2022 BUDGET ADDRESS

DELIVERED BY

PREMIER AND MINISTER OF FINANCE

HONOURABLE ANDREW. A. FAHIE

UNDER THE THEME:

Strategically positioning New Industries with Sustainability and Innovation: Continuing to improve the standard of living with focus on Education, Small Business, Healthcare and Technology

Thursday, 11th November, 2021

Thank you Mr. Speaker.

It is important that I begin this Budget Address from the words of Abba, our Father as found in Luke 12:8, And I tell you, everyone who acknowledges me before men, the Son of Man also will acknowledge before the angels of God.

I thank God for His continued strength as we turn this Budget Address over in to His hands.

I say Good Day and GODs Blessings to all Honourable Members of this Honourable House and all the people of these beautiful Virgin Islands wherever they may be, as we continue to move forward in this New Regular, living and working with COVID-19.

Together we continue to confront all the challenges and embracing opportunities that this unpredictable pandemic has thrown, and continues to throw our way.

I am pleased and proud, as a Virgin Islander, to stand today to present this fourth National Budget in under three years, and to do so with sufficient time in hand for all the necessary processes to be completed so that everything will be in place for the start of the new financial year in January 2022. Simply put; since taking office, all our Budgets have passed on time as mandated by the Constitution.

Introduction

Mr Speaker, it is important for us as a young country to bear in mind the symbolism of what it is for a people to develop, present, approve and implement their own Budget; especially when they are able to generate the funds and to balance their Budget for themselves year after year after year. It is something to be proud of, to be inspired by and to be encouraged.

For this empowerment, we thank our foreparents. Let us join in paying tribute to our foreparents who started and maintained the course, on the journey to ensuring that the Virgin Islands people are empowered to pursue their aspirations of being fully in control of their destiny.

It was the late Theodolph Faulkner of Anegada and other great Virgin Islands leaders who made the bold and unequivocal declaration on 24 November, 1949: [And I Quote]

We are imbued with a desire to decide our local affairs our own selves. We have outgrown that undesirable stage where one official, or an official clique, makes decisions for us.

We are seeking the privilege of deciding how our monies are spent and what shall be our Presidential laws and policies. [End of Quote]

That was the impetus for the return of legislative function to the shores of the Virgin Islands, paving the way for Virgin Islands people to enjoy full participation in the democratic election of their representatives and for the making of laws to govern themselves legislation such as the Appropriations Act.

As we continue to honour the struggles and strides of those who led before us, we recall the Late and Great former Chief Minister Dr. the Honourable Willard Wheatley, the first Virgin Islander to officially hold the post of Minister of Finance, on 1 June, 1977.

Dr. Wheatleys exceptional public management saw the Government of the Virgin Islands independently closing a budget deficit in 1978 and ending the year with a budget surplus of $1.3 million. Through this, in one of the most significant milestones in the political and economic journey of our nation-building, the Virgin Islands graduated out of Grant-In-Aid, and have maintain this course through the decades.

Virgin Islanders liberated themselves from external financial dependence on the United Kingdom. And as I said, we graduated from Grant-In-Aid, and have maintain this course through the decades for all Chief Ministers, for all Premiers.

And at this time, I would like to take a moment. Because it is two years now today since Honourable RT ONeal died. And I would like us to stand and take a moment of silence, Mr Speaker, in honour of his memory.

Thank You. May his soul rest in eternal peace.

Virgin Islanders liberated themselves from external financial dependence on the United Kingdom; clearly demonstrating the ability of our people to manage our own economic affairs from each Chief Minister to each Premier, hold each other accountable, and uphold their dignity. Virgin Islanders are not defined by anyone or any circumstance. We are innovative, capable and resilient. We just have to continue to believe in ourselves and stay laser-focused on our true Virgin Islands Vision.

The year 2021 has been another unprecedented year for the Virgin Islands. While your Government wished we could focus exclusively on delivering our Manifesto pledges - remedying decades old problems with our aging infrastructure and furthering the development of the Virgin Islands for the benefit of our people - this unfortunately could not entirely be the case.

For the second consecutive year, like most - if not all - other countries, we remained in battle with the worst pandemic to hit the world in over 100 years. The COVID-19 pandemic, in recent months, is presenting new threats in the forms of aggressive variant strains, as it continues to supress economic activity generally in every part of the world, and more specifically in the areas of tourism and travel, upon which our economy is heavily reliant. This is subduing revenues for the public and private sectors, and creating hardship for many of our people whose jobs and income streams are adversely affected, not just locally, but globally.

