other projects and severely weakened the fiscal position of the Government of the Virgin Islands and by extension, the prospects for the immediate future of Virgin Islanders.

Premier Smith revealed that cash balances as of the November 4, 2011 were slightly over $40M but when taken in the context of the running deficit of $51M, presents a picture that is worthy of serious concern.

“Current projections by the Ministry of Finance indicate based on the spending patterns thus far for the year that total revenue will be in the region of $268M. This is a shortfall of 18 million dollars compared to what was budgeted and approved by the House of Assembly for the 2011 fiscal year.

“Recurrent, that is operational expenditure, is anticipated to be in the region of $264M with capital expenditure at some $46M. These figures represent a three percent increase over last year’s recurrent expenditure and a 50percent increase on last year’s capital expenditure. This compromising fiscal position has resulted in the Virgin Islands breaching the liquidity requirements of the borrowing guidelines agreement signed between Her Majesty’s Government and the Government of the Virgin Islands in 2005, and thus preventing any additional debt or in this case, borrowing, from being placed on the books of Central Government without the express permission of the Foreign and Commonwealth Office (FCO),” the Premier explained.

When his party left office in 2007, Hon. Smith claimed that the Auditor General’s report of 2007 showed that the National Democratic Party (NDP) left “healthy cash balances of $82M and was in compliance with all the provisions of the borrowing guidelines.

The Premier added, “Indeed this same report showed that there was a surplus of close to $407,535 in that year. The current breach of the borrowing guidelines potentially has very serious implications for our Territory as it suggests that we are on a path of un-sustainability. Further, as a result of our current state of play with respect to this, the loan that was approved by the Caribbean Development Bank (CDB) in May of this year for fixing our roads cannot be finalized without approval from HMG.

“As of today we do not have that permission. But I am confident that my Government’s commitment to prudent financial management as we go forward will help us to address the concerns of the Foreign and Commonwealth Office and secure this approval.”