Following another year of economic struggles amid the Covid-19 pandemic, Premier Andrew Fahie promised a brighter 2022 during his budget address on Nov. 11.
Government, he said, hopes to tap into a reviving tourism industry and new economic opportunities to spur a comeback following a year where public spending was $11 million higher than anticipated and revenue didn’t quite meet expectations.
“While your government wished we could focus exclusively on delivering our manifesto pledges — remedying decades-old problems with our aging infrastructure and furthering the development of the Virgin Islands for the benefit of our people — this unfortunately could not entirely be the case,” Mr. Fahie said in the House of Assembly on Nov. 11.
Instead, he explained, much of the government’s spending and energy had to go to handling the pandemic.
During the speech, the premier announced that the new 2022 budget totals $397.17 million, a little smaller than the $402 million budget that passed the House in December 2020. The majority — $337 million — is dedicated to recurrent expenditures, and an estimated $39.4 million will go toward capital expenditures.
The remainder includes $5.85 million for statutory funds and $14.96 million for principal debt repayments, the premier said, predicting a recurrent surplus of approximately $13.8 million.
Meanwhile, projected revenue for 2022 comes to $356.7 million, with $323.2 million from taxes and $33.5 million from other sources.
Compared to last year’s deficit of $69.8 million, the 2022 budget deficit comes to $40.5 million, largely for spending needed for capital projects.
Of that spending, $8.8 million will come from the Consolidated Fund, $600,000 from the Miscellaneous Purpose Fund, $800,000 from the Environmental Protection and Improvement Fund, $21.5 million from the Development Fund, and $8.8 million from loan disbursements, the premier said.
Tourism
The pandemic continues to affect key sectors like tourism, the premier noted. Though the availability of vaccines brought hope in early 2021 of reviving economies around the world, he explained how recent months brought new challenges in the form of aggressive Covid-19 variants and subsequent economic suppression in travel-dependent countries.
Citing a June 2021 report by the World Bank, Mr. Fahie said 90 percent of advanced economies were expected to regain their pre-pandemic per capita income levels by 2022, but the same was true for only one third of emerging-market and developing economies.
“This is subduing revenues for the public and private sectors and creating hardship for many of our people whose jobs and income streams are adversely affected not just locally, but globally,” he said.
The VI, though, did make a significant stride in reinvigorating the industry recently with the return of cruise ship visitors in October, he noted.
A total 299 calls are expected for the 2021-22 season, and Mr. Fahie said discussion is ongoing with small- and medium-size cruise ships to call on Anegada, Virgin Gorda, and Jost Van Dyke.
“A survey conducted by the BVI Tourist Board on the accommodations sector suggests the number of visitors over the six-month period will rival what we saw for the 11 months since we reopened in December 2020 to October 2021,” he added. “Slowly but surely, we are getting there.”
Mr. Fahie said the territory expects that easing travel restrictions will put the number of overnighters and day-trippers at 46,000 by the end of the year, up from about 38,000 at the end of last month. A total 66,000 cruise passengers are projected to visit by the end of the year based on schedules from the BVI Ports Authority, he said.
Possible barriers for tourism rates returning to normal including travel restrictions, slow containment of the virus, low traveller confidence, and a poor economic environment, he claimed. The United Nations predicts global arrivals won’t return to pre-pandemic levels until 2023 at the earliest, he said.
Part of adapting to the new market will be reaching out to a wider variety of tourists, particularly younger travellers who may spend less but seem more willing to travel and stay longer, Mr. Fahie said.
He added that a National Tourism Strategy will be completed next year as a blueprint for shaping the future of the industry.
Revenue
Even though revised 2021 budget estimates show total government revenue this year was $190,000 short of the $332.1 million initial projection, the premier painted a brighter picture of 2021 revenue compared to 2020.
He pointed out increases in income from tourist arrival levies, sea passenger taxes, motor vehicle rental taxes, income and payroll taxes, good and services taxes, international trade taxes, and trade licence revenue.
