2024-2026

MEDIUM TERM

DEBTSTRATEGY

Theme:
Nation Building and Sustainability:
Planning, Priorities and ProgressTABLE OF CONTENTSTABLE OF CONTENTS ..................................................................................................................................... 2
LIST OF TABLES ............................................................................................................................. ................. 4
LIST OF FIGURES ............................... ............................................................................................................. 4
LIST OF ABBREVIATIONS AND ACRONYMS ................................................................................................... 5
DEFINITIONS .............................. .................................................................................................................... 6
FOREWARD ................................ .......................................................................................................... .......... 7
ACKNOWLEDGMENT ........................................................................ ............................................................. 8
EXECUTIVE SUMMARY .................................................................................................................................. 91.

2.

Introduction ........................................................................................................................................ 11
1.1

Background .............................................................................................................................. 11

1.2

Objectives ................................................................................................................................ 11

1.3

Scope of the MTDS .................................................................................................................. 11

1.4

Legal and Institutional Framework for the MTDS ................................................................... 12

Recent Macroeconomic and Market Developments .......................................................................... 13
2.1

Economic Developments .......................................................... ............................................... 13

2.2

Fiscal Developments................................................................. ............................................... 15

2.3

Market Developments............................................................................................................. 15

3.

Review ofthe 2023 Actual Borrowing ................................................................................................ 17

4.

Review of Existing Debt Portfolio ........................................................................................................ 17

5.

4.1

Composition of Outstanding Central Government Debt ........................................................ 17

4.2

Domestic Debt ......................................................................................................................... 19

4.3

Foreign Currency Debt ............................................................................................................ 19

4.4

External Debt ........................................................................................................................... 19

4.5Interest Rate Structure of Public Debt .................................................................................... 20

4.6

Maturity Structure of Public Debt ........................................................................................... 21

4.7

Debt Service Payments ............................................................................................................ 21

4.8

Cost and Risk Analysis of the Debt Portfolio ........................................................................... 22

Medium-Term Macroeconomic Framework ....................................................................................... 24
5.1

Macroeconomic Assumptions ................................................................................................. 24

5.2

Risks Associated with the Macroeconomic Indicators ............................................................ 26
Page 12The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

6.

7.

Assessment of Potential Sources of Financing ................................................................................... 27
6.1

Domestic Sources ..................................................... ............................................................... 27

6.2

Strategic Benchmark and Targets ........................................................................................... 28

Modelling ofthe Medium-Term Debt Strategy .................................................................................. 29
7.1

Description of Alternative Debt Management Strategies ...... ................................................. 31

7.2

Result Analysis: Costs and Risks of Alternative Strategies ...................................................... 32

7.3

Analysis of Cost-Risk Trade-Off of the Strategies .................................................................... 34

8.

Optimal Debt Management Strategy.............................. .................................................................... 36

9.

Debt Sustainability .............................................................................................................................. 37

10. MTDS Implementation, Monitoring, Review and Reporting .............................................................. 39
10.1

Annual Borrowing Plan ............................................................................................................ 39

10.2

Review and Monitoring ........................................................................................................... 39

10.3

Reporting ................................................................................................................................. 39

APPENDIX 1: SCENARIO ANALYSIS INCORPORATING GUARANTEED DEBT ................................................ .40
APPENDIX 2: ANNUAL BORROWING PLAN ................................................................................................. 42

Page I 3
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

LIST OF TABLES
Table 1: Cost and Risk Indicators of Existing Debt ...................................................................................... 23
Table 2: Baseline Macro-Fiscal Projections ...................................................................... ........................... 25
Table 3: Baseline Pricing Assumptions ........................................................................................................ 30
Table 4: Descriptions of Alternative Strategies ........................................................................................... 32
Table 5: Gross Borrowing by Instrument under Alternative Strategies .............. ........................................ 32
Table 6: Cost and Risk Indicators under Alternative Strategies ............................................ ...................... 33
Table 7: Selected Strategy Details (US$M) .................................................................................................. 36
Table 8: Comparing Risk Indicators including Guaranteed Debt .............................................................. ..41
Table 9: Borrowing Requirements, 2024 .................................................................................................... 43
Table 10: 2024 Annual Borrowing Plan ....................................................................................................... 43
Table 11: Projected Cost Risk Indicators following implementation of ABP .............................................. 44

LIST OF FIGURES
Figure 1: Public Sector Debt Portfolio ........................................................................................................ 17
Figure 2: Central Government Debt as a percentage of Nominal GDP ..................................................... 18
Figure 3: Public Debt Lending Institution, end of December 2023 ........................................................... 18
Figure 4: Public Domestic Debt by Sector and Lender, end of December 2023 ....................................... 19
Figure 5: Public External Debt by Sector and Lender, end of December 2023 ......................................... 20
Figure 6: Public Debt by Interest Rate Type, end of December 2023 ....................................................... 21
Figure 7: Maturity Profile of Public Debt, end of December 2023 ........................................................... 22
Figure 8: Debt Service Costs from 2019 - 2023 .......................................................................................... 22
Figure 9: Redemption Profile of Government Debt, as at end-December 2023 ...................................... 24
Figure 10: Interest Rate Projections .......................................................................................................... 30
Figure 11: Cost-Risk Representation of Alternative Borrowing Strategies ......... ..................................... 35
Figure 12: Gross Financing Needs .............................................................................................................. 37
Figure 13: Compliance with Protocols for Effective Financial Management Ratios ................................ 38

Page 14The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

LIST OF ABBREVIATIONS AND ACRONYMS
ACRONYMS & ABBREVIATIONS

Creditors
COB

Caribbean Developent Bank

EIB

European Investment BankFCiBClBC First Caribbean International BankSSB

BVI Social Security Board

Currencies
EUR

Euro

GBP

British Pound Sterling

USD

United States Dollar

OthersABP

Annual Borrowing PlanATM

Average Time To Maturity

ATR

Average Time to Re-fixing

CARTAC

Caribbean Regional Technical Assistance Centre

Col

Commission Of Inquiry

COMSEC

Commonwealth Secretariat

DSA

Debt Sustainability Analysis

DOD

Disbursed Outstanding Debt

FSC

Financial Services Commission

FX

Foreign Exchange

GoVI

Government of the Virgin Islands

KPI

Key Performance Indicators

IMF

International Monetary Fund

MFU

Macro Fiscal Unit

MTDS

Medium Term Debt Strategy

MTFF

Medium Term Fiscal Frame

MTFP

Medium Term Fiscal Plan

OCR

Ordinary Capital Resources

PEFM

Protocols For Effective Financial Management

PARBOsPublicly Assessible Registers Of Beneficial Ownership

PFM

Public Finance Management

SFR

Special Funds Resources

SOE

State Owned Enterprises

SB

Statutory Bodies

RRL

Rehabilitation and Reconstruction Loan

UKG

United Kingdom Government

VI

Virgin Islands

WAIR

Weighted Average Interest Rate

Page I 5
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

DEFINITIONS
Average Time to Maturity (ATM)A measure of the weighted average time to maturity of all
principal repayments in the portfolio. A longer ATM implies
lower financing risk, and vice versa.

Average Time to Refixing (ATR)

A measure of the weighted average time until all principal
repayments in the debt portfolio become subject to a newinterest rate.

Gross Domestic Product (GOP)

The market value of all final goods and services produced
within a country in a given period. The GOP is determinedusing data for production, expenditures, or income, and ispresented in current or constant prices.

Refinancing Risk

The possibility that a borrower cannot refinance its debt byborrowing to repay existing debt.

Weighted Average Interest Rate (WAIR)

The weighted average interest rate or implied interest rate on
outstanding debt is determined by the value of the debt as apercentage of the total outstanding amount.

Yield Curve

A graph that plots the structure of interest rates, at a set point
in time, of government securities with different maturities,
ranging from the 3-month T-bills to the 3D-year bonds. It
enables investors to compare yields offered on short, medium
and long-term government paper.

Primary Balance

Total revenue less non-interest expenditure.

Overall Fiscal Balance

Total revenue less total expenditure

NOTES
Fiscal Year

The VI's fiscal year runs from 1 January to 31 December

Reporting Currency

The domestic currency of The VI is the USD at 1:1. Unlessotherwise stated, all values are in US Dollar equivalents.

Coverage

The Medium Term Debt Strategy (MTDS) includes only central
government existing debt and projected borrowings.
However, guarantees are included in a simulation exercise, aspresented in Appendix 1.

Classification

For the purposes of the MTDS, debt is classified by currency
and not residency.

SourceThe source of all tables and figures is the Ministry of rinance.
Historical statistics on GOP up to 2020 and prices up to 2022
are obtained from the Central Statistics Office and projections
for both are prepared by the Ministry of Finance.

