The hardball talk between the UK Government and the Anguilla Government now appears to be over with the approval of the 2018 budget and the release of the long-expected humanitarian aid.
As a welcome consequence, the Anguilla Government is now in a position to begin financing the island’s varied public services for the year. The Government is able to begin work on a number of public sector projects severely damaged by Hurricane Irma for which delayed humanitarian aid has been provided.
The Budget Address and the estimates of revenue and expenditure were presented in the Anguilla House of Assembly by Chief Minister and Minister of Finance, Mr. Victor Banks, on April 23, pre-empting the UK’s notification, on April 25th of the approval of the budget. The budget totals EC$287,901,916 with a deficit of almost EC$25 million. The budget debate commenced on April 30 and was approved in the Anguilla House of Assembly by the end of the day.
There are no new taxes contrary to the UK Government’s insistence for the same. The promptings were resisted by the Anguilla Government taking into account the island’s volatile economic and financial situation particularly following Hurricane Irma.
As indicated, in addition to the delay of the budget by the UK Government, there was also the protracted delay of the release of the humanitarian aid, amounting to 60 million pounds (EC$230 million), promised to Anguilla in the aftermath of Hurricane Irma. This money, as stated above, is now being released to finance “six critical recovery projects”.
Both the approval of the budget and the release of the humanitarian aid were the subjects of two letters several days ago between Lord Ahmad, the UK Minister for the British Overseas Territories, and Anguilla’s Honourable Chief Minister and Minister of Finance, Mr. Victor Banks. The exchanged letters are published below.
Lord Ahmad’s Letter to Chief Minister Banks
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.
Chief Minister Banks’ response
April 25, 2018,
Lord Ahmad of Wimbledon
Minister of State
Foreign & Commonwealth Office
King Charles Street,
London,
SW1A2AH
Dear Tariq
Thank you for your letter today in which you set out your positive response to our 2018 Budget. I am grateful to you and your team for this support. It is critical to restoring an atmosphere of hope and confidence to our people. In addition, my ministerial colleagues and my team in the Ministry of Finance are relieved that our engagement has resulted in a reasonable way forward.
As I said to Mr. Merrick, Director, Overseas Territories Directorate, we have used our best efforts to produce a Budget that is realistic given the circumstances of our economy at this time. And even though we were not able to meet the target of an EC$20 million deficit we were very conservative on our revenue projections which we comfortably predict will far exceed our target. Over the years we have always placed a premium on erring on the side of caution whe~ it comes to revenue projections. I fully appreciate your challenge in making the case for Anguilla with the Inter Ministerial Group(IMG). We both have our several constituencies to satisfy within the decision making process.
You have been expressing concerns about the possibility of default and must assure you that such a possibility remains “top of the mind” with the Government of Anguilla. You cannot be more concerned about such an eventuality than we are. And it is therefore an issue which the capable team in the Ministry of Finance and I, work on a daily basis to prevent. Successive Governments of Anguilla over the last 37 years that I have been in active politics have always found ways to avert such crises. We intend to do nothing less.
The Consultative Group which derives from a series of discussions we have had is a very useful initiative.
We are keen to expedite an early start to this process which will be to our mutual benefit. We are in fact of the view thatthe Group should be extended to include IMFand World Bank officials as well. These two agencies have been extremely beneficial to Anguilla during the Banking Resolution process.
We agree in principle to the five issues you have posited in keeping with your approval of the 2018 Budget. There may, however, be some procedural issues which we may need to negotiate to ensure that their application is efficient and effective in carrying out the functions of Government in an atmosphere of mutual respect.
I thank you also for the indication that you will approve the additional COB borrowing to effect the reduction of debt payments and to facilitate other debt management strategies. This is critical to our ability to build the bridge to financial restoration and the reinvigoration of our economy in 2019 and 2020.
Kindly convey my thanks and that of the Government and People of Anguilla as a collective, to the IMG for their approval of the budget and the first phase release of the capital grant funding for projects. We are further encouraged by their clear expressions of readiness to expedite, in parallel with our delivery of an agreed MTEFP, the next phase of project approvals by June 30, 2018. And on a personal note let me thank you Minister, for the part you played in building the frank and honest relationship we have· developed as we deal with the several concerns of the various constituencies we represent.
Victor F. Banks
Chief Minister
