Minister: $150 million increase in debt ceiling

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March 17, 2020

Due to the expected impact of the Covid-19 global pandemicThe Department of Finance is taking the necessary steps to secure emergency liquidity lines of credit, including an associated $150 million increase in the debt ceiling, Finance Minister Curtis Dickinson said.

Speaking in the House of Assembly on Monday [March 16] the Minister said: “The Covid-19 pandemic has already had a significant health, economic and social impact on people and countries around the world. This government has therefore already taken essential steps to address this serious threat to the safety and well-being of the people of Bermuda.

“As countries have had to take extraordinary measures to prevent the spread of this virus, it has had a very negative impact on global markets and economies. In light of the potential impact of all of this on Bermuda, the government is taking proactive steps to help provide appropriate financial assistance to Bermudians and protect our island’s economy.

“The measures currently taken under the tax plan of the Ministry of Finance in the event of the Covid-19 pandemic are as follows:

  • “In order to provide funding to supplement reduced income, the ministry is taking the necessary steps to secure emergency liquidity lines of credit from local financial institutions. The required discussions have taken place with all parties involved in order to obtain the necessary approvals, including an associated $150 million debt ceiling increase. These facilities will only be used when absolutely necessary.
  • “The department will provide additional funds to the Department of Financial Aid to further assist Bermuda’s unemployed.
  • “Lower priority spending will be reduced to ensure necessary spending on Covid-19 issues can be maintained.
  • To this end, over the next 3 months, the government will: Delay the start of any capital project that has not started | Introduce an immediate freeze on publications that are not necessary to deal with Covid 19 or to protect the national interests of Bermuda | Pursue ban on non-essential government travel | Reduce all discretionary expenses, including training, equipment and supplies, clothing and uniforms, etc.

“No spending cuts will be made that would jeopardize the health, safety and security of the people of Bermuda. Bermuda’s unemployed will be helped and fiscal prudence will be strictly maintained. To be clear, protecting Bermuda from the health and economic impact of Covid-19 is our priority.

“The future is unclear, but we anticipate there will be economic and fiscal consequences for Bermuda as a result of Covid-19,” Minister Dickinson said, adding that implications for Bermuda will likely include a decline visitor arrivals, reduced consumer spending, slower growth of Bermuda’s economy, increased unemployment and reduced government revenue.

“The Department of Finance will continue to assess likely economic scenarios, including economic circumstances that could lead to even more severe reductions in trading conditions, employment and government revenue,” the minister said.

“This will allow for further temporary emergency measures to be taken, if necessary, so that the government can maintain essential public services and continue to meet the needs of our community.”

A bill [PDF] was tabled in Parliament amending the Government Loans Act 1978 to “increase the limit on public debt from $2.75 billion to $2.9 billion”.

The pandemic is expected to have economic consequences worldwide, with the UN saying that “In addition to the tragic human consequences of the COVID-19 coronavirus outbreak, the economic uncertainty it has created is likely to cost the global economy $1 trillion in 2020” and also predicts a “estimated loss of $30-50 billion in international tourism receipts.”

You can see all of our coverage of the Covid-19 pandemic here, and our update continues live blog here.

The Minister’s full statement follows below:

Good afternoon, Mr. Speaker, I rise this morning to provide this honorable House with an update on some of the proactive economic and fiscal measures to be taken by the Department of Finance to combat the likely systemic threat that the Covid-19 pandemic will have on Bermuda’s economy and, by extension, on government finances.

Mr. Speaker, during this crisis, the Government of Bermuda is committed to ensuring that we communicate as often as possible with information vital to our community, which is seeking answers to natural concerns.

The Covid-19 pandemic has already had a significant health, economic and social impact on people and countries around the world. This government has therefore already taken essential steps to address this serious threat to the safety and well-being of the people of Bermuda. As countries had to take extraordinary measures to prevent the spread of this virus, it had a very negative impact on global markets and economies. In light of the potential impact of all of this on Bermuda, the government is taking proactive steps to help provide appropriate financial assistance to Bermudians and protect our island’s economy.

Mr. Speaker, this government takes seriously its responsibility to help the most vulnerable in our community, especially in times like these, and the public can be assured that this continues to be one of our primary goals. To that end, the relevant Cabinet sub-committees meet regularly as needed to ensure this crisis is appropriately managed.

Mr. President, the measures currently taken under the tax plan of the Ministry of Finance in the event of the Covid-19 pandemic are as follows:

  • In order to provide funding to supplement reduced revenues, the ministry is taking the necessary steps to secure emergency cash lines of credit from local financial institutions. The required discussions have taken place with all parties involved in order to obtain the necessary approvals, including an associated $150 million debt ceiling increase. These facilities will only be used when absolutely necessary.
  • The ministry will provide additional funds to the Department of Financial Aid to further assist Bermuda’s unemployed.
  • Lower priority spending will be reduced to ensure necessary spending on Covid-19 related issues can be sustained. To this end, over the next 3 months, the government will:
  • Delay the start of any capital project that has not started;
  • Introduce an immediate freeze on publications that are not necessary to deal with Covid 19 or to protect the national interests of Bermuda;
  • Continue banning non-essential government travel; and
  • Reduce all discretionary expenses, including training, equipment and supplies, clothing and uniforms, etc.

Mr. Speaker, no spending cuts will be made that will jeopardize the health, safety and security of the people of Bermuda. Bermuda’s unemployed will be helped and fiscal prudence will be strictly maintained. To be clear, protecting Bermuda from the health and economic impact of Covid-19 is our priority.

In addition, the Ministry of Finance has intensified its monitoring of global economic conditions and its interaction with key public and private sector stakeholders. To this end, the department has already had very productive meetings with the Bermuda Bankers Association and is in regular communication with our union partners, representatives of major employers and other key government agencies. We have sought their input in refining contingency plans in the event of a severe downturn in Bermuda’s economy, while discussing with them the appropriate steps they should take to help the people of Bermuda during this difficult time.

Mr. Chairman, the future is unclear, but we anticipate that Covid-19 will have economic and fiscal consequences for Bermuda.

Implications for Bermuda will likely include:

  • A drop in visitor arrivals – air passengers and cruise passengers;
  • A reduction in consumer spending;
  • Retail sales could slow further in 2020;
  • Slowing growth of Bermuda’s economy;
  • Reduced government revenue.

The Department of Finance will continue to assess likely economic scenarios, including economic circumstances that could lead to even more severe reductions in economic conditions, employment and government revenues. This will allow for other temporary emergency measures to be taken, if necessary, so that the government can maintain essential public services and continue to meet the needs of our community.

In conclusion, I am confident that Bermuda and its people will come out of this crisis stronger. Together, we have already considered a wide range of possibilities and developed plans to respond to them and strengthen Bermuda’s ability to weather the economic and fiscal storms.

Mr President, I would like to assure the people of Bermuda once again that the government is sensitive to the challenges we are facing due to Covid-19 and with your support and cooperation we will continue to take the necessary steps to navigate on our island through these economic difficulties. and financial terms.

Thanks.

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