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TCIG can afford to do lower LIVING COSTS; surplus hits $73 Million says Finance Minister

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By Dana Malcolm 

Staff Writer 

 

 

#TurksandCaicos, May 19, 2023 – Residents and politicians agree, the cost of living in the Turks and Caicos is especially high. It has been a regretful admission and an enduring complaint respectively over the years, even more so in the 2022/23 financial year.

A deadly cocktail of inflation over dependence on imports, almost no local food production, low exports, and a resource stifling war, has left the Turks and Caicos’ residents paying exorbitant prices on nearly every front, from food to gasoline to housing.

Despite several programs implemented in the financial year (2022/23), the Government has not quite managed to bring costs down significantly or even to cut the prices where they tend to balloon most significantly, at the ports.

Last year, the PNP Government stepped in with three programs to buffer residents from inflation: The Food and Fuel Tax Break (April 2022), the Bread Basket Duty Exemptions (August 2022), and the Fuel Factor Stabilization Credit (October 2022). Introduced alongside various stimulus payments, the credits were aimed at taming food, electricity, and gasoline costs.

Together, these were initially projected to cost the Government $ 21.5 million. That is $15 million for the Food and Fuel Tax Break, an initial 4 million for the Bead Basket exemptions and 2.5 million for the Fuel Factor.

It took some time, the measures suffered some technical setbacks but they eventually worked to lessen the strain and were given multiple extensions.

Still, Magnetic Media fielded residents’ questions, asking ‘whether this was the most the Government could do?’ The Government made it clear that the buffer was just that, a buffer, not a magic wand to eliminate the historic inflation rate entirely.

With the programs and inflation slowly decreasing globally, prices in the country eased a bit in all three areas. However, revealing public conversations with a leading shipper exposed that the Turks and Caicos uniquely pays more for goods brought in.  Having little exports, many learned, drives up the cost of imports which come largely from the USA.

Giving credence to the concerns that more could be done to reduce the cost of living in TCI, The Turks and Caicos Islands Government reported that revenue in 2022 took no significant hit from the three programs, which reduced or eliminated Government taxes on select commodities.

In fact, revenue earned on imports from January – September 2022 increased by 45.7 percent, or $497.5 Million, according to the Trade Report of April 2023.

The Budget Communication delivered by the Hon E Jay Saunders, Deputy Premier and Minister of Finance, Investment & Trade, further revealed that TCIG underspent its initial $388 million Budget for 2022-2023 by a whopping $48 million. That contributed to an ‘operating surplus’ of $73 million.

It now brings to the surface, yet again, that the TCI Government with only $600,000 in debt, tens of millions in surplus, and the understanding that the country’s unique position which forces the costs of fuel, food, electricity, and housing to be unrelentingly high, can afford to do more.

For the 2023/24 financial year E Jay Saunders, Deputy Premier and Finance Minister, has promised that with record profits recorded, cost of living is one of the main items the Government is looking to address. On the way, is a trio of social programs and port upgrades to make importation cheaper.

Finance

UK holds steady on interest rates 

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Dana Malcolm

Staff Writer 

 

#UnitedKingdom, September 24, 2023 – For the first time since 2021, the Bank of England has decided to ‘hold steady’ on interest rates rather than increase them.

The decision comes following an unexpected fall in inflation in the European country.

It means UK consumers’ interest rate remains at 5.25 percent.  According to the BOE reports tabled on September 21st, only 5 of the nine members of the Monetary Policy Committee (MPC) voted to keep the rate steady.

The Bank expects the inflation rate, currently at 6.7 percent, to reach the two percent target by mid-2025 and food inflation is going down.

But at the same time, the UK’s Gross Domestic Product GDP declined in July and growth is expected to stay weak, plus, unemployment is on the rise in the country.

“The Labour Force Survey unemployment rate rose to 4.3 percent in the three months to July, higher than expected in the August Report,” the bank explained.

The US also recently held steady on its interest rates after a significant period of increase.

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Finance

Canadian analysts watching for recession 

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Dana Malcolm

Staff Writer

 

#Canada, September 9, 2023 – Financial analysts are watching the Canadian economy for the possibility of recession following a contraction in its Gross Domestic Product (GDP) for the second quarter of 2023, and a decision to keep interest rates at 5 percent.

The Bank of Canada decided to ‘hold steady’ on interest rates this Wednesday, a week after Information shared by Statistics Canada revealed the country’s GDP declined last quarter, failing to reach the over 1 percent growth that was predicted by economists.

“The slowdown was attributable to continued declines in housing investment, smaller inventory accumulation, as well as slower international exports and household spending,” Statistics Canada explained.

Central Banks in North American countries like Canada and the US have been hiking interest rates over the past year to balance out inflation. Both countries want inflation levels to remain at 2 percent.

A recession occurs when a market records negative GDP growth for two consecutive quarters. If Canada records another contraction in its GDP for the third quarter of the year, it will officially be considered to be in a recession.

In late 2022, the Royal Bank of Canada had predicted the country would fall into recession early this year because of cooling housing markets and high interest rates.

The country has not recorded a recession since the beginning of the pandemic.

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Finance

TCI Commercial Banks CAUTIOUS about LENDING, Report reveals

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By Dana Malcolm

Staff Writer

 

#TurksandCaicos, August 14, 2023 – Credit risk in the Turks and Caicos is decreasing; however, local banks are still very cautious with their lending practices, according to the latest annual report from the Turks and Caicos Financial Services Commission (2021-22).

The FSC Bank and Trust Department oversees the six banking institutions operating locