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News from the Turks and Caicos Islands:

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Debt concerns escalate
Published on October 12, 2012 Email To Friend    Print Version

Despite seemingly rosy figures from the first quarter’s financial report, there appears to be mounting concern that the TCI government cannot handle the debt left by the former Progressive National Party (PNP) administration.

This has left the country with most of a $260 million loan used up and another loan of $125 million to pay for just 30 hospital beds under the new health care plan. This loan is layered with a 12 percent mortgage and is due to cost the TCI nearly half-a-billion dollars over its 24-year life.

Also costing the TCI dearly is the contract between Interhealth Canada and the TCI government. According to recent figures, this cost will amount to nearly $50 million per year for another 18 years to the end of the 20-year contract. This is designed to pay for local primary and secondary care as well as overseas referrals. Such referrals are no longer directed to the USA but are being handled in Nassau and Jamaica.

Concern over inflation has added to the mix of factors that indicate that the TCI can no longer even come close to meeting the guidelines set for Britain’s overseas territories. The plan to refinance the $260 million loan guaranteed by Britain by 2016 is now being questioned.

Gone also is the possibility of infrastructure growth. Also of concern is the diminished attractiveness of the islands as a low tax investment destination. It appears the 11 percent value added tax (VAT) will not be adequate and the rate may have to be raised to 15 or 16 percent.

At the same time, the British government is itself facing belt tightening due to an exceptionally high cost of government. This situation makes the possibility of another bailout of TCI finances further removed.

After tourist arrivals from the US peaked from April 2011 through April 2012, the Interim government does not now expect similar results this year. By 2016, the cruise port promises to bring in additional millions as the original contract expires. This will improve the income of the TCI by $6 to 7 million. However, with the US busy printing dollars, which reduces each dollar’s worth, this increase may be needed just to keep up with mounting inflation.
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