In 2021 we saw a major spike in COVID-19 cases on our shores and grief that was unprecedented in our era in the loss of 37 additional lives. We ask God to continue to comfort families and loved ones, as we also remember our loved ones who passed due to different causes. Many of them were friends. Many of them were family. Thankfully, according to recent data, the number of positive cases now stands at 15, all of which were detected by our effective travel screening protocols. We wish those persons a full and speedy recovery.

In January 2021, the United Kingdom Government declared it an appropriate time to institute a Commission of Inquiry (COI) on Governance in the Virgin Islands, under the Commissions of Inquiry Act 1880.

The Inquiry, which is still in progress, placed significant demands on the resources of our Public Service as documents dating back more than a decade had to be sourced, officers had to prepare affidavits and statements, and senior public officials including Ministers, Permanent Secretaries, heads of departments and others had to attend the COI to give evidence.

The Inquiry took up significant time and attention, but Mr Speaker, your Government fully and faithfully participated in the proceedings, with the hope that a transparent COI would lead to a just and beneficial outcome for the people of the Virgin Islands.

These challenges have come as we continue to recover from the 2017 August Floods and two devastating Category 5 hurricanes Irma and Maria, that created a paradigm shift for our economy. We continue our recovery efforts with our limited resources.

But, as I will explain later in this Budget Address, your Government and its agencies and departments, still managed to accomplished a lot of work for the development of the Virgin Islands, amid the challenges and distractions.

This is an appropriate time to commend our public officers across all ministries, agencies and departments. And I must commend all f our public officers for the hard work they have done through these last few years during the hurricanes, during COVID-19 and even during the COI. I want to say that they mean a lot to me as Premier, because even during the COVID-19 lockdown, I personally took the time to call each and every public officer in terms of Permanent Secretaries and Department Heads and Senior Officers, and even some other officers everyone, to see how they were doing and to see how they were coping with COVID-19. Because larger than the public service, we are one people and we do have a life, and we do have to make sure as leaders that we care.

So, I commend our public officers and all those who have powered through with commitment to keep our Virgin Islands moving forward during these difficult times. Our successes are the results of collective effort and dedication.

The Acting Financial Secretary, Mr Jeremiah Frett, the officers in the Ministry of Finance, and the Permanent Secretaries who provided the Ministry with the relevant programmes of works and project details, have done an exceptional job in preparing the 2022 National Budget, which I present now under the theme of,

Strategically positioning New Industries with Sustainability and Innovation: Continuing to improve the standard of living with focus on Education, Small Business, Healthcare and Technology.

Mr Speaker, what follows in this Budget Address is just a summary and a snapshot of some of the work that has been done and some of the targets that we are setting for the year ahead. More comprehensive details can be found in the Medium-Term Framework Plan 2022-2024 and the Draft Estimates of the 2022 Budget, which I encourage all our citizens to read once it is published.

Knowledge is power, and these documents will provide persons with the knowledge and information they need to more actively participate in the opportunities in our economy.

The Global Economy

Mr Speaker, context is important. Therefore, we must situate the Virgin Islands economy within the global landscape. That is the only way we can have a proper appreciation for what has happened in 2021 and what the projections will be for 2022.

The advent of COVID-19 vaccines early in 2021 brought optimism for the resurgence of economies after a stagnant 2020.

In June 2021, the World Bank, in its Global Economic Prospects Report, forecasted that the global economy was set to expand 5.6 percent in 2021 - the strongest post-recession pace in 80 years underpinned by steady but highly unequal vaccine access. The July 2021 global growth projection from the International Monetary Fund (IMF) for 2021 was for 6.0 percent over 2020.

Perspective is, however, important. This recovery was, however, projected to be unevenly concentrated in a few major economies, with most emerging market and developing economies lagging behind. While about 90 percent of advanced economies were expected to regain their pre-pandemic per capita income levels by 2022, only about one-third of emerging market and developing economies were expected to do so.

Further, the World Bank noted, in low-income countries, the effects of the pandemic are reversing earlier gains in poverty reduction and compounding food insecurity and other long-standing challenges.

According to the World Bank, by 2022, the global output would remain about 2 percent below pre-pandemic projections, and per capita income losses incurred in 2020 would not be fully undone in about two-thirds of emerging markets and developing economies.

Simply put, COVID has messed up the entire worlds economy.

