PROVIDENCIALES: The United Kingdom has approved a US$260 million rescue package for the Turks and Caicos Islands (TCI).
TCI Governor Gordon Wetherell said the package, centred on new loan funding from Scotiabank, will refinance the high level of existing debt and monthly deficits that, even with new budget measures, are expected to continue for around two more years.
“It is a vital step for the Turks and Caicos Islands because it buys us the time we need to tackle the dire fiscal legacy the interim government inherited,” he said.
However, Wetherell warned that “tackling the severe and structural fiscal problems will not be easy.”
“We must make significant changes to get us on course for a fiscal surplus in the financial year 2012/13,” said Wetherell. “This is a key milestone to reach before a date for elections can be set. The financial package itself gives us a head start in achieving a fiscal surplus, since it will sharply cut the cost of our debt. The UK government guarantee means we get very low rates of interest on the Scotiabank loan.”
However, he did not give an exact figure for that interest rate or details of the repayment.
Wetherell said that more work is needed to strengthen the government’s capacity and systems to manage its public finances.
The UK government currently intends to retain sufficient control over public finances to ensure that the British Overseas Territory emerges from its financial crisis as soon as possible. In addition, while the loan guarantee is in place the Department for International Development will reserve the right to require the TCI government to retain the current role of Chief Financial Officer (CFO) and to nominate the holder of this position who shall be appointed by the Governor.
Wetherell said the March budget will set out in detail the measures that will be needed to set the TCI on the road to fiscal surplus. Key measures will include: raising revenues through the introduction of new revenue streams, changes to existing streams, and improved collection and enforcement; cutting the cost of the public service by 25 per cent by 2013/14; reducing the costs of statutory bodies by 25 per cent by 2012/13; introducing a new, more targeted system of student support; cutting government expenditure on rents by 25 per cent by 2012/13; eliminating all non-essential expenditure and improving financial management and reporting; requiring all purchase orders and contracts over $5,000, and all new leases, to be approved by the CFO.
Wetherell said work must be done to help stimulate the TCI economy at the same time the measures are being implemented.