On 19 March following what has been described as a turbulent six months, Premier and Minister of Finance Dr. the Hon. D Orlando Smith delivered what he described as the most difficult budget he has had to present to the people of the BVI. Dr. Smith announced that the 2018 estimates forecast a 7.3 percent decline in revenues and a 14.4 percent increase in expenditure.
With reversals of fortune such as the August flood and the two September hurricanes the citizenry anticipated a decline in the 2018 budget figures. However, after Premier Smith revealed that the 2018 projected revenue is $299,525,366, which is equivalent to a $23,587,265 decrease from the 2017 estimates some commented that it could have been worse.
However, the two attention grabbing numbers are the anticipated recurrent deficit which Premier Smith says is equivalent to $53,291,134 and the estimated recurrent expenditure of $352,816,500.
Hon. Smith said that the 2018 expenditure reflects a 14.4 percent increase over the 2017 allocation of $308,187,131. This increase stems from Government’ undertakings across various sectors and agencies in response to the ongoing recovery and reconstruction work.
While addressing the anticipated deficit of $53,291,134 the Premier said that government expects that this amount would be partially financed from loans and fund contributions as well as insurance proceeds. For 2018 the Premier prognosticates 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.
Hon. Smith called for unity during what he described as a difficult time: “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 Minister for Finance explained that last year even though the financial services sector performed well, the Territory brought in $30M or 9.3 percent less than had been expected. These figures Hon. Smith pointed out demonstrate the significant impact of the storms in the months following their destructive visits.
The import duty moratorium for certain items was mentioned by the Premier as a contributor to the decline in revenues. Dr. Smith explained that Government’ effort to assist people in rebuilding resulted in 34.7 percent or $16.5Million negative variance in collected taxes on international trade including customs duties.
The BVI Leader further mentioned that in 2017 government spent $11.5Million or 4.1 percent above the originally budgeted recurrent expenditure in response to storm impacts and to pay off outstanding utility bills. 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.”
While speaking about the GDP and the economy the BVI Leader mentioned that the tourism pillar took a hit. He explained that at the end of 2017 the overall visitors numbers showed total arrivals at 756,151 a decrease of 387,922 when compared to the 2016 figures. This drop in numbers represents a 33 percent decrease in arrivals.
Commenting on the financial services sector the Premier lauded the resilience of the Registry of Corporate Affairs, and the general nimbleness of the industry which he said is one of the positive Irma stories.
Nonetheless, the Minister for Finance announced that the sector is still being pressured. “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,” the Premier explained.
Opposition gives Mixed Review
Following the budget address members of the media interviewed Leader of the Opposition Hon. Andrew Fahie to get his perspective. Mr. Fahie adopted more of a supporting tone as he announced that he is willing to assist the Premier in any initiative that helps the Territory.
He told the media: “It’s clear that we have to work together to get things done, basically what I am hearing is that we have to find a lot of loans to get us out of what we are in, and we need some of the loans. It’s clear that we have challenging days ahead and it’s clear that we have to find a way to work together to get this done.”
“I heard his vision today for the first and I want to say that I am going to support anything that’s good for the BVI whether it’s coming from the Premier or whoever…What came out of the speech that is good is that the Premier will continue to press on, regardless. His methodology is the only thing that I question…I support him on not lying down that we must move forward despite the challenges we just have to discuss the methodology,” Hon. Fahie pointed out.
The Leader of the Opposition says that this is not the time for political games and pointed out that the Opposition and Government need to work closely on recovery matters: “We were through a major disaster and I am going to be fair to the government on that. That is nothing to be playing politics, but my heart is aching. I have spent a lot of nights crying for my country because while they are saying that we are playing politics. It is clear that they are playing more politics than anyone else but they are not admitting to it and there is not togetherness, they have no intention of working together they are just saying that with their mouth.”
When asked to share his perspective on the budget figures particularly the revenue and expenditure figures the Leader of the Opposition called for vigilance: “I don’t want to frighten anybody, all I would say is we need to sleep with our eyes open…sleep with our eyes open – be vigilant. Figures don’t lie we need to sleep with our eyes open and be vigilant.”
The other member of the Opposition, Third District Representative Hon. Julian Fraser frankly announced that the budget estimates are worrying and that people should be skeptical about the numbers.
Hon. Fraser told the media: “I am kind of surprised that he has a budget to present after all that we’ve gone through. I heard the figures; the figures are impressive. I am still trying to figure within my mind as to how we are going to make it with all the revenue shortfalls that we are expecting – customs duty exemptions from building materials, customs duty exemptions from automobile, and still having a budget of that magnitude. I am skeptical.”
The seasoned politician said that he listened to the budget address and noted the Premier’s mentions of loans and grants, but he said that grants are known to be long on promises, but short on delivery.
He commented that the revenue and expenditure figures do not inspire jubilation: “This is cause for concern because under normal circumstances our revenue normally grows. Each year it grows, last year it was $321M as you can hear we only collected $289M, but look at what happened over the last six months beginning September 6 – or we can go back to August 7 – if you wish from the floods. Our revenue base has been eroded significantly and to have figures like this I think it is a matter the public would not know until the end of the year 2018 when we are going to come back with the actual figures might then read $271M but right now as the premier gave the figures it looks good and I think that’s what It is all about looking good,” Hon. Fraser noted.
“I am very skeptical, absolutely skeptical. I don’t believe they are going to meet the figures. I think they are rosy, I think they are artificial and I don’t think they are going to make it. Our economy is not the size that it was, our GDP says,” he added.
Hon. Fraser said that the reduction in the GDP was significant, and now there is a chance that the projected figures might not materialize: “If you are not collecting customs duties on these significant items such as building materials. If you’re not collecting customs duty on automobile – of all things – that’s 20 percent. Any reasonable person can figure those revenue figures that we heard maybe just pie in the sky. They’re not going to meet them. Talk about augmenting the revenue with loans and grants. You don’t even have the loans yet. It’s a rosy picture that was painted that you ought to be skeptical about. I am skeptical about it and being skeptical about it is natural,“ he further stated.