The IMF, however, in its October 2021 World Economic Outlook Report has downgraded the 2021 growth projection by 0.1 percent.

The world will have to wait until June 2022 to hear what the World Bank has to say.

Mr. Speaker, no-one has a playbook for this unpredictable and unprecedented COVID-19.

I caution that persons should not get carried away by the overall figures, because while the projections are very encouraging for the wealthier economies, the situation is very much the opposite in the less developed economies.

Vaccine access, vaccine hesitancy, the emergence of new variants of the virus, and disruptions to major supply chains, are among the main contributors to the reduced projection. Pandemic-related disruptions to contact-intensive sectors have also caused the labour market recovery to significantly lag the output recovery in most countries.

The IMF is maintaining its projection for 4.9 percent global growth in 2022.

Mr Speaker by April 2020, international tourist arrivals globally had dropped by 98 percentage points from pre-pandemic levels, according to data from the United Nations World Tourism Organization (UNWTO). The recovery has been very sluggish.

A joint report by the UNWTO and the United Nations Conference on Trade and Development (UNCTAD) in June 2021 estimates a total loss of more than $4 trillion to the global Gross Domestic Product (GDP) for the years 2020 and 2021 due to COVID-19s direct impact on tourism and its ripple effect on other sectors. Some 53 percent of this loss will be experienced by developing countries.

The Virgin Islands is clearly not unique in our experience, Mr Speaker.

According to the UNWTO/UNCTAD report, experts do not expect a return to pre-COVID arrival levels until 2023 or later. The main barriers are travel restrictions, slow containment of the virus, low traveller confidence and a poor economic environment.

Additionally, the profile of travellers has changed. Retirees, who tend to spend more per trip, are more likely to stay at home. Younger travellers, who seem more willing to travel tend to stay longer but spend less than older travellers. This means that tourism-dependent developing countries must diversify their industries.

While we will strive to be optimistic, we have to also be realistic.

We must measure our expectations while global tourism recovers. We must take heed. We must adjust our thinking and our strategy.

We must pivot to our strengths, improve on our weaknesses, be cognisant of threats and position ourselves to take advantage of opportunities when they arise - and to even create our own opportunities through innovation.

We must push forward, adapt, evolve and we must continue to diversify our economy.

Financial Performance Review

But notwithstanding this glum projection from the global tourism community, I am pleased to say that the Virgin Islands tourism industry did show some encouraging signs for recovery, particularly in the recent months. And for this we must say to GOD be all the glory.

We have much to be thankful for and much to look forward to in 2022 as a preferred destination and jurisdiction.

Despite the unavoidable restrictions on travel such as reduced airline and ferry capacities which apply not only to the Virgin Islands, the demand for the Virgin Islands sun, sand, sea and overall experience has remained high.

Up to the end of October just below 38,000 persons entered the Virgin Islands via the air and sea ports, with the vast majority being visitors.

With a more aggressive advocacy for mass vaccinations, the reduction of the BVI Gateway fee and easing of the quarantine periods for fully vaccinated travellers, it is expected that the gradual increase in arrival numbers will continue through the rest of 2021 to reach a projected 46,000 overnighters and day-trippers.

Based on the cruise schedules published by the BVI Ports Authority (BVIPA), it was projected that a total of around 66,000 cruise passengers would visit our shores by the end of 2021.

And in case you are wondering, I want to thank all of those who work at the Cyril B. Romney Tortola Pier Park, the BVI Ports Authority and especially all of us who went to Seatrade and were able to help this to happen with Gods help.

Critical to this progress was the Virgin Islands profile as a relatively safe destination for travel during the pandemic.

We were clear that our strategy for the reopening of the borders and businesses, was a managed one with vigilance to keep everyone safe.

Notwithstanding the protocols for operations, our people generally kept in line with what was required. Our visitors adapted and adjusted to our New Regular, so that activity could continue to expand.

Mr Speaker, there were those at this time who said that the BVI will never be back. There were those who were saying at this time that other places were eating our lunch. But Iam here to say today that because of the measures that we have put in place, we not only now have our lunch back; we have the entire store to get breakfast, lunch and dinner.

For 2021:

We are on our way back.

When the pandemic struck in March 2020, your Government took some decisive measures, which we said although they were tough -- were aimed at protecting the lives and livelihood of our people and the economy from catastrophic damage.

The level of economic activity that can be seen taking place is proof that we have been able to achieve this so far, and our economy remains stable and resilient after all it has been through in recent years.

The stimulation of the economy through various measures assisted in reducing some financial burden on our systems, while creating opportunity for business ideas, innovative operations, and boosting activities where possible.

For 2021:

The projected improvement in economic activity in 2021 came as no surprise following the stimulation of the economy from the roll-out of a $40 million grant from the BVI Social Security Board (BVISSB) in the third quarter of 2020.

Do keep in mind that $10 million from the BVISSB grant was placed into an unemployment relief fund and managed by BVISSB. Also, $7.5 million from the grant was paid to the National Health Insurance (NHI), where from the inception previous Governments had been delinquent in making payments.

Along with the economic stimulus package, your Government also injected resources into the economy by advancing the roll-out of a number of public sector capital projects.

The combination of these two measures the grant and the capital projects resulted in a vitamin boost for economic activity across many sectors leading to a 2.2 percent upward revision of the projection for the overall growth in 2021 over 2020, compared to the 7.5 percent contraction that was first forecasted.

Mr Speaker, your Government is fully aware of the need to continue exercising a reasonable level of caution. Because we continue to get back stronger and stronger daily, but we are not there yet. But thank GOD we are not where we were.

Hence, while this improvement is encouraging, we are cognisant that it is not enough to outweigh the effects of the pandemic on our GDP. We will get there, but it will take diligence, persistence and vigilance.

With respect to Financial Services, Mr Speaker, despite the continued declining annual trend in the market share of the industry in 2020, which was accelerated by the COVID-19 pandemic, there was a rebound of the financial services industry in mid-2020, which continued into the first half of 2021, with incorporation figures that were similar to pre-pandemic levels. New incorporations grew by 68.5 percent and 24.1 percent by the end of the second quarter of 2021 compared to the same period in 2020 and 2019, respectively.

Incorporations up to August, numbered 23,182, growing 65.5 percent when compared with the same period in 2020. Similar growth patterns were recorded in revenue from fees up to August 2021 with a growth of 3.7 percent compared to the similar period in 2020.

Revenue from Financial Services surpassed the initial 2021 estimate of $184.4 million and is projected to close at $196.4 million more than $7 million in excess of the 2020 figure of $189.75 million. This is of course due to the sterling efforts of our innovative and driven team at the Financial Services Commission and our other industry stakeholders.

While the projection is that new incorporations will remain steady or be slightly improved at best, we must be on guard that the overall declining trends witnessed over the last 10 years, in both incorporations and transactional activity can continue.

In the construction sector, Town and Country Planning Department data shows that construction imports grew by a substantial 98.8 percent in the first half of 2021 - to $51.98 million, compared to the first half of 2020. Inflationary pressures do continue to be felt across goods following the demand and supply stresses affecting the general movement of prices impacted by the pandemic. And may I add, this is not just in the BVI, but this is happening throughout the entire world.

While the pandemic impacts linger, in 2021 some sectors continue to operate with certain constraints. On the other hand, other sectors such as mining and quarrying, construction, and transportation and storage are showing signs of increasing economic activity that is largely driven by ongoing public and private sector capital projects.

The revised budget estimates show total Government revenue in 2021 was $332.1 million; just $190,000 less than the initial projection.

Total Revised Recurrent Expenditure for fiscal year 2021 totalled $341.7 million; $11.3 million above the initial estimates. This included $17.88 million in Coronavirus Prevention Expense, which together with other expenditure, was essential in keeping our people safe while protecting the economy during the on-going pandemic.

It is anticipated that by the end of 2021 the Government of Virgin Islands will expend $4 million towards the long overdue increments for work year 2017 and the balance will be expended in 2022. Our public officers deserve their increments, and even during these challenging times, this Government is making provisions to ensure that it is paid and paid in this 2022 Budget. And even before the end of the year, some of the public officers will receive their increment. We are almost there. We are getting there.

Total Government Debt stands at $140.98 million as at 15 October, 2021, of which $94.3 million is foreign debt and $46.6 million is local debt.

The numbers once again show prudent, responsible fiscal management. The situation could easily have turned much worse had your Government not taken the tough and well calculated decisions to mitigate the spread of COVID-19, and to stimulate the economy in the areas targeted.

Mr Speaker, as the captain of the financial ship, I can honestly say that there were many sleepless nights to keep this country running. But with GODs help, we continued to run between the raindrops and dont get wet.

Record and Forecast

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2022 Budget Address - Government of the Virgin Islands