The Government of the Virgin Islands will be seeking to negotiate with the Government of the United Kingdom for certain terms of the Protocols for Effective Financial Management (PFEFM) to be relaxed or amended to allow Government to freely seek immediate relief funding in light of the negative economic impacts of the COVID-19 pandemic.
One of the terms the VI is seeking relief from is the controversial borrowing ratios imposed on the Territory by the UK in the PFEFM signed into agreement in 2012 by the previous National Democratic Party (NDP) Government.
Speaking during a live COVID-19 update to the Territory today, April 15, 2020, Premier and Minister of Finance, Hon Andrew A. Fahie said Cabinet has agreed to instruct the Financial Secretary to lead technical discussions with the UK Government’s financial technical team in petitioning the Secretary of State to relieve the Government of the Virgin Islands of its obligations under Section 20 of the Protocols for Effective Financial Management and the review and amendment of Sections 25, 27 and 28.
This, Hon Fahie said, is to, “enable the BVI Government to secure the funding necessary to respond to catastrophic events such as the COVID-19 pandemic, in light of 1. The real impacts and economic forecast outlook for the BVI due to the catastrophic COVID-19 pandemic, 2. The unavailability of grant funding from the UK Government and 3. The impediment the conditions of the Protocols for Effective Financial Management pose to the BVI Government being able to finance immediate relief and economic stimulation programmes on its own.”
Under the current financial ratios, the Territory is required to maintain under the Protocols: net debt of 80 percent maximum or recurrent revenue; debt service of 10 per cent maximum of recurrent revenue; and liquid assets of 25 percent of recurrent expenditure.
It should be noted that if the government violates those limits, it would be required to submit to greater fiscal controls under the UK.
Section 28 of the PFEFM, which is one the sections the VI Government will be seeking an amendment to, particularly states that a breach of the borrowing limits will constitute a breach of the Agreement.
The VI Government has also been trying to get the UK to revise the borrowing ratio for the VI to access adequate funding for hurricane recovery so that it does not violate the Protocols for Effective Financial Management.
This is one of the reasons the VI has not readily accepted the £300m loan guarantee offered by the United Kingdom following Hurricanes Irma and Maria in September 2017.
Premier Fahie has in the past argued that these ratios would be “reasonable” and “healthy, but in the aftermath of two Category 5 hurricanes, “These are not ordinary times and ordinary circumstances.”
The Virgin Islands Party (VIP) Government seemingly views the COVID-19 Pandemic as also not ordinary times and circumstances.
All COVID-19 funding to go to Consolidated Fund
Meanwhile, Premier Fahie also disclosed that Cabinet agreed that any and all funding, aid, assistance, grant, gift or donation, whether monetary or non-monetary, received by or on behalf of the VI from or through any country or government, person, business, institution, organisation/NGOs with respect to the COVID-19 global pandemic, the economic effects of the pandemic or anything otherwise related to the pandemic, “shall be payable into the Consolidated Fund and managed through the Ministry of Finance, in keeping with the Virgin Islands Constitution Order, 2007, the Public Finance Management Act, 2004, and the Audit Act, 2003 to ensure accountability and fiscal responsibility through one single Virgin Islands institutional framework to ensure public accounts accountability, transparency and good governance in the management and auditing of monetary or non-monetary contributions to the Virgin Islands for COVID-19 pandemic.”
He said Cabinet agreed that the Minister of Finance publicly account and report on any and all funding, aid, assistance, grant, gift or donation monetary or non-monetary, received by or on behalf of the VI from or through any country or government, person, business, institution, organisation/NGOs with respect to the COVID-19 global pandemic in keeping with transparency, accountability and good governance.