After submitting a revised Recovery to Development Plan to the United Kingdom in September, the Virgin Islands government is now waiting to learn whether the UK will approve the territory’s “credit worthiness” and offer the promised £300 million loan guarantee to help fund the recovery from the 2017 hurricanes, Premier Andrew Fahie said Tuesday while delivering a statement in the House of Assembly.
“It is important for citizens to understand that the loan guarantee is not guaranteed at this time. It never was,” he said. “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.”
Even if the territory passes the UK’s “contingent liability test” and thus demonstrates its “credit worthiness,” the VI and UK governments will still have to work out a partnership agreement, Mr. Fahie explained on Tuesday.
Revised plan
In explaining why he believed a revised recovery plan was needed, Mr. Fahie said the 116-page plan conceived under the previous aministration — which he himself voted to approve in 2018—was “too bulky” and would have placed “an undue financial burden” on the territory.
Additionally, he claimed that under the original 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.”
The original RDP was extensively debated before it passed the HOA in October 2018 with unanimous support, including a vote from Mr. Fahie, who was then on the opposition. It was projected to cost around $580.8 million over seven to ten years and entail 19 projects.
But last September, after friction with the UK spilled out onto the public stage, Mr. Fahie’s administration sent the UK a downsized plan: a 33-page document that omits much of the detail of its predecessor and estimates financing needs at $186.9 million over the course of four years.
After subsequent discussions, the government is now waiting on the UK to respond, Mr. Fahie said Tuesday.
Opposition members and Governor Gus Jaspert have urged the government to quickly access the loan guarantee, which they say would bring low-interest loans backed by the UK government to help repair and restore hurricane-damaged infrastructure like schools, police stations, roads, libraries and more.
As a condition of the loan guarantee, much of that recovery spending would be managed by the Recovery and Development Agency in accordance with the RDA Act, which the HOA passed with 10-2 vote in March 2018 with the support of Mr. Fahie, who has since begun to chafe at the restrictions included in the law.
In the absence of the loan guarantee, the RDA has struggled to complete major recovery projects, and its CEO announced his resignation last month.
The agency’s current mandate includes hundreds of millions of dollars’ worth of major efforts, but as of late January it had spent less than $9 million on projects since it was established in April 2018, and it had completed only five, according to information provided by the RDA.
Late last year, it cancelled its biggest effort yet — the removal of more than 200 derelict boats across the territory — in the midst of the tender process, and as of Dec. 31 it had less than $5.3 million in the trust that funds its projects, agency officials said.
Criticisms
Opposition Leader Marlon Penn did not respond to requests for comment this week, but he expressed related concerns last month during a press conference.
“We have yet to finalise that loan guarantee,” he said. “We are concerned with the pace of the recovery of this territory.”
Mr. Penn said not having the details of the loan guarantee confirmed leaves the VI in a “very uncertain place.”
In September, he described the territory’s political climate as having “looming clouds with the potential to cause damage to the economy.”
Mr. Penn also said the territory needs money: Of the government’s $361 million budget for the 2019 fiscal year, two-thirds went toward operating costs, he explained.
“That means we’d have $22 million for redevelopment,” he said. “Do we want to develop at the rate of, say, $15 million each year, or we have to borrow. How we do that has to be an open discussion.”
The premier, however, has pushed back against suggestions that his government should rush to access the loan guarantee.
On Tuesday, he insisted that the government will not be “bullied, coerced or misled” into debt “beyond our ability to repay.”
He also cited “reckless and misleading statements coming from certain individuals” he did not name.
Issues of concern
On Tuesday Mr. Fahie also summarised the outcome of recent discussions with the UK government regarding the loan guarantee.
“Your government has accepted all the conditions and requirements put to us by the UK government, except three terms which we remained concerned about,” he said.
Those three areas, he said, concern the scope of the public projects to be managed by the RDA; the “meaning of certain ambiguous terms;” and the territory’s financial performance ratios in respect to the loan guarantee.
“Some persons are insisting that the RDA must be responsible for all government-development projects — not just those associated with the recovery,” Mr. Fahie alleged.
However, he added, government agencies have a significant role to play in the recovery and development of the territory as well, and turning all projects over to the RDA could result in terminating staff in those agencies. The territory, he said, must “be careful” not to create a “parallel public service.”
Some of the terms of the loan guarantee also raised red flags, the premier said.
“We have been asking for these definitions to be expressed in black and white,” he added. The premier also alleged that taking out loans under the arrangement could cause the territory to exceed the borrowing ratios outlined in the 2012 Protocols for Effective Financial Management.
In recent months, the governor and other UK officials have responded to such criticisms by insisting that the loan guarantee could greatly accelerate the pace of the public-sector recovery, and offering to discuss any concerns.
Without the needed funding, Mr. Jaspert added last month, the RDA “has not fully been given the opportunity to realise its potential.”
“For that, the RDA requires the full support of the premier and his ministers so that it can work with government, bring in funding and deliver transparency, value for money, and a full and prosperous recovery for the people of this territory,”he said.
Mr. Fahie also addressed RDA CEO Paul Bayly’s resignation, which was announced last month.
“While Mr. Bayly 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,” the premier said. “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.”
The premier also gave a break-down of money he said had been provided to the RDA. Up until the end of October 2019, he said, the government contributed more than $1.88 million for administrative and operational expenses, and $10 million for projects facilitated by the agency.
“The UK would have contributed approximately [$3.7 million] up to the same time,” Mr. Fahie said.
He added that under a January 2019 memorandum of understanding between the Ministry of Finance and the RDA, the government is responsible for providing a minimum of $300,000 per quarter to the RDA to cover administration costs.
“There is no limit, so this is a blank cheque that was signed under the previous administration,” he stated.
He also noted a discrepancy between a fully operational agency and the lack of a loan guarantee to fund projects.
“How can anyone expect the government to authorise the commencement of those projects without the loan funding coming into place?” he asked.
The governor, who is out of the territory, had not responded to Mr. Fahie’s statement as of Beacon press time yesterday afternoon.