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by pltm
(PLTM) - Should, the public be worried or sigh in relief? That is the question that lingers following the budget estimates that were presented by Premier and Minister for Finance, Dr. the Hon. D. Orlando Smith on March 19.
The budget cites a 7.3 percent decline in revenues and a 14.4 percent increase in expenditure.
Even before the budget was read, it was clear that the August flood, as well as hurricanes Irma and Maria, impacted the 2018 estimates, which have an anticipated total revenue of $299,525,366, a 7.3 percent or $23,587,265 decrease from the 2017 estimates.
This bares the fiscal picture that things have changed, a point that was made clear by the Premier’s announcement that government is expecting a recurrent deficit of $53,291,134 and a total recurrent expenditure of $352,816,500.
This was Hon. Smith’s seventh budget address, and for more than an hour he delivered the 2018 estimates, which he described as the most difficult he has had to deliver in his years as BVI Leader.
In looking at the outlook for this year, Hon. Smith noted that the 2018 expenditure reflects a 14.4 percent increase over the 2017 allocation of $308,187,131. This increase, the Minister for Finance pointed out, is attributed to Government’s undertakings across various sectors and agencies in response to the ongoing recovery and reconstruction work.
As it relates to the $53,291,134 recurrent deficit, Hon. Smith projected that this amount will be partially funded from loans and fund contributions, as well as insurance proceeds.
For 2018, the Premier projects that the development expenditure would be $51,750,096 – an amount which comprises of capital acquisitions of $6,237,866 and $45,513,096 for infrastructure development across the Territory.
In putting the current situation into perspective, the Premier said that since the 1980s, the BVI has been on an upward trajectory with surpluses in its budget. In recent times, he said that the Territory has had a GDP of $1 Billion, and a per capita income of over $40,000.00. In short, Hon. Smith noted that the BVI was a beacon in the Caribbean until September.
From what can be described as a personal perspective, Premier Smith said that six months after hurricanes Irma and Maria, it is like being in Churchill’s England at the time of the Second World War. “It required a different type of leadership, a firm leadership, a steady hand, a commitment to the people and their progress,” he said.
In calling for an all hands on deck approach, the BVI Leader said, “These are some the most challenging times to date in the life of this Territory…One miss-step could undermine our immediate recovery and hope for generations to come, and may mean the difference between us rebuilding our homes, lives and economy or not. It is not business as usual and it is against this backdrop that I present my budget address to you and to all the people of the Territory.”
The Premier pointed out that in 2017, despite the fact that financial services performed well, the Territory still brought in $30M or 9.3 percent less than was budgeted. This, Hon. Smith said, demonstrated the significant impact of the storms in the months following their landing.
He also mentioned that Government’s effort to assist people in rebuilding resulted in 34.7 percent or $16.5M negative variance in collected taxes on international trade, including customs duties.
Last year, government also expended $11.5M or 4.1 percent above the originally budgeted recurrent expenditure in response to storm impacts and to pay off outstanding utility bills.
The Premier also noted that several capital expenditure projects were suspended at the end of 2017, as the focus was shifted to immediate recovery.
The Minister for Finance further noted that underperformance of revenue combined with over-expenditure on the recurrent side resulted in a smaller than budgeted recurrent surplus of approximately $500,000. “Repaying our existing debt and making needed capital acquisitions and investments thus resulted in an overall negative balance brought into 2018.”
Inside The Pillars
The tourism figures were used to illustrate the point that the economy was greatly impacted in 2017 and the effects are still residual. For instance, the Minister for Finance recalled that in 2016 the BVI exceeded the one million visitor mark for the first time in its history.
This figure, he said, was a total figure that reflected increased arrivals across all sectors of that industry. However, it was noted that the historic and unprecedented disasters of 2017 threw the industry into chaos and diminished the revenue potential as well as the product.
At the end of 2017 the Premier said that the figures showed total arrivals at 756,151, a decrease of 387,922, which represents a 33 percent decrease.
As the sector repositions, the BVI Leader warns that the competitors are readying to take advantage.
“Other players in the industry will not sit idly by and wait for the British Virgin Islands to redevelop and regain its market share. So we must act swiftly and aggressively. Our survival is at stake.”
In stressing the seriousness of the situation, Hon. Smith stated that many visitors came back to the BVI out of a sense of loyalty to the Territory and a desire to help. However, he said that situation may be different next year and beyond.
Looking at the other pillar, it was noted that while the Territory’s gross domestic product took a hit, the BVI’s financial services sector did not suffer greatly. This, the Premier credits to the intervention of government, a resilient registry of Corporate Affairs, and a nimble industry. In fact, Premier Smith noted that the resilience of the financial services sector is one of the positive Irma stories.
However, the Premier stressed that even though the industry was barely touched by Irma, it is still facing threats.
“The challenges we face from the European Union in their campaign to list countries that in their opinion are non-cooperative third countries, also of significance are the pressures within the UK Parliament itself to mandate a move that is constitutionally tenuous, for the BVI to make its register of companies public," he said.
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