The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

Page I 6

FOREWARD
The persistence of external vulnerabilities and their alignment to the Virgin Islands' (tithe Territory") maineconomic pillars strongly supports the importance of having effective debt management practices as partof the government's plans for achieving macro-fiscal stability and long-term economic growth anddevelopment.
A Medium Term Debt Strategy (MTDS) is one mechanism that can be used to determine the parameters
being measured under Section 20 of the Protocols for Effective Financial Management (PEFM), 2012. A
MTDS presents a debt management strategy with a medium-term focus that would guide thegovernment's borrowing policies and debt management operations to achieve the debt management
objectives. Against the backdrop of the improved macro-fiscal forecasts, as updated in the recent 2024
Budget, the government is pleased to release the 2024 - 2026 Medium Term Debt Strategy (tithe MTDS").
As designed, the MTDS aligns with the primary debt management objective of meeting government's
financing needs at the lowest cost, consistent with a prudent degree of risk and with the secondary
objective of developing the domestic debt market.
Four (4) alternative financing options were evaluated under the macro-economic assumptions to ensure
the selection of a feasible financing strategy. This process culminated in the government's adoption ofStrategy 1 (Sl) which is expected to improve debt sustainability by reducing interest and refinancing risks
in the portfolio while encouraging private sector participation in national development. Under uncertain
global financial conditions as previously outlined, Sl is more feasible, produced better overall
performance under stressed conditions and therefore has greater benefits to the debt management
objectives of the VI. Additionally, Sl is aligned well with the gradual approach towards achieving the longterm internal debt targets and presents the lowest risk for approximately the same level of costs as theother alternative strategies.
Consistent with the medium-term fiscal framework of the government, the MTDS was formulated tofinance the net fiscal deficit including capital expenditure of $202.95 million over the next three fiscal
years. Under the optimal strategy, Sl, the combined three-year deficit would be financed through existing
disbursements on Caribbean Development Bank (CDB) loans of $20.04 million, and the remaining $182.91
million through the domestic market investing in the development of the Territory.
The preparation and release of this document affirms the government's commitment to promoting clarity,transparency and accountability in debt management operations, and facilitating constructive dialogue
with the VI's investor base. The government will monitor the MTDS due to changes in the macroeconomic environment to maintain consistency with key debt management objectives.
Completion of this very comprehensive exercise would not have been possible without the invaluable
support of various stakeholders. I wish to recognise the committed efforts of the Financial Secretary andthe team in the Macro Fiscal Unit, Ministry of Finance, for coordinating this exercise, and the ongoingstrategic input and guidance from the Commonwealth Secretariat.

Dr. the Hon. Natalio
Minister of Finance
Page I 7
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

ACKNOWLEDGMENT
The global pandemic rendered the use of debt management tools, such as the Medium Term Debt
Strategy (MTDS) and the Debt Sustainability Analysis (DSA) essential tools for countries to monitor andsafeguard the sustainability and proper management of debt portfolios. These tools, once developed,
should be updated annually to reflect the current macro-economic and fiscal positions of countries. A
MTDS for the Virgin Islands (VI) would enable comprehensive consideration of measures that would
minimise cost and risk in the evolving portfolio. It is also a broad-based platform that considers the macroeconomic framework, future borrowing requirements of the government, market conditions and otherrelevant factors.
The 2024-2026 MTDS marks a significant milestone for the Government of the Virgin Islands, representing
the culmination of three ongoing efforts to establish a strong Medium Term Development Strategy.
Building on the 2023 base year, this report demonstrates the government's commitment to long-term
territorial development planning.
This commitment is further evidenced by the previous attempts in 2014 and 2022 to create similar multiyear plans. These earlier efforts provided valuable insights that helped shape the current successful MTDS.
The preparation for the 2024-2026 MTDS would not have been possible without the commitment andeffective contribution and collaboration of various stakeholders. My sincere appreciation is extended to
Macro-Fiscal Unit Coordinator, Michele Richmond-Phillips and Financial Analyst Sandra Brewley of the
Debt Management Section of the Macro-Fiscal Unit within the Ministry of Finance, which spearheads the
MTDS exercise, along with all other support team members.
This would also not be possible without the ongoing technical assistance and capacity building support
and guidance provided by the Commonwealth Secretariat's (COMSEC's) Debt Management Unit and
IMF/CARTAC to the VI's team, especially in the use ofthe various debt management analytical tools. Basedon the anaiysis of the cost risk trade-ofts among the four (4) alternative strategies reviewed, the optimal
strategy selected Strategy (S1) suggests 100% of gross financing needs will be financed in USD. It also
envisages the domestic market's development while maximising opportunities for concessional and semiconcessional borrowings and credit enhancements to contain costs and lengthen the debt's maturity. In

implementing Sl, the ~.4in!str" of Finance, \'vil! revie\v and monitor prevailing macro-economic andfinancial conditions to ensure the ongoing relevance and appropriateness of the strategy to achieve thedebt management objectives.
In keeping with our government's endorsement of the principles of good governance in fiscal affairs, alldebt strategy reports are available on the government's website at w~w.bvi.gov.vg .

Jeremiah Frett
Financial Secretary

Page I 8
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

EXECUTIVE SUMMARY
In today's dynamic global economy, governments are exploring innovative strategies to ensuresustainable funding for public services. Many have opted for debt financing to cover their deficit
budgeting. The Virgin Islands has not been excluded from this complicated fiscal imbalance. With theincreasing social needs of the population, the necessity for development in critical areas, and the low
probability of realising fiscal surpluses, the fiscal position of the territory must be delicately balanced.
Under Section 20 of the Protocols for Effective Financial Management, 2012, the United Kingdom
Government (UKG) requires the Government of the Virgin Islands (GoVI) to ensure that the level of debt
is sustainable and consistent with the delivery of macro-economic and fiscal stability in the short, medium
and long-term. The Medium Term Debt Strategy (MTDS) and a Debt Sustainabiljty Analysis (DSA) are two
mechanisms that are able to assess the sustainability of planned new borrowings in the short, medium
and long-term. As a result, the Ministry of Finance prepared a MTDS for 2024-2026 which is the roadmap
for the government's debt management decisions, policies and operations. The base year for this current
exercise was 2023, and there is alignment with the three-year period of the Budget and Medium Term
Fiscal Plan (MTFP). The MTDS is structured based on the overall debt management objective of thegovernment to ensure that the Territory's financing requirements are at the lowest possible cost, while
maintaining risks at prudent levels.
In the Virgin Islands where tourism and financial services are the main drivers of the economy, it waspredicted that Gross Domestic Product (GDP) would grow by 5.5% in nominal terms for 2023. This
expected level of growth, although heavily influenced by rising inflation and supply-chain issues, is atestament of the resilience of the economy, within this very challenging global economic environment.
This growth, which was seen throughout the main industries in the economy, was driven by increased
activity in the financial services, tourism and construction industries.
This outcome supported an improvement in fiscal consolidation, as revenue out-performed budget
expectations and prior year performance, combined with spending below budgeted levels, realised an
overall surplus of $12.21 million, a 2.1% improvement from the surplus of 2022 ($11.96 million). With the
uptick in economic activity in 2023, the stock of central government debt ($118.98 million) was 7.7% of
nominal GDP compared to 9.3% by the end of 2022. Despite a higher GDP in 2023, the lower central
government debt realised a lower debt to GDP ratio than that in 2022 when debt was higher and GDP waslower.
The medium-term macro-economic forecasts for the VI are modest but positive which assumes a durable
revival in tourism, a stable financial services industry, public investment in infrastructure, and an increasein foreign investment flows. Continuing the positive trend from 2023, nominal GDP is expected to growby 1.4% in 2024, 1.7% in 2025 and 2.1% in 2026. These very conservative growth levels are expected tobe mainly driven by tourism, which has a multiplier effect across virtually all industries in the Territory. In
spite of positive but conservative economic growth fundamentals, an overall deficit is expected to berealised in 2024, at 2.7% of GDP. Moreover, the overall fiscal position is expected to continue at lower
levels, reaching a fiscal deficit to GDP ratio of 2.2% by 2026. However, this projected deterioration in
fiscal developments will be linked to the elevated investment by government in infrastructuredevelopment projects across the Territory.

Page I 9
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

With shrinking savings and no new borrowing in 2023, to be able to significantly invest in the developmentof the infrastructure of the VI, the government would need to acquire new borrowing in 2024 and into
the medium-term. The Vis' debt portfolio is predominantly exposed to refinancing risk, given changes ininterest rates and interest rate risk with 90.2% of the portfolio with floating rates. Therefore, the terms
and conditions of any new borrowing should be composed of fixed rate debt instruments that would
reduce interest costs while maintaining a prudent level of risk. The portfolio currently has no exchange
rate risk as there are no foreign currency denominated loans.
Four (4) alternative financing options were evaluated under the same macro-economic assumptions in
the 2024 Budget to ensure the selection of a feasible financing strategy. The options have also taken into
consideration prevailing domestic and international financial market conditions, the availability offinancing from various creditors, and vulnerabilities that could impact future borrowing requirements anddebt service costs. The strategies were evaluated in terms of their cost risk profile and subjected to various
stress scenarios. The analysis culminated in the government's adoption of Strategy 1 (51) as providing thebest balance, under both the baseline economic projections and shocks to the baseline. This strategy is
expected to improve debt sustainability by reducing refinancing risks in the existing portfolio andachieving a lower cost risk profile of the debt stock by 2026. Consistent with the government's debt
management objectives, certain benchmarks for the cost and market risk indicators were also establishedfor (i) interest rate risk and (ii) refinancing risk.
The optimum debt strategy selected through this process seeks to utilise domestic sources offinancing to
mitigate foreign currency risk and promote the development ofthe domestic capital market. The strategy
prioritises the utilisation of more fixed interest rate instruments, extending maturities, and implementing
liability management operations to manage refinancing risk, extend the average time to maturity of theportfolio, and manage interest rate risk, while also balancing cost. The financing mix under 51 thatminimises costs and risks of the debt stock suggests 100% of gross borrowings In USD.
The 2024-2026 MTDS report is presented in five sections. The first section outlines the debt management
objectives and the scope for the strategy. This section is followed by an analysis of our existing portfolio- stocks, flows, risk analysis and redemption profile at the end of 2023. The third section focuses onmacro-economic performance, medium-term outlook and key risks.

The fourth section presents

alternative strategies with assumptions to finance the government's borrowing needs, based on its
current economic constraints. The last section presents the preferred strategy with regard to the costrisk trade-off and proposes the implementation methods and financing plan for this strategy. In Appendix
2, the annual borrowing plan for 2024 has been outlined.
The preparation and release of this document affirms the government's commitment to promoting clarity,transparency and accountability in debt management operations, and facilitating constructive dialogue
with the Vis' investor base. The domestic investor base continues to remain committed to thedevelopment of the Territory and is willing to invest at substantial levels.
Although 51 was selected as the optimal approach, uncertainties related to the global economy, market
conditions and geopolitical developments may necessitate deviations from this strategy. Consequently,
the strategy will be closely monitored and reviewed in the context of any emerging changes and may be
adjusted accordingly.

Page 110
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

1.

Introduction

1.1

Background

A Medium Term Debt Strategy (MTDS) is one mechanism that can be used to determine the parameters
being measured under Section 20 of the Protocols for Effective Financial Management (PEFM), 2012. A
MTDS presents a debt management strategy with a medium-term focus that would guide the GoVI's
borrowing policies and debt management operations to achieve the debt management objectives.

1.2

Objectives"Our debt management objective is to ensure that our financing requirements are met at thelowest possible cost, while maintaining risks at prudent levels.
II

The Medium Term Debt Strategy seeks to:

1.

provide a framework to guide borrowing decisions consistent with the GoVI's debt
management objective and having regard to the outlook in the GoVI's medium-term fiscal
plan and the borrowing limits set out in the PEFM; and2.

increase financing options and diversify funding sources in order to provide opportunities tolower the costs and/or risks of the debt portfolio.

The formulation of the MTDS is consistent with the GoVI's 2024-2026 Budget Estimates and the Medium
Term Fiscal Plan (MTFP) which were approved in December 2023 in the House of Assembly.

1.3

Scope of the MTDS

The MTDS analysis covers foreign currency and US Dollar debt contracted by central government andmanaged by the Macro Fiscal Unit (MFU) in the Ministry of Finance. It also incorporates the assessedfinancing needs of the Statutory Bodies (SBs) and State-Owned Enterprises (SOEs), insofar as these havebeen incorporated in the 2024 budget forecasts. Although the analysis is statutorily limited to central
government debt only, the government undertook a secondary analysis to consider the impact ofguaranteed debt on the risk and cost profile of the government (see Appendix 1).
To assess portfolio risks more accurately, debt is grouped by currency, as opposed to residency of holders.
Therefore, throughout the document, external debt captures aI/foreign currency denominated debt anddomestic debt represents USD debt.
The baseline data for the MTDS analysis is the government's debt outstanding and disbursed, as at 31
December, 2023.
The MTDS spans a three-year rolling time horizon of the upcoming budget year (2024) and the next two
fiscal years (2025 and 2026). The strategy will be reviewed and published annually. In preparing the MTDS,
the World Bank/IMF analytical tool kit was used to simulate and compare the cost risk profiles ofalternative financing sources, with a view to identifying the optimal strategy.

Page 111
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

1.4

a.

Legal and Institutional Framework for the MTDS

Legal Framework

There is currently no dedicated legislation for debt management, but on a broader perspective, debt isembodied under the Public Finance Management (PFM) Acts and the Constitution of the Virgin Islands.
The PFM Acts are as follows, No.2 of 2004 - Public Finance Management Act, 2004 and No.9 of 2012 Public Finance Management (Amendment) Act, 2012, along with the Regulations, S.1. No. 28 of 2007 Public Finance Management (Amendment) Regulations, 2007. The government is finalising a revision of
the PFM Act, 2004 and subsequent amendments which would include an in-depth and comprehensive
section on debt management.
Further supporting the broad legislative framework for debt in the PFM Acts is the PEFM, 2012 which isan agreement between the Government of the VI and the United Kingdom Government on fiscal
sustainability and accountability. Under Section 20 of the PEFM, the Government is responsible:
liTo ensure that the level of debt is affordable and consistent with the delivery of macro-economic and fiscal sustain ability and financial stability in the short, medium and long term
as outlined in the MTFP, the Government of the Virgin Islands will comply with the borrowing
limits defined".
The MTDS is one mechanism that can be used to determine the parameters being measured under Section
20 of the PEFM. A MTDS establishes the roadmap to achieve the objectives of public debt management
for the upcoming budget year and at least two subsequent financial years. The MTDS guides thegovernment's borrowing policies and debt management operation and is based on a detailed assessmentof the costs and risks of alternative borrowing strategies. It considers the government's fiscal policy, theannual budget, the fiscal strategy, the macro-economic environment, market conditions and otherrelevant factors.

b. Institutional Arrangements
The ultimate responsibility for public debt management operations in the VI rests with the Ministry of
Finance. The Macro-Fiscal Unit within the Ministry of Finance is responsible for back, middle and front
office functions of debt management. These functions are performed by two staff members, one who
conducts the back office and occasionally the middle office functions, and the other performs theremaining middle office and front office functions. The government's debt portfolio is only constituted ofstandard loans, and there have been no securities acquired up to this point. There is a close collaboration
with the Treasury Department, under the Ministry of Finance, as this agency makes the actual payments
to all lenders.
The Ministry of Finance continues to collaborate with development partners to enhance the institutionalarrangements for debt management which includes ongoing efforts to build the team and its technicalcapacity for debt management analysis. Implementation ofthe new debt management system MERIDIAN
which replaced CS-DRMS, has also been instrumental in an easier management ofthe debt portfolio with
its web-based capability and enhanced processing and reporting platforms. To further strengthentransparency and accountability in debt management, a Debt Management Committee, withrepresentatives across the public and private sectors, will be established to help the government explore,

Page 112
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

identify and implement financing alternatives that would optimise the cost/risk, while minimising debt
management objective.
The upcoming sections will present:•

the key macro-fiscal and market backdrop to the preparation of the MTDS, (Section 2);•

the 2023-2026 costs and risks relative to the projected debt strategy, (Section 3);
a review of the existing debt portfolio, (Section 4);•

the medium-term macro-economic context for the MTDS, (Section 5);•

the medium-term debt strategy, (Section 6);•

a summary of the optimal debt management strategy, (Section 7);•

debt sustainability analysis, (Section 8); and•the MTDS implementation, monitoring, review and reporting process, (Section 9).

2.

Recent Macroeconomic and Market Developments

2.1

Economic Developments

In the Virgin Islands where tourism and financial services are the main drivers of the economy, it waspredicted that a growth in Gross Domestic Product (GDP) of 5.5%, in nominal terms for 2023, may berealised. This expected level of growth, although heavily challenged by the influence of rising inflation andsupply-chain issues, was a testament of the resilience of the economy, within this ever-challenging global
economic environment. This growth, which was seen throughout the main industries in the economy, wasdriven by increased activity in the financial services, tourism and construction industries.
The financial services industry, one of the two main pillars of the economy, contributes about 60% of
government's revenue, and as such, any shocks to this industry has the potential to immediately affectthe operations of the government. In recent years, the financial services industry has faced, and continues
to face many challenges, including but not limited to, new global reporting standards, the lingering effectsof the pandemic, the ever-increasing uncertainty surrounding a global recession, and the possible
catastrophic impact of the PARBOs. In 2023, new incorporations (22,317) dropped by 20.5% from 2022's
level (28,061). The impact of the decline was minimized by the fee increase implemented from 1st January
2023. With the increase, revenue from industry collected by the Financial Services Commission in 2023
was $252.14 million or 13.8% above that for 2022, $221.66 million.
Tourism, the other pillar of the economy, is the industry that is widely spread across almost all sectors of
the economy, and as such, has a greater impact on the overall GDP. The impact of inflation continues tomask the real activity level of the industry, with a substantial rise in the dollar value of tourism revenue.
Overnight visitors are the main driver behind increases in the value of tourism revenue. Tourist arrivals in
2023 grew by 89.7% to 994,896 from 524,427 in 2022. Almost 73% of the visitors in 2023 were cruise
passengers (719,519), while just under 27% were overnighters (262,080). There was a 109.4% increase incruise passengers from 343,571 in 2022 to 719,519 in 2023. There was also a 50.3% increase in overnight
visitors from 174,344 to 262,080 by the end of 2023.
Page 113
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

