WATCH: 'Economic challenge we face unprecedented'
GUERNSEY is now dealing with an economic crisis as well as a public health one, the Civil Contingencies Authority chairman Gavin St Pier said yesterday as he looks at new borrowing of up to £500m.
During yesterday’s media briefing, Gavin St Pier said that up to £100m. would potentially be taken from the States ‘rainy day fund’, as the Bailiwick faces an unprecedented situation that will be economically severe and will take longer to recover from than the public health crisis.
He declared that in 2020 alone, Guernsey would need to find £170m. to £190m. to cover the unexpected demands on finances, including the financial support schemes for businesses and reduction in States revenue from all sources, increases in States expenditure in responding to the health situation, as well as Aurigny’s requirement.
He warned also these estimates could increase if there were further waves of the virus.
An urgent policy letter on these concerns will be submitted by Policy & Resources to the States this week.
This will include a request for up to £100m. from the core investment reserve – also known as the sovereign wealth fund or the States ‘rainy day fund’.
Deputy St Pier warned that the States’ investments had declined by about 11% during the first quarter due to the falling market, which had reversed 2019’s gains.
He said it was best not to cash in investments now – it would crystallise losses.
‘We will be seeking authority for the Policy & Resources Committee to borrow up to £500m. in order to provide the liquidity to fund business support measures, to replace income lost as a result of Covid-19, to service our cashflow requirements as payments to the States are deferred and to make overdraft facilities available to the trading assets,’ he said.
‘And of course also importantly to provide firepower to our recovery plan, as we develop that. These are eye-watering sums of money.’
Deputy St Pier said they were now trying to deal with both the economic and health crises and encouraged the public to have faith in how they would handle it.
‘I said a few weeks ago in relation to the public health crisis, we’ve got this, and I say again now in relation to the economic crisis, we’ve got this,’ he said.
‘Like the public health crisis, it is going to require swift, bold and courageous decisions, which is why we’re going to the States this week, but just as we are managing our way through the public health crisis, so we will manage our way through the economic one too.’
He added that the full impact is currently unknown – it would depend on the timescale of the public health measures and how fast Guernsey could restart the economy, but warned that this would have an impact in 2021 and beyond and that planning ahead was the best start they could make.
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