Top S&P rating as island looks at borrowing
Wednesday 11th February 2009, 2:30PM GMT.
GUERNSEY has been given a top credit rating and the preparatory work has been done to borrow money to fund the host of capital projects in the pipeline.
Treasury and Resources asked Standard & Poor’s to assess the local economy and this month it issued a credit rating that put the island in the top 25 of more than 120 rated jurisdictions around the world.
The States will next month decide which projects it wants to go ahead with this term and how they could be paid for.
‘In the context of the capital prioritisation debate, we want to be able to present the States with all the options, including borrowing,’ said Treasury minister Charles Parkinson (pictured).
‘In order to give members the relevant facts, we needed to know what the island’s credit rating would be so we can advise them what sort of interest rate we must pay.’
Whether Guernsey did borrow was a decision for the States, he stressed.
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Good to see some positive financial news for a change.
Any borrowings should be at a minimum interest charge, and although a charge to the taxpayer, will be significantly less to the taxpayer than any PFI PPP scheme.
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Guernsey should live according to it’s means in these uncertain times. We have had what we want when we want it too easily in the past. Times are changing and we have to accept that we will have to wait for some things which are nice to have but not essential.
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Guernsey has had a remarkable record of not having any public debt, unlike most countries.It would appear to be the best possible time to borrow because interest rates are at their lowest for over 300 years!
We are a country with shrinking tax revenues and we should therefore only consider borrowing for specific projects that are essential and preferably have the potential to increase States revenues or reduce costs. The runway extension and waste disposal are two examples.
Because Governments have a record of spending indiscriminately I think the borrowing should be for clearly defined projects only. The maturity date and coupon of the loan must be set so that we will have no problem with the repayment
One thing that we have learnt from previous recessions is that inflation usually follows. on this basis we should borrow and build whilst interest rates and building costs are low. We should be able to source some attractive quotes as the economy in Europe moves deeper into recession
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Great.
With no visible means of repayment, we are about to enable the states to mortgage our children’s future in order to build unnecessary capital projects, most of which will need rebuilding or be obsolete in twenty of thirty years. Most of the work will go to outside contractors and project managers, and virtually all materials will be imported.
Benefit to the economy will be minimal, as this capital expenditure will mean the retention of a number of otherwise eminently disposable civil service posts, and probably the creation of a lot more. We already cannot afford the cs we’ve got.
We haven’t addressed the gaping hole in the unaffordable pension scheme, which will inevitable follow from the market write-downs.
The only hope is that GB borrows so heavily that Sterling becomes devalued and that eventually inflation will destroy the debt – but that means even bigger pay increases and higher living and operating costs.
Meanwhile…
Had letter from bank today – they’re off to IOM, closing Gsy branch. Ouch!
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Bob
Which bank is closing its Gsy branch (just out of interest)?
Tks
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Bank of Ireland (formerly Bristol and West International).
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