He attributed improvements in economic activity largely to the $40 million Social Security Board stimulus grant and the rollout of public sector capital projects.
In the financial services sector, he acknowledged that the market share has declined in recent years, but he noted a rebound in mid2020 that continued into the first half of this year and saw incorporation figures rising to nearly pre-Covid rates.
This year’s projected financial services revenue surpassed initial estimates of $184.4 million to about $196.4 million, up from the $189.75 million seen in 2020, he said.
“While the projection is that new incorporations will remain steady or be slightly improved at best, we must be on guard that the overall declining trends witnessed over the last 10 years in both incorporations and transactional activity can continue,” he warned.
Meanwhile, total government debt came to $140.98 million in October: $94.3 million foreign and $46.6 million local, he said. Total government debt stood at about $149 million last year: $97 million foreign and $52 million local.
“The situation could easily have turned much worse had your government not taken the tough and well calculated decisions to mitigate the spread of Covid-19, and to stimulate the economy in the areas targeted,” he said.
Capital projects
Despite worldwide challenges with shipping and production chains, many construction projects continued this year.
The Town and Country Planning Department showed construction imports grew by 98.8 percent in the first half of 2021 compared to the first half of 2020, reaching $51.98 million, according to the address.
In 2022, Mr. Fahie estimated, capital expenditure will be $39.4 million, with $13.65 million of that going toward projects to be administered by the Recovery and Development Agency.
Of the $39.4 million, $12.4 million is allocated for infrastructure development projects including the Ralph T. O’Neal Administration Complex; the Road Town Improvement Project; sewerage projects at East End/Long Look, Cane Garden Bay and Road Town; and repairs to the water network throughout the territory, the premier said.
Other planned projects include work to roads, the Frenchmans Cay Bridge, and storm surge mitigation on northern coasts. Another $300,000 is earmarked for fixing community centres at Cane Garden Bay and East End/Long Look; $400,000 for rehabilitating the Multi-purpose Sports Complex; and $500,000 for infrastructure for Her Majesty’s Customs.
A further $2.1 million is budgeted for work on the National Emergency Management Operations Centre, he said. Extensive works are also planned at the ports, with $2 million allocated for continued construction of a permanent West End Ferry Terminal capable of accommodating more than 200,000 passengers annually, according to the premier.
Funding for these projects is planned to come from $8.8 million in the Caribbean Development Bank Rehabilitation and Reconstruction Loan, $9.1 million in the Consolidated Fund, $17.1 million in the Development Fund, and $4.4 million in insurance proceeds.
Schools
School repairs will also get top billing in 2022 capital expenditures, the premier said.
The budget includes $8.5 million allocated for addressing infrastructure issues through the Recovery and Development Agency.
Mr. Fahie promised the Elmore Stoutt High School redevelopment would progress with a focus on building modern classrooms, noting that more than $7 million has been allocated in the 2022 budget.
“All our students and teachers will finally be moving from the CTL building to the Elmore Stoutt High School campus where they belong and in proper facilities in time for the 2022- 2023 school year,” he said.
At Isabella Morris Primary School, where demolition began last month, $200,000 is allocated for design development and engineering works for a new facility to be renamed the Isabella Morris Junior High School.
On Jost Van Dyke, $400,000 is going toward building a new school, the premier said, adding that pledges are coming to cover the remainder of the construction costs.
Another $50,000 is allocated to finish work on Virgin Gorda’s Bregado Flax Educational Centre. Further funding may come from a vote on the rehabilitation of schools, he said.
The Eslyn Henley Richez Learning Centre, he added, is slated to receive $800,000.
While at least $1 million is planned in the budget for additional work on schools, Mr. Fahie said he anticipates that figure will come to $2 million during the budgeting process once the needs of each school are assessed.
He added that mould remediation will continue next year, and funding for school supplies will be increased by $255,000.
NHI programme
Another big focus for next year’s agenda is health care, according to the premier.
The National Health Insurance programme now falls under the umbrella of the Ministry of Natural Resources, Labour and Immigration rather than the Ministry of Health and Social Development, a reassignment Mr. Fahie said took effect last year to allow the latter to focus on public health issues amid the pandemic.
As part of a $40 million grant awarded last year by the BVI Social Security Board for economic stimulus, $7.5 million went to the NHI programme because previous administrations have been delinquent in making payments, Mr. Fahie said.
Last year, Opposition Member Mitch Turnbull shared concern for the sustainability of NHI, noting its mounting deficit projected to reach $34.1 million by 2022 if the current system wasn’t reformed.
Mr. Fahie didn’t announce any comprehensive revamp of the system. However, to cover the costs, the NRLI Ministry is set to receive the largest piece of the pie when it comes to ministries’ recurrent expenditures, at 14.3 percent, totalling $51.2 million.
“One area of emphasis in 2022 will be preparation for the implementation of Covid-19 vaccine boosters and vaccination of school-aged children — with parental consent, of course — using the Pfizer vaccine,” Mr. Fahie added.
Other major projects include completing work at the Dr. Orlando Smith Hospital on the Road Town clinic’s first floor, dual-purpose specialist clinics and isolation unit on the second floor, and laboratory unit annex.
Ministry budgets
In close second for recurrent funding is the Ministry of Education, Culture, Youth Affairs, Fisheries and Agriculture, with 13.68 percent of the recurrent budget, which the premier said will fund “human capital development.” The ministry is also getting more than a quarter of development allocations.
The Ministry of Transportation, Works and Utilities is getting 12.34 percent of the recurrent budget; the Premier’s Office 12.47 percent; the Governor’s Group 12.08 percent; the Ministry of Health and Social Development 9.57 percent; and the Finance Ministry 6.93 percent.
The Governor’s Group budget includes plans for several major projects including renovations to the House of Assembly building and other government properties, according to the premier.
Industry changes
Also in 2022, the government plans to equip the Virgin Islands Trade Commission to foster trade and development in business, he added.
“This latter function includes looking at areas of opportunities for citizens, encouraging investments, creating new industries while bolstering existing ones, and leveraging existing Virgin Islands assets in cooperation with other agencies with respect to the green, blue and digital economy,” Mr. Fahie said. “This will also include training our people and getting them ready to be entrepreneurs.
He added that the commission will help implement long overdue consumer protection legislation.
In the planned gambling sector that the premier pitched as a future multimillion-dollar industry, he said the Gaming Commission should be in place by Jan. 1.
“Staff who will be trained in anti-money laundering should be on board by the second quarter of 2022 so that this new industry can open up and move forward soon thereafter,” he said.
Medical marijuana
Regarding a regulated medical marijuana industry, the premier said government is working with the United Kingdom’s Foreign, Commonwealth and Development Office to address issues holding back the implementation of legislation the House passed last year.
“We were ahead of the game when we passed that legislation in this honourable House,” he said. “But we may have been delayed, but with God’s help we will not be denied.”
In the 2022 budget, he said $480,000 is allocated to the East End/Fat Hogs Bay Harbour Development to promote the territory’s fishing and agriculture interests.
Public officers
More than a third of the recurrent budget is slated for compensating public officers, Mr. Fahie said.
Government plans to spend $4 million by the end of the year toward long-overdue increments — some dating back to 2017 — for public officers, Mr. Fahie said, adding that the balance will be paid next year.
Heading into 2022, the premier said, government will also be looking to improve the effectiveness of public services.
“The Water and Sewerage Department has been carrying significant deficits over the years,” he said. “WSD collects on average $5 million per annum in revenues from the sale of potable water, but it pays to the water suppliers approximately $27 million per annum, which results in a gross variance of some $22 million each year. We must stop that haemorrhaging.”
Pending legislation would turn the department into a statutory body capable of better tackling issues with old infrastructure and water loss, he said.
Now in SFC
After the address, House members referred the annual estimates to the closed-door Standing Finance Committee.
Mr. Fahie said the Medium-Term Framework Plan 2022-24 and Draft Estimates of the 2022 Budget would be published soon.