Government draws on another £25m of its £500m Covid 'overdraft'

Tuesday 10 August 2021

The Government used another £25m of its ‘overdraft’ in the second quarter of this year.

A recent ministerial decision reveals that the money was drawn down from the Government’s £500m ‘Revolving Credit Facility’, which it took out in May 2020 to help pay for the island’s response to the pandemic.

It was set up for an initial period of two years and was provided by five local banks: Barclays, Butterfield, HSBC, Lloyds and RBS International.

Up to this year, the Government had only accessed £5m of credit, which it has now repaid.

But between April and June, it took another £25m.  

A Government spokesperson said: “This drawdown was necessary as a result of the impact upon public finances arising from the pandemic and to support businesses, in the form of the co-funded payroll scheme, at a time when income through taxation and duties is lower than previously forecast.”

Pictured: The £25m of credit given to the Government helped fund the extension of the co-funded payroll scheme. 

Treasury Minister Susie Pinel is required to approve borrowing limits on a quarterly basis and has set this ‘utilisation cap’ at £110m until the end of September, after which a review of the cap must be carried out.

This means that there is £85m worth of credit until the end of next month.

Previously, Deputy Pinel approved a £130m spending cap for the second quarter of this year.

The spokesperson added: “The Minister for Treasury & Resources has approved up to a further £85 million for quarter 3, but no drawdowns have been necessary as yet. 

“Any amounts drawn down within the new approval limit will be for the same purpose and made as and when they are required up to the end of September, but it is too early to determine the exact level of draw down that will be required.”

Although the credit facility is up to £500m in total, the States Assembly has approved a maximum borrowing limit of just under £386m in 2021, which included the cost of the Fiscal Stimulus Fund, which was budgeted as £50m but only £30m worth of projects were approved. 

Next year, the Government expects its cumulative borrowing to rise by another £71m to £457m, according to the current Government Plan.