The following letter from Lord Ahmad states that Anguilla’s 2018 budget has been approved. Chief Minister Banks will reply shortly.
Mr Victor F Banks
Hon. Chief Minister
PO Box 60
The Secretariat
The Valley
Anguilla
25 April 2018
Dear Victor
Thank you for your letter of 30 March in which you shared the draft 2018 Budget for approval. I thank you and your team for your continued engagement in this process and welcome the changes made from the initial draft shared with my team.
I of course recognise the challenges in balancing the Budget in 2018 given revenues will be suppressed and note that ·with expenditure saving measures as well as deferral of payments of arrears, the recurrent deficit stands at EC$24. 7 million. Alongside this I note your reference to the potential for revenue upside which could bring this figure down. I also welcome the decision to reduce total long-term borrowing in 2018 to EC$4omillion as well as seeking to rebalance and reduce the GoA’s debt profile, which is urgently needed.
However, I have some concerns given the 2018 Budget has limited headroom to manage future downside risks. It provides limited opportunity to address important structural issues and demonstrates the need to close financing gaps without adding to expenditure arrears in order for the GoA to meet amortisation payments. Given the structural challenges, I am keen that we work together with you to identify a comprehensive package of short and medium-term reforms to restore Anguilla’s economy, reduce its burden of debt and put its public finances on a sustainable footing. To that end, I was delighted to hear of your support for a Consultative Group consisting of the GoA, UKG, Eastern Caribbean Central Bank (ECCB) and Caribbean Development Bank (CDB). I hope that through a constructive dialogue we can ensure a successful outcome for all.
With these issues in mind, I approve the 2018 Budget with your agreement to the below, which we have discussed:
1. Engagement in the Consultative Group of regional development partners to identify a comprehensive multi-year economic and fiscal reform programme to update and monitor the GoA’s Medium Term Economic and Fiscal Plan (MTEFP). The Consultative Group represents the primary stakeholders in Anguilla’s fiscal and economic recovery. It will support the delivery of sustainable public finances and greater prosperity for Anguilla.
2. The agreed, fully casted MTEFP to be published and progress monitored by an oversight committee that reports to the Consultative Group. This, I’m sure you’ll agree will be beneficial to all concerned.
3. I would appreciate if you could reconfirm your commitment to expedite the introduction of a Goods and Services Tax (GST) as committed to in previous MTEFPs and to have requisite legislation and processes in place by June 2019 with implementation and collection commencing from January 2020 at the latest. As I’m sure you recognise, this will help to close future financing gaps and allow the GoA more fiscal space to meet amortisation payments.
Alongside consideration of support to implement this important policy, the Consultative Group will help to collectively determine the schedule of rates under the GST as part of the MTEFP. This of course does not prejudice any further revenue raising measures identified by the Consultative Group.
4. Given the size and age of the GoA’s expenditure arrears, worth 25% of forecast 2018 recurrent revenues and their effective treatment as “off-balance sheet debt”, for these to be classified as public sector debt when calculating the debt sustainability ratios as set out in the Framework for Fiscal Responsibility.
5. I appreciate your previous references to the fact that 2018 should be considered a bridge year in terms of the restoration of the GoA’s finances and that no new revenue raising measures would be introduced in 2018. In turn I anticipate the GoA will ensure that it maximises revenue collection. I would therefore appreciate if any further tax or duty concession or exemptions are introduced that they first have the economic case of such policies presented to and appraised by ExCo, including the Governor, before any policy is approved.
I have also directed the Governor to this effect to ensure he is satisfied that an appropriate case has been made.
With respect to the EC$40million of borrowing from the CDB, I agree to this in principle whilst reserving final approval until the relevant Caribbean Development Bank papers have been issued. Key to this will be ensuring that the EC$25 million Policy Based Loan contains conditionality that achieves the reforms which we will agree collectively through the Consultative Group.
I am keen to work collaboratively and cooperatively to ensure we can seek out solutions to reinvigorate Anguilla’s economy and restore its public finances.
I am pleased to confirm that the Inter Ministerial Group (IMG) have agreed to the release of funding for six critical recovery projects. I would also like us to work through details of the next phase of reconstruction projects in parallel with finalising the MTEFP by 30 June, so I may seek IMG approval to release the remainder of the funds. The IMG will be particularly interested to hear of the progress that has been made on the MTEFP when it next convenes and look forward to continuing to work closely together in achieving Anguilla’s sustainable recovery.
LORD AHMAD OF WIMBLEDON
Minister of State for the Overseas Territories
Prime Minister’s Special Representative for Preventing Sexual Violence in Conflict
PS. I look forward to seeing you in the near future.
