On 19 November, in a two hours presentation Premier and Minister for Finance Hon. Andrew Fahie delivered the 2020 Budget Address. The highlight of the presentation was the announcement that Government has no intention to add any new taxes and that the Territory’s projected revenue is $414Million.
This was the Premier’s second budget since taking office in February and he noted that the budget that was presented in April for this year did not sufficiently reflect the Government’s aspiration for the Territory’s development and growth.
Being very candid about current or anticipated threats and challenges the BVI Leader announced that his government since the elections has been in mitigation mode as they consider and decide on ways to deal with anticipated economic fall outs.
As it relates to the 2020 estimates Hon. Fahie noted that the recurrent expenditure is expected to be $327M, with capital expenditure being $65M, while the Government $14M going towards debt repayment; and $6Million would contribute to the funds. Once again, the Ministries of Health and Education got the lion’s share of the budget. In noting these big contributions, the Premier said: “The bulk of expenditure continues to be on education and health, two of the most important areas in guaranteeing the empowerment, strengthening, and development of our people.”
The issues that were highlighted in the 2019 budget as concerns for the Territory’s two main economic pillars of tourism and financial services are carrying through to 2020 based on disclosures by the Premier. As it relates to tourism Hon. Fahie explained that the tourism sector is facing immense regional competition and he gave some examples of how countries in the Caribbean are planning to add to their tourism economies in 2020.
The Premier also noted that things are not rosy with the main economic pillar of financial services: “Our financial services industry has been exposed to shocks as well the likely implementation of a publicly accessible register of beneficial ownership and the requirement for economic substance will change the landscape in this sector,” he said.
“Prior to our taking office there were already projections that clearly stated that in the coming years the financial services industry will be faced with some serious and unprecedented challenges,” the Premier further added.
Staving off the projected threats and placing the Territory on a better trajectory was said to require diversification and innovation and the Premier presented a litany of proposals that would be explored during this budgetary year to mitigate the effects of anticipated economic shocks and trigger the new revenue injectors.
As it relates to the figures presented on Tuesday was the disclosure that at the end of 2019 the Ministry of Finance projects that the total size of the BVI economy — measured by gross domestic product (GDP) in nominal terms should reach $1.303Billion. According to the Premier this figure reflects an increase of between one and two percent from 2018.
Hon. Fahie further mentioned that the sum approved in the 2019 budget for recurrent expenditure was $331M, while the total recurrent expenditure based on estimates is $293M. However, the BVI Leader pointed out that mechanisms that were put in place by his then new government constrained unnecessary and wasteful spending resulting in potential savings for the people of the Virgin Islands. This – he said – was despite the significant decline in revenues from incorporations of companies.
In noting this point Hon. Fahie announced: “It is estimated that $350.3M of the $361.8M budget revenues were realized under your government’s astute and prudent management. The projections are for ending the year with a recurrent surplus; despite having to deposit $26.9 M to the Reserve Fund in 2019 to bring our Territory into compliance with the ratio under the Protocols for Effective Financial Management.”
Additionally reporting on fiscal performance the Premier stated that income taxes surpassed expectations — drawing an estimate of $51.8M, which he noted is $1.3M more than the amount projected in the 2019 budget. “This is a sign of employment growth, which is an indication of our recovering economy,” Hon. Fahie declared.
Following his extensive list of plans to diversify the economy such as entrepreneurial investments and new funding sources such as a new medical marijuana industry the Premier said that government expects to increase its revenue.
“The strategy incorporates increase in income from new revenue generating initiative which include collections … from the licensing fee etc from privately run medical schools, improved collection of taxes from a myriad of areas including from our shipping registry and collection from our statutory bodies and state owned enterprises just to name a few,” he pointed.
The Premier explained that this budget was different because it was not just about figures, but that there was a human and social side to it: “This budget is not just about money, it is about us being innovative through laws, and the Budget reflecting how the laws will help our people to earn money,” Hon. Fahie explained.
He stated that considering the times that the Territory is in this budget is sort of a blue print or a nudge for the Territory to return to the mindset that shaped its development: “What you will recognize throughout this Budget Address is that it is about ‘back to basics’. It is about engaging and employing the strategies that our forefathers used to build the BVI,” the Premier pointed out.
“This Budget Address is about us connecting what we need with what is in our hands using green and SMART strategies. This address is about getting our people involved in the planning, production, and distribution of success through their entrepreneurial spirits and innovation,” he added.