PROVIDENCIALES, Turks & Caicos Islands: The United Kingdom has agreed to make its largest ever loan to the Turks and Caicos Islands (TCI) government to help pay off debt and boost the economy of the British Overseas Territory.
The UK’s Department for International Development (DFID) announced that it has received proposals from a number of commercial banks to provide lending to the TCI government for an amount of up to US$260 million for up to five years.
“Securing commercial lending would be a vital step for the Turks and Caicos Islands,” said TCI Governor Gordon Wetherell. “It would provide the time we need to rebuild financial stability and balance the budget. This guarantee would form an important step in our financial plan, and will help the achievement of key milestones that need to be reached before a date for elections can be set.”
However, the TCI government still has to show it will have the ability to repay before the DFID guarantees the loan.
In a Departmental Minute to the UK Parliament, the DFID said the main risk associated with the guarantee is that the TCI cannot make capital repayments and interest payments when they become due.
“Its ability to do so depends on its ability to implement measures so that it achieves fiscal balance by March 2013. Consequently, the guarantee will not be provided until DFID is satisfied that the TCI government has plans in place to raise revenue and cut costs so as to achieve fiscal surplus in the financial year ending March 2013; and is continuing to strengthen its capacity and systems to manage its public finances. The UK government has been providing support for these measures including through the appointment of a Chief Financial Officer in September 2010,” it said.
When it does guarantee the loan, the DFID says it will do so for the full amount of the capital outstanding plus any accrued interest.
The UK Treasury has approved the proposal in principle, but parliamentarians will have until February 17 to express any objection.
The DFID said that while it is normal practice to provide 14 parliamentary sitting days notice before taking on contingent liabilities, the shorter period is being given to provide sufficient time to take all the steps required to allow the TCI to have a budget, with its much needed fiscal measures, in place for the financial year starting April 1.
While finalizing this loan package, the UK provided short-term financing totaling £27.3 million (US$44 million) to allow the TCI to meet unavoidable commitments, including continuing to pay for public sector salaries for essential health, education and policing services. But according to the British government, the territory is still running a fiscal deficit.