The Virgin Islands (VI), being a small and open economy, is vulnerable to changes in the global economic
environment. The Territory relies heavily on imported consumer goods resulting in the rising prices on
the domestic market which are a direct consequence of imported inflationary pressure. Additionally, theVI has its share of imported monetary policy, with the US dollar being the official currency of the Virgin
Islands. Therefore, when the Federal Reserve adopts an expansionary monetary policy that would further
lead to inflationary pressures on the Virgin Islands' economy. The inflation rate was 4.0% by the end of2022 and for 2023, it was 2.7% which was below the rate of 3.5% projected for the year.
By the end of 2022, there were 21,134 persons employed throughout the Territory, a 2.6% increase over2021 (20,609 persons). Employment in 2023 was projected to grow by between 1-2% over 2022.
Construction imports in 2022 ($68.01 million) decreased by 12.0% from 2021 ($77.25 million). The valueof imports of construction goods in 2023 was expected to be above that for 2022, with the increase in theprices of goods, but not in the volumes imported. A total of $328.32 million from 2019-2022 was imported
in construction material, which was on average 15.6% of all imports for the period, $2.14 billion.
Fewer real estate transactions were recorded in 2022 at 238 (a 29.6% decline from 2021), but a higher
value of $143.30 million (a 11.6% increase from 2021) in sales was achieved. 81.5% of all sales in 2022
were made by Belongers and Vlslanders. Over the period from 2018-2022, the highest value for homesales, in the amount of $61.90 million was realised in 2021.
Moving into 2024, the heavy influence of high inflation on the economy will continue to be seen in thevalue oftourism revenue, in nominal GOP, in construction activity, and further in real estate. The inflation
rate is projected at 2.5% for 2024 but is subject to changes due to unpredictable global economic
conditions, policy changes and unforeseen events like natural disasters and shocks.
In the medium-term (2024-2026), plans by Government to undertake extensive infrastructural works willlead to growth in employment between 1-2%, growth in nominal GOP, and growth in construction
imports. Although the financial services industry continues to face seemingly insurmountable challenges
and new incorporations continue to decline, it is projected that the stock of companies wiii remain at asustainable level. By the end of 2024, it is anticipated that there will be around 23,000 new incorporations
and an overall $248 million in revenue from fees collected. The Territory is expected to welcome about
one million visitors in 2024. Over the medium-term, overnight tourism is expected to be boosted with thecompletion of severa! large-scale planned tourism development projects and the increase in thefrequency of daily flights to mainland USA. The necessary public infrastructure and tourism development
will place the nation on a sustainable path, which would be driven by the resilience of citizens andresidents and the natural beauty of the Territory.
Credit rating for the VI is undertaken by CARICRIS, a regional credit rating agency in the Caribbean, withthe most recent rating in March 2023 of CariAA-. Except over the period May 10 to August 11, 2022, when
CARICRIS placed the Territory on a Rating Watch - Developing, the credit rating for the Government
remained at CariAA- for foreign and local currency. In the March 2023 rating update reports on the VI,
CARICRIS stated that the stable outlook was based on expected continued good control over fiscal
operations guided by the PEFM and the consolidation of economic growth based on recovery in tourism
and resilience in financial services.

Page 114
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

2.2

Fiscal Developments

Total preliminary revenue for 2023 at $387.67 million was 7.0% above 2022 intake of $362.19 million andwas 2.9% above the 2023 budget estimate at $376.76 million. This improvement in performance wasmainly attributed to an active tourist season, along with an increase in incorporation and renewal fees
implemented by the government from 1 January 2023. The increase in tourist arrivals resulted in growthin hotel accommodation taxes, cruising permits and tourist arrival levy. The 8.8% increase inincome/payroll taxes for 2023 from $57.27 million in 2022 is linked to the improvement in the economy,
while the expiration of the waiver on property taxes ended resulting in a growth of 10.8% in collection forthis revenue stream in 2023 from $3.34 million in 2022. With the discontinuation of 5% reduction in
import duty policy, along with the improvement of the economy, the performance of taxes oninternational trade recorded noticeable growth 39.6% in 2023 from $36.93 million in 2022. The shortfalls
in performance were seen in other taxes from reduced stamp duty from a sluggish real estate industry,
and in grants with minimal donations and dividends from Statutory Bodies and State-Owned Enterprises.
The decline in other revenue was mainly due to a reduction in court fees to normal levels after the spikein 2022 due to a lump sum payment being made to the government by an interim collector offees, alongwith the reduction ofthe money transfer fee charge from 7.0% to 3.5% in 2022.
On the recurrent spending side, the preliminary outlays for 2023 of $353.71 million was $40.43 million,
13.0% higher than that of 2022 at $313.10 million but was 8.7% below the revised budget expenditure for2023 of $387.21 million. The increase in interest rates and prices which significantly impacted the use ofgoods and services, along with the policy decision to pay public servants outstanding increments were themain drivers behind the increase in expenditure in 2023 from 2022. A 41.4% decline in public sector
investments in 2023 rendered capital spending significantly lower by $15.38 million from 2022 ($37.13
million). This reduction was mainly due to not being able to execute planned projects as the level ofrequired preparation was not realised.
Preliminary data for 2023 confirm that despite the noticeable rise in recurrent spending with the increase
in revenue collections, there was a steady improvement in the fiscal outturn. An overall fiscal surplus of$12.21 million was realised, a 2.1% improvement from the surplus of 2022 ($11.96 million). Consequently,
the primary position moved from a surplus of $16.83 million in 2022 to $18.97 million in 2023, a 12.7%
improvement in fiscal performance.
2.3

Market Developments

During the recent fiscal year, the Government has been able to successfully manage the debt portfolio, inline with the macro-fiscal objectives, Government's financing needs and the medium-term strategic
objectives of debt management. There was no new borrowing in 2023, no disbursements on existing
borrowing, and as debt servicing continued, debt balances reduced for the year.

a. Domestic
In June 2021, the Government acquired a standard fixed rate loan from the domestic market, butsince this addition no new debt has been acquired. Despite not borrowing in 2023, based on meetings
held during the year with some of the main players in the domestic market, there is still a high interestin lending to the government and a high level of liquidity is available to facilitate this, if approached.

Page 115
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

Based on the fourth quarter 2023 Statistical Bulletin of the Financial Services Commission (rsC), total
risk-weighted assets of the banking sector stood at $1.41 billion at the end of the quarter and deposits
were at $2.35 billion. From this Bulletin, there was $110.51 million in non-performing loans which
was 8.2% oftotalloans. Total non-performing loans in the fourth quarter of 2023 increased by 3.1%
when compared with the same quarter in 2022 ($107.19 million) and increased by 2.9% whencompared with the third quarter of 2023 ($107.41 million). At the end of the fourth quarter, the loans
to deposits ratio stood at 70.4% which was lower than the 72.9% at the end of the fourth quarter of2022. The sensitivity to market risk of net open position as a percentage of capital was 0.3% at theend of the fourth quarter.

At the end of December, there was $630.99 million in cash andinvestments, a 19.5% decrease from the third quarter of 2023 ($783.60 million) and a 7.6% increase
from the fourth quarter of 2022 ($586.41 million).

b. External
Global economic conditions remained challenging throughout 2023, amid the ongoing conflict in
Ukraine, the Israel-Hamas war that commenced in October 2023, and continued inflationary
concerns. High interest rates continued to impact debt service costs and impose a further strain on
already stretched economies.
The rapid interest rate hikes registered across major advanced economies have resulted in a tightmonetary policy stance that is expected to endure into 2025. There are signs that tighter monetary
policies have started to work their way through the financial system, which has resulted in constrained
credit conditions increasingly affecting real activity. Higher interest rates more than likely placedbanks in major economies under increased pressure, both directly through higher cost of financing
and indirectly as the quality of credit deteriorates.
The latest projections confirm that the global economy is slowing as inflation declines from 2022's
peak. As short-term inflation expectations decline, real interest rates are likely to stay elevated.
Although monetary tightening is starting to bear fruit, it is not the major factor for the decline ininflation. The central driver of the fall in inflation is the decline in international commodity prices.
Debt markets have started to reflect tighter monetary policies, while spreads to risk-free government
debt have basically remained constant. This suggests that there is no immediate indication of a credit
crunch, although credit conditions have significantly tightened.
Federal Reserve officials left interest rates unchanged in their final policy decision of 2023 and forecast
that they will cut borrowing costs three times in 2024. This decision in December 2023 was a sign thatthe central bank is shifting towards the next phase in its fight against rapid inflation. Interest rates
are set to a range of 5.3 to 5.5 %, at which levels they have been since July 2023. With the Federal
Reserve keeping rates steady, inflation falling and a cooling economy, bond investors are feeling
optimistic about the future. According to Capital Economics, the United States 20 Year Government
Bond Yield is expected to be 4.0% by the end of December 2024.
The UK 10 Year Gilt Bond Yield traded at 4.2% at the end of March 2024, according to Tra9ing
Economics global macro models and analysts' expectations. By the end of 2024, it is expected to tradeat 3.9 %, according to World Government Bonds. Further, it is estimated that the Bank Rate will fall
Page 116
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

to around 4.8% by the end of 2024, down from its current 5.3%, according to Trading Economics. The
UK 20 Year Bond Yield is expected to trade at 0.5 percentage points above the 10 Year Gilt Bond Yield.
A risk margin of 2.5% was estimated for the BVI for bonds.

3.

Review of the 2023 Actual Borrowing

The gross financing needs of government for 2023 was met by disbursements from existing loans fromthe CDB RRL, insurance proceeds from the 2017 hurricanes, and savings from the Consolidated Fund andother funds. There were no new debt instruments acquired in 2023.
Borrowing in the VI has been guided by best practice and the approved budget and usually articulated in
the Debt Strategy Section of the three-year MTFP. This inaugural MTDS represents key debt reforms
which align with the GoVI's commitment to improved governance, transparency and prudent debt
management. This MTDS also includes the Territory's ABP which is appended to the document.

4.

Review of Existing Debt Portfolio

4.1

Composition of Outstanding Central Government Debt

As illustrated in Figure 1, at the end of 2023, public outstanding debt stood at $118.98 million-a declineof $16.83 million (12.4%) from December 2022 ($135.81 million). This decrease was solely attributed tothe continuous servicing of debt as there were no disbursements throughout the entire year.

Figure 1: Public Sector Debt Portfolio

Total Public Debt Annual Comparison (U5.1 millions)
December 2019 - December 2003
160.00149.54. Publle Deb<

143.61. Public Debt

145.73, Publk:Debt
135.81, Publk: Debt

140.00118.98, Public Debt
120.00100.00

&>.00

60.00

40.00

20.00
(D) - Domestic(E) - Extem.aI

31-Det:-2019

31-Det:-2020

31-Det:-2021

31-Dec-2022• Cenual Gov't (D)

57.42

5236

%.24

37.32

30.49

• Cenual Gov't (E)

86.19

97.18

99.50

98.49

88.49

31-Det:-2023

Page 117The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

With the uptick in economic activity In 2023, the stock of government debt recorded an improvementwith 7.7% of nominal GDP compared to 9.3% by the end of 2022 (see Figure 2). Historically, the debt to
GDP ratio for the Virgin Islands has always remained below 20%, which is well below any global thresholdestablished for the ratio. This ratio level indicated that the VI, currently and historically, has been
producing sufficient output to continue servicing its level of debt.
The CDB with $88.49 million in outstanding debt with the government occupied the largest share, 74.0%
of total public debt. The remaining $30.49 million (26.0%) of central government debt was with domestic
sources (see Figure 3).
Figure 2: Central Government Debt as a percentage of Nominal GDP

Total Public Debt and Debt-to-GDP (%):
2019 - 2023 Comparison
240.00

90.0%
80.0%

200.00
70.0%

l!!

..'"t
;:,

160.0060.0%50.O"k

120.00
40.0%

SO.OO

30.0%
20.0%

40.00

1000"k

2019

2020

2021

2022

2023

_

Total Public Debt

143.6114954

145.73135.81118.98_

Total Debt to GDP ('I'.)

95%

10.5%

10.2%

9.3%

7.7%

-

Debt-to-GDP Thremhold (IMF)

50%

50%

50%

50%

50"'"

_

DebHo-GDP (lMF-Ca!:lbbi!aJl-Wide)

66%

75%

78%

70"A>

72%

0.0%

Figure 3: Public Debt Lending Institutionl end of December 2023

Public Debt by Lending Institution (US$ millions)_ SSB

Republic Bank_ CIBC-FCIB_ COBPage 118
The BVI Medium Tflrm Ilebt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

The government's domestic debt profile amounted to $84.62 million (48.9%) of total public sector debt,
with SSB ($28.03 million), Republic Bank ($10.44 million) and FCIB ($46.14 million) making up this amount.
The remaining $88.49 million (51.1%) of total public sector debt made up the external debt profile which
comprised solely COB loans.

4.2

Domestic Debt

By the end of December 2023, central government's domestic debt was at $30.49 million, 25.6% of total
public debt. Central Government's domestic debt ($30.49 million) occupied the Construction, Health andSewerage sectors and it was held by SSB ($9.95 million), Republic Bank ($10.44 million) and FCIB ($10.10
million). There were no major changes in the domestic debt portfolio.
Figure 4: Public Domestic Debt by Sector and Lender, end of December 2023

Domestic Debt Profile by Sector and Lenderas at 31 December 20Z3 (U&$ millions)
50.0%

16.00

45.0"A>

14.00

40.00/.
12.00

35.0%

10.00

30.00/.

8.00

25.0%

6.00

20.0%
15.0"A>

4.00

10.00/.

200

5.0%- -- - , 0.0%

4.3

Foreign Currency Debt

In November 2023, the remaining EIB loan ($0.82 million/$823.59 thousand) held in the Water sector was
repaid in full, thus closing out the euro denominated portion of our debt profile. Therefore, as ofDecember 2023, there were no foreign currency debt in the portfolio.

4.4

External Debt

By the end of December 2023, external debt was solely comprised of central government debt totaling$88.49 million. External outstanding debt occupied the Construction, Education\ Transportation andPublic Administration sectors, and was solely held by CDB2.

1 Student Loan Scheme loans are held by GoVI but are administered and managed by NBVI.
2 COB'sloan profile comprises of eight (8) loans covering disaster infrastructure, disaster recovery, rehabilitation and relief,

education and administrative. All loans have been fully drawn except for the Rehabilitation and Reconstruction Loan ($65.29
million) (RRL).

Page 119The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

Figure 5: Public External Debt by Sector and Lender, end 0/ December 2023

External Debt Profile by Sector and Lenderas at 31 December 2023 (US$ millions)
60.00

60.0%

•

50.00

50.0%

40.00

40.0%

30.00

30.0%

20.00

20.0%

10.00

10.0%
0.0%
Construction

Education

Water

Administration

Transportation

In October 2023, the balance ofthe Hurricane Rehabilitation (Sea Defense) loan of ($0.41 million/$405.27
thousand) was repaid in full. Also in that same month, the fourth quarter payment of the Student Loan
Scheme VI OCR ($4.70 million) which is managed by National Bank of the Virgin Islands (NBVI), washandled by Government due to a shortfall in student loan payments. The SFR portion of Student Loan
Scheme VI ($0.30 million or $300,000) would be fully repaid by April 2024.
COB is the only multilateral agency from which the government borrows at this time, and it is considered
as external debt by residency definition. Therefore, external debt is at present equivalent to multilateraldebt for the Virgin Islands.

4.5

Interest Rate Structure of Public Debt

A substantial 90.2% ($107.27 million) of GoVI's public sector debt profile was attributed to debt withfloating interest rates held by SSB ($9.95 million), FCiB ($10.10 million) and COB ($87.22 million) loans.
The remainin~ $11.72 million (9.8%) was ascribed to debt with fixed interest rates held by Republic Bank($10.44 million) and COB ($1.28 million) (see Figure 6).

Page 120
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

Figure 6: Public Debt by Interest Rate Type, end of December 2023

Interest Rate Structure as at 31 December 2023
(US$ millions)120.00100.00

so.oo
60.00

40.00

9.8%

20.00

I
- 11.72

4.6

Maturity Structure of Public Debt

Public sector debt scheduled to mature in five years at the end of 2023, stood at $23.13 million, 19.5% of
total public sector debt. This amount was held by Republic Bank ($10.44 million), FCiB ($12.39 million)
and COB ($2.59 million).
As at the end of 2023, $16.72 million (14.1%) and $79.13 million (66.5%) of existing public debt is set tomature within 10 years and after 10 years respectively. This means that the majority (80.6%) of our debt
profile consists of long-term debt (see Figure 7).

4.7

Debt Service Payments

By the end of 2023, debt servicing for central government totalled $23.51 million, $8.83 million or 42.2%
was attributed to domestic debt. The remaining 57.8% was attributed to external debt and was
dominated by COB with $13.94 million in debt servicing.
Debt service costs were higher in 2023 from 2022 as repayments on the COB $65.29 million RRL began in
January 2023. In addition, in October 2023, the Hurricane Rehabilitation (Sea Defense) loan and theremaining EIB water loan were fully repaid. The impact of higher interest rates was also another factor in
the increase in costs in 2023 over 2022.
Notably, the exceptionally high costs in 2021 were directly linked to the early repayment ofthe remainingbalance of $17.25 million on the Peebles Hospital Loan with Banco Popular (see Figure 8).

Page I 21
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

Figure 7: Maturity Profile of Public Debt, end of December 2023

Maturity of Public Debt
as at 31 December 2023 (US$ millions)s: 1 Year, 0.15,0.1%> 1 Year s: 5 Years, 22.98 ,19.3%> lOYears, 79.13,66.5%> 5 Years,; 10 Years, 16.72,14.1%

Figure 8: Debt Service Costs from 2019 - 2023

Central Government Debt Servicing
2019-2(1134n .nn~ .' . nn

30 .00•c

25 .00E.,.

20.ll0:I

15 .00~III

10 .005 .00• Interest• Principal

4.8

701'1

2020

2.021

202.2.

7.82

629

4.90

4.90

6.68

13.11

9.61

2.9.6114.92.

16.83

202J

Cost and Risk Analysis of the Debt Portfolio

The VI's debt portfolio is predominantly exposed to refinancing risk, given changes in interest rates andinterest rate risk with 90.2% of the portfolio with floating rates. Table 1 illustrates key cost and risk
indicators for the debt portfolio at the end of December 2023.

Page I 22
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

Table 1: Cost and Risk Indicators of Existing Debt

Notes:'PV as percent of GOP is calculated based on projected debt service payments where discountrate of 6% is applied to those instruments on concessional or semi-concessional terms.
2 Cost-Risk indicators that use projected cash flows such as weighted average interest rate,

refinancing and interest rate risks use projected exchange rate assumptions.
3 Interest payment as percent of GOP is calculated by dividing interest payment on outstanding

debt at 2023 to 2023 GOP.
ATM means Average Time to Maturity, and ATR means Average Time to Refixing.

The overall debt portfolio ofthe VI is very small, and this can be seen in the indicators in Table 1. The costof the existing debt portfolio is very low, with both nominal debt as a percentage of GDP and present
value as a percentage of GDP below 10. There is no foreign currency debt as at the end of December
2023, and therefore, no exposure to exchange rate risk.
Rollover/refinancing risk captures the exposure of the debt portfolio to higher refinancing costs formaturing debt obligations within a specified period or, in extreme cases, the inability to rollover the debt.
The key indicators for measuring refinancing risk are debt maturing in one year as a percentage of total
debt, Average Time to Maturity (ATM) and debt maturing in one year as a percentage of GDP.
The ATM of4.5 years indicates that a significant portion ofthe loans are maturing within five years. Basedon the information presented in the section on the maturity profile of existing debt, $23.13 million (19.5%)of total public sector debt will be maturing in five years. This amount almost entirely relates to the
Republic Bank and FelB loans with final bullet payments in 2026. To improve the ATM, these loans should
be restructured, with extensions on maturity between 2-5 years.
The maturity profile of the debt, as presented in Figure 9, highlights the amortization of the outstanding
debt and the risk inherent in the structure of the debt. The maturity profile is well distributed over theyears, except in 2026 when two loans will mature with large bullet payments. Over the longer-term, theforecasted redemptions are entirely from floating rate, longer maturity debt, indicating interest rate risk
for many years ahead.

Page I 23
The BVI Medium Term Debt Strategy , 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

Figure 9: Redemption Profile of Government Debt, as at end-December 2023
25,00020,000

GJ T-bills~ Variable Interest Rate

15,000• Fixed Interest Rate
10,000
~

5,000

o

q-

VI

U)

N

N

N

N

N

N

0

-5,0000

0

III I I I I
r-

eo

N

N

N

N

0

0

0'1
N

0

N

0

~

M

M

N

N

0

0

N
M

0

N

M
M

0

N

~ ~
q-

VI

U)

M

M

M

N

N

N

0

0

0

rM

0

N

eo
M

0

N

0'1
M

0

N

0
q0
N

~

N

N

N

0

q0

Interest rate risk relates to the changes in debt service cost arising from variability in market interest
rates. The Average Time to Re-fixing (ATR) captures the vulnerability of the portfolio to higher market
interest rates at the point at which the interest is reset or fixed rate debt is refinanced.
The debt portfolio has an overall ATR of 0.6 years, at the end of 2023, with 92.8% of the total debt
subjectto a change in interest rate in one year. These indicators mirror the prevalence offloating rate
debt in the portfolio . Fixed rate debt represented a mere 9.8% of the total debt. Interest rate risk ofthe portfolio is assessed as high as the bulk (92.8%) of the portfolio is comprised of floating rate debt
and as shown by the low ATR.
Outside of the cost and risk indicators above, other risk factors can disrupt debt service and the overall
debt management operations. Fiscal risk will be one such factor which can emerge from natural
disasters, major decline in revenue from the financial services industry, and other impacts on theeconomy. Contingent liability risk will be another factor that can emerge from the operations of StateOwned Enterprises (SOEs) and Statutory Bodies (SBs). Another potential risk factor can be operationalfrom lack of a robust debt management legal framework.

5.

Medium-Term Macroeconomic Framework

5.1

Macroeconomic Assumptions

As summarised in Table 2, the baseline macroeconomic assumptions for the MTDS are predicated on theforecasts as outlined in the approved 2024-2026 Budget, and the fiscal strategy as articulated in the 20242026 MTFP that aim at achieving sustainability and nation building through planning, priorities andprogress.
The medium-term macroeconomic forecasts for the VI are modest but positive and based on theassumption of a durable revival in tourism, a stable financial services industry, public investment ininfrastructure, and an increase in foreign investment flows. These are expected to support economic
growth and employment, sustainability of new borrowing, adherence to the ratios under the Protocols
for Effective Financial Management (PEFM) and allow for a rebuilding of the savings from surpluses.

Page 124
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

Continuing the positive trend from 2023, nominal GOP is expected to grow by 1.4% in 2024,1.7% in 2025
and 2.1% in 2026. These conservative growth levels are expected to be mainly driven by tourism which
has a multiplier effect across virtually all industries in the Territory. The tourism industry is anticipated to
be further boosted by large-scale private sector tourism development projects across the islands. Major
investment by both private and public sector in infrastructural development across the Territory is also
expected to elevate economic activity in the medium-term. Consequently, employment is anticipated to
grow between 1-2% over the period 2024-2026.
Real GOP is projected to continue to be heavily influenced by supply-chain issues from shipping routes
obstruction, the wars and inflation rates that are falling but still high. With this backdrop, real growth isexpected to range between 1-2% over the period 2024-2026.
Overthe medium-term (2024-2026), projections are expected to indicate a trend toward more stable andmoderate inflation rates of 2.5,2.4, and 2.3%, respectively. While these projections look moderate, they
are subject to changes based on global economic conditions, policy changes, and unforeseen events likenatural disasters and other internal and external shocks to the economy.
Table 2: Baseline Macro-Fiscal Projections
USD Thousands

Budgeted Revenue and Grants
Budgeted Primary Expenditure
Budgeted interest payments
Total Expenditures including budgetedinterest payments
Nominal GOP
Use of existing funds/deposits that reducegross financing requirement

2024

2025

2026

387,969
454,852
6,195

384,463434,359
5,924

386,629
421,764
5,415

461,048440,282

427,179

1,483,426

1,540,368

1,621,248

32,399Source: Macro-Fiscal Unit, Ministry of Finance

Against the backdrop of positive but conservative economic growth fundamentals, fiscal assumptions
highlight the government's proposal to target a progressive improvement in revenue collections throughthe revision of aged fee structures, collection of arrears, and use of technology to implement systems forrecording and processing of payments. Based on projections for revenue intake in the medium-term, thegovernment anticipates collections to be above 2% of GOP.
The government is increasingly aware that its dependence on the financial services industry for revenue(around 60% comes from fees within this sector) could pose a risk to its operations. To address thisvulnerability, they are actively seeking new and diversified revenue streams across various industries,
including financial services.
Over the period 2024-2026, the focus for expenditure was anticipated to be on improving effiCiencies,
mainly through embracing technology, and reviewing processes and laws related in charges and rates of
SOEs and SBs. Based on projections for spending in the medium-term, the government envisages
informally limiting total spending to around 30% of GOP.
Page I 25
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

Under the assumptions for revenue and expenditure, the government, therefore, forecasts in 2024, a
deficit of $40.73 million or 2.7% ofGDP. This overall fiscal position is expected to deteriorate in 2025 witha higher deficit of $55.39 million or 3.6% of GDP followed by a lower deficit in 2026 of $39.91 million or
2.5% of GDP. Clearly primary deficits would be recorded with the highest over the three-year period being
in 2025 at 3.2% of GDP and an improvement in 2026 to 2.2% of GDP. The projected high primary andoverall balances are linked directly to the elevated investment by government in infrastructuredevelopment projects across the Territory.
5.2

Risks Associated with the Macroeconomic Indicators

Estimates of the baseline macroeconomic assumptions are exposed to risks and vulnerabilities of varying
intensity that could cause deviations from the projections and crystallise in higher borrowing
requirements and increased debt levels. Some key risk exposures are:•Uncertainty in economic growth and price conditions, due to ongoing geo-political tensions,wars, global inflation, high interest rates, financial challenges in the insurance market and climatechange related supply chain disruptions.

•

Severe climate-related events and the possibility of a future pandemic could disrupt growth
expectations, given the potential adverse implications for tourism and fiscal performance.

•

Delays in and/or not implementing the proposed revenue measures, efficiencies in recurrent
spending, and execution of planned development projects could jeopardise the government's
ability to achieve the medium-term revenue targets, with downside risks for the fiscal
sustainability of the Territory, the borrowing requirements under the PEFM, debt levels and debt
servicing costs.

•

Delays in or not implementing the Col recommendations could lead to the enactment of the'Order in Council' by the United Kingdom government which would impact the governance in the
Territory.

•

The implementation of PARBOs and reporting standards for the financial services industry, alongwith reputational issues being faced could translate to a significant loss in revenue and as such,crisis for the continued operations of government.

•

Continuation of an un-funded pension bill and the rise in subsidies to SOEs and SBs due toinefficient operations could increase debt levels beyond those projected and lead to issues withsustainability of debt costs.

•

Monetary tightening in advanced economies could elevate borrowing costs and curtail access todomestic markets and international capital markets.

To contend with these exposures, the government's risk mitigation action plan envisages a range ofstrategies to support the various agencies across government in ensuring that a robust and sustainablefiscal position is maintained.

Page I 26
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

6.

Assessment of Potential Sources of Financing

6.1

Domestic Sources

Over the medium-term, the domestic market will continue to be the main source of financing for thegovernment's needs, to ensure the improvement of costs in accordance with the objectives set to manage
the risks of the debt portfolio. Funding is planned to be secured via loans issued at varying maturities andat fixed interest rates, with variable rates to be considered based on conditions in the domestic market,
Le., demand preferences and interest rate trends.
External sources offunding will be used to complement domestic sources. To optimise portfolio risks, thegovernment will continue to secure external financing in the form of concessionalloans. These loans may
be from multilateral agencies and leverage credit enhancement options such as guarantees, from credibleinternational organizations like the Caribbean Development Bank, and explore other financing on an
opportunistic basis.

a. New financing Alternatives
Beyond the traditional borrowing instruments, the government acknowledges the availability ofalternative financing instruments being used to address public policy concerns in confronting the effects
of climate change, as well as for blue economy and biodiversity protection and climate change mitigation
and adaptation. Addressing these concerns will require substantial financing and will need to beaccompanied by a sound debt management strategy to support effective access to national andinternational debt markets.
The VI has not explored this alternative financing option as yet. But, in December 2023, a technicalassistance mission by IMF/CARTAC and COMSEC was the first step in the Territory's journey towards
eventually using these options as a financing source. After the mission, a 'roadmap', to establish the
Territory's eligibility for climate financing was prepared by the mission team. Considering the very small
team dedicated to debt management, the Ministry will be heavily reliant on IMF/CARTAC, COMSEC, andother donors and partners in achieving the various steps involved in the process. The process would be amulti-year one and wilt involve several agencies across the Government of the VI, and the steps will haveto be divided accordingly. Also, the process will involve several national organizations and ministries. A
detailed list of activities will be included in the Ministry of Finance annual work plan.
As observed from international experience, there is an increased interest among private, bilateral andmultilateral investors in two main sets of sovereign debt instruments has emerged. These instruments
have the potential to improve market access and financial conditions for sustainable financing by offering
opportunities for broadening the investor base, improving financing conditions (in tenor and cost), andincreasing the transparency and accountability of sovereign debt markets. A few new alternatives being
evaluated by the government are:• Sustainable Green, Blue or Social Bonds, styled "use of proceeds" loans or bonds that are directed
to finance new or existing projects with environmental and/or social benefits (e.g., a renewableenergy, social housing, clean transportation project). Typically, these bonds are aligned with thePage I 27
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

Green Bond Principles (GBP) from the 2020 International Capital Market Association (ICMA)-a setof guidelines that foster a transparent and unified reporting on the benefits and expected impact,
and the 2019 Sustainability Linked loans principles form the Loan Market Association (LMA); and• Sustainability-linked Bonds or Loans, which are structured using KPls that are linked to theachievement of climate or social goals and where performance vis-a-vis the KPls result in a decrease(step down) or increase (step up) in the instruments' coupon or interest rate. These loans and bonds
are also sometimes aligned to the Sustainable Development Goals (SDGs).
As a first step, the officers assigned to debt will work with the other agencies in government to identify
green, blue and social projects as well as key SDGs, that supports climate change mitigation andadaptation or biodiversity protection. The government intends to build a framework that incorporates
blue and green taxonomies, and that is aligned with internationally recognised best practices, as provided
by the ICMA and the LMA. The framework will explain the context and background of the policy
intervention and the functioning of the instruments in terms of execution, expected outcomes,
monitoring and reporting. Typically, this framework requires the examination and analysis of a Second
Party Opinion (SPO) provider-a reputed organisation that validates compliance of the framework withinternational best practices.
As a final step, the government would then identify the creditor/investor, the type of climate financeinstrument that is best for the BVI debt portfolio, and also identify whether the creditor/investors should
be domestic or external.
The government intends to commence this work during 2024, with technical assistance provided by the
IMF/CARTAC, COMSEC and other donors and partners, working with a team in the Ministry of Finance.

6.2

Strategic Benchmark and Targets

For the efficient management ofthe government debt, it is important to identify risks inherent in the debt
portfolio and to establish corresponding quantitative targets for the risk indicators. These targets help tocommunicate the debt management objectives more clearly, in terms of cost and risk factors, andfacilitate a more sustainable and predictable debt strategy, independent of political or other exogenous
impacts inherent to the debt portfo!!o.
Quantitative targets also allow for clear comparisons with the actual outcomes of the underlying
indicators. However, because unanticipated exogenous shocks and changes in market conditions create
uncertainty and risks, which often give rise to the potential need for quick responses by the debt
management team, these indicators are normally defined in ranges.
The key debt portfolio risks for the BVI are interest rate and refinancing risks and the objective of the debt
management strategy is managing these risks within prudent levels. However, if foreign-currency debt isacquired, then there will be an assodi:lted risk and the benchmark would then apply. The indicative
benchmark and target for key risk indicators are summarised below.

Page I 28
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

a. Interest Rate Risk Benchmark
This is the main risk in the portfolio forthe VI. The MTDS will place emphasis on stabilising debt service
costs by increasing the share of fixed rate debt in total debt portfolio to keep average time for refixing
greater than or equal to five years.

b. Re-Financing Risk Benchmark
The MTDS would seek to ensure a stable and affordable maturity structure to reduce refinancing risk
exposure by maintaining an ATM of greater than or equal to 7 years.

c. Foreign Currency Risk Benchmark
The currency and interest rate composition of debt and its maturity structure are important
determinants of debt vulnerability. Therefore, external (FX) debt will be maintained at 30% (+/-5%) of
total debt.
Foreign currency borrowings, if acquired, will be targeted at financing government's capital expenditures,
secure improvements in the policy, legal, and institutional framework for state-owned entities, publicprivate partnerships, fiscal management, and the small business and investment promotion, and build
resilience to climate change, including emergency and disaster response. There are no plans in place toborrow in foreign currency as part of this strategy.

7.

Modelling of the Medium-Term Debt Strategy

In formulating the MTDS, the costs and risks of four alternative debt strategies were assessed, under boththe baseline economic projections and potential shocks to the baseline . These plausible strategies weredeveloped by increasing/reducing the tenor of the domestic debt and the variation of domestic financing
instruments. Various debt strategies were analysed under the baseline macroeconomic and financing
assumptions and with different shock scenarios, involving interest rate, exchange rates, and a combinedinterest rate and exchange rate shock.
An optimal strategy was then selected based on cost and risk outcomes, as well as its impact on
development of the domestic bond market. Consistent with the medium-term fiscal framework of theGovernment, the MTDS was framed to finance the net fiscal deficit including capital expenditure over the
next three fiscal years.
Baseline-Pricing Assumptions and Description of Shock Scenarios

This section is based on the Government's projections and the assumptions of the expected market
interest and exchange rates during the strategy period.

a. Description of Stylized Instruments
Seven USD-denominated representative debt instruments were created for the analysis. The domestic
stylized debt instruments included market-based bonds and loans. The loans comprised concessional,

Page I 29
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

semi-concessional and commercial loans grouped into fixed and floating interest rates. Table 3 presents
a summary of the debt instruments and underlying terms.
Table 3: Baseline Pricing Assumptions

DX Multilateral LoansDX Multilateral LoansDX Domestic Commercial LoansDX Domestic Commercial LoansDX Other Domestic Loans
USD lOY Sustainable Bond wi UK Guarantee
USD 20Y Sustainable Bond wi UK Guarantee

Interest
Rate Type
Floating
Fixed
Fixed
Floating
Floating
Fixed
Fixed

Maturity(Yrs .)
15
15
12
12
12
10
20

Grace
(Yrs.)
5
5
2
2
2
9
19

Currency
Type
USD
USD
USD
USD
USD
USD
USD

b. Interest Rate Assumptions
To ensure that the MTDS baseline projections reflected current circumstances, different methodologies
and sources were utilised to appropriately model domestic and international markets rates. Overall, thebaseline projected an environment of increasing interest rates in the short-term, stabilising in the medium
to long-term.

Figure 10: Interest Rate Projections

MTDS Interest Rate Projections

10.00%
9.00%
8.00%
7.00%
6.00%
5.00%

-

4.00%
3.00%
2.00%
1.00%
0.00%

-

Domestic Commercial BanksJloating-

Domestic Commercial BanksJixed-

Other Domestic SourcesJloating-lOY Sustainable Bond w/UK Guarantee~20Y Sustainable Bond w/uK Guaranteec. Exchange Rate Assumptions
For the MTDS, it is assumed that all debt financing will be contracted in USD, the local currency of the VI.

Page I 30
The BVI Medium Term Debt Strategy. 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

d. Description of Shocks
Within the MTDS framework, different shock scenarios were applied to capture possible adverse
deviations from the baseline projections emanating from any further increases in the interest rates andnon-USD currency valuations that can impact the cost and risk profile of the portfolio. The
extreme/moderate shocks to the baseline projects are detailed below.
• Interest rate shock. Given this is the main risk in the portfolio, the moderate risk scenario simulated
a 200-basis point interest rate hike over the baseline projections applied to floating rate instruments
each year in the projection period. The extreme risk scenario assumed a stand-alone 400-basis
points rise over the baseline reference rate projections and, where applicable, variable spreads forfloating rate instruments, for each year of the strategy period, allowing a parallel shift or change inthe yield curve.
• Exchange rate shocks. Given the official currency of the VI is the U5D, there were no foreign
currency denominated instruments in the portfolio to necessitate modelling of a currency
depreciation.
7.1

Description of Alternative Debt Management Strategies

Considering the debt management objectives, four financing strategies were formulated to inform thegross financing needs and guide medium-term borrowing over the three-year MTD5 timeline as shown in
Table 4. The first two strategies (51 and 52) focused on possible strategies for the short to medium-term.
The final two strategies (53 and S4) were modelled after the strategy selection to explore the portfolio
cost/risk impact of integrating climate finance into the chosen strategy. Hence, S3 and 54 comprisecomponents of 51 together with terms representative of 10- and 20-year sustainable bonds. For eachstrategy, the cost and risk implications on the debt profile in the future are analysed to determine themost suitable debt strategy for the VI.
Each strategy considered a distinctive financing mix, comprising debt instruments issued in the local
domestic market open to both residents and non-residents denominated in USD. The alternative
strategies considered are summarised in Table 5.
Table 5 presents new financing and the gross borrowing by financing sources from the alternative
strategies considered for the period ending December 2026. Each alternative strategy presented different
combinations of borrowing instruments, thereby resulting in various debt compositions at the end of thestrategy period.

The Bvr Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

Page I 31

Table 4: Descriptions of Alternative Strategies
Description

Sl :

S2:
S3 :

S4:

•
•

Rolling over existing debt at similar or better terms
Lengthening portfolio maturity using various domestic commercial sources•

Addressing interest rate risk by issuing fixed rate debt•

Lengthening maturity using mainly multilateral sources•

Roll over maturing debt at similar or better terms•

Financing the gap similar to Sl, but instead, addressing refinancing and interest raterisk by issuing a 10-year sustainable bond•Roll over maturing debt at similar or better terms•

Financing the gap, similar to Sl, but instead, addressing refinancing and interest raterisk by issuing:•oa 10-year sustainable bondoa 20-year sustainable bondRoll over maturing debt at similar or better terms

Table 5: Gross Borrowing by Instrument under Alternative Strategies(In % of Gross Financing Needs by end-December 2026)

Total Gross norrowing (2024- 2026)
!

US$M

•

S1

52

53

54

Multilateral Sources

20.00

157.70

20.00

20.00

Commercial SourceslOY Sustainable Bond

178.3040.00

118.3060.00

118.3030.00

20Y Sustainable Bond

30.00

Gross Financing

198.30197.70198.30198.30Net Financing*146.20145.60146.20146.20*A negative figure represents an overall debt repayment, which means that for this representative instrument, there were more repayments than disbursements.

7.2

Result Analysis: Costs and Risks of Alternative Strategies

The outcomes of cost and risk trade-ofts of the various alternative strategies reflect a balance between
costs and risks and are used to inform the choice of the optimal strategy. Table 6 and Rgure 11 highlightthe cost and risk characteristics ofthe debt portfolio under the four alternative strategies considering theunderlying assumptions.

Page 132
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

Table 6: Cost and Risk Indicators under Alternative Strategies
As at 2026

2023

53

54

16.4
15.7
0.7

16.4
15.7
0.7

<20%

5.9
5.5

5.9
5.5

<4.5%

Weighted Average interest rate (%)
Debt maturing in 1 yr. (% ofRefinancing risk total)

5.3
13.2

51
16.4
15.7
0.7
5.9
5.5

Debt maturing in 1 yr. (% of
GDP)

1.0

0.9

0.6

0.9

0.9

ATM Domestic Portfolio (yrs.)

4.5
4.5

5.7
5.7

7.3
7.3

5.3
5.3

5.3
5.3

0.6

2.1

2.0

2.2

2.2

92.8
9.9

72.5
28.6

78.9
21.3

53.7
47.5

53.7
47.5

Current
Nominal debt as % of GDP

7.7

Present value debt as % of GDP

7.0
0.4

Interest payment as % of GDP

ATM Total Portfolio (yrs.)
Interest rate
risk

52
16.3
14.1
0.7
5.2
3.8

Long-term
Targets>5.5 yrs.

ATR (yrs.)
Debt refixing in 1 yr. (% of total)
Fixed rate debt (% of total)>40%

T-bills (% of total)
FX risk

FX debt as % of total

Note: Fixed rate debt includes T-bills, but VI does not currently engage in market instruments.

a. Growth of Public Debt
Nominal Debt to GDP: In the case of nominal Debt to GDP ratio, all four alternative strategies resultin a higher ratio compared to the baseline on account of increased financing needs required for capital
expenditure. Notwithstanding the increase, all strategies maintain the ratio at a sustainable level andare within the target for this ratio. All strategies performed similarly when nominal debt to GDP isconsidered. However, 52 outperformed the other strategies when the present value of debt as apercentage of GDP was considered given the higher proportional financing from multilateralconcessional sources.

b. Cost of Debt
Implied Interest Rate: All strategies presented similar interest payments as a percentage of GDP.
Although, 52 presented a marginally lower implied interest rate than other strategies, 52 presented
higher proportional interest rate risk (see point c below).

c.

Evaluation of Risks Profile
Interest Rate Risk: Interest rate risk was the most significant risk identified in the portfolio. As such,managing interest rate risk was a key consideration during the strategy selection process. Overall, 51
outperformed the other alternative strategies for managing interest rate risk when the interest raterisk indicators were considered.

Page I 33
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024

Refinancing Risk: All strategies performed well at reducing refinancing risk. Overall, 52 produced thebest results at extending the maturity of the portfolio.
Foreign Exchange Risk: All strategies performed similar given the portfolio comprises no non-USDdenominated debt.
Overall, the cost and risk indicators analysed under each strategy improved over the medium-term,
signaling progress towards achieving the long-term debt targets and benchmarks.
As shown in Table 6, under current market conditions, 51 is more feasible, produced better overall
performance under stressed conditions and therefore, has greater benefits to the debt management
objectives in the VI. 51 performed best at managing the main portfolio risk, interest rate risk. Additionally,
51 performed well at managing refinancing risk and aligned well with the gradual approach towards
achieving the long-term debt internal targets. When taken overall, 51 achieves the Government's broaddebt management objectives at the lowest possible cost and a prudent degree of risk, despite theuncertain global financial conditions previously outlined. Further, 51 presents the lowest risk forapproximately the same level of costs of the other alternative strategies while providing opportunities forthe domestic market to invest in Government debt and by extension national development.

7.3

Analysis of Cost-Risk Trade-Off of the Strategies

Several shocks were applied to the projected macroeconomic and market conditions, to ensure theGovernment of the Virgin Islands implements the most robust and resilient debt management strategy
among its various financing options. The capacity ofthe strategies considered in the analysis to withstandeconomic shocks are evaluated in Figure 11 which depicts the effects of baseline pricing and shock
scenario analysis considered. Specifically, the effects of these shocks on Debt/GDP and potential
increased costs measured by interest payments/revenues and interest payments/GDP were considered.
Risk measures estimate the potential unexpected increase in debt service payments produced by an
unanticipated shift in market variables, including changes in interest rates. In a deterministic setting,risk is measured as the difference between the cost over the period under a shock scenario and thebaseline cost. Overall; 51 performed better against alternative strategies under the various shock
scenarios further supporting the point that 51 presents the lowest risks among the strategies and remains
the most robust even in stressed conditions. As such, the cost risk combinations for 51 align well withachieving the debt management objectives of balancing both low cost and a prudent degree of risk,
despite the uncertain global financial conditions as outlined previously.

Page 134
The BVI Medium Term Debt Strategy, 2024 - 2026
Prepared by the Macro Fiscal Unit, Ministry of Finance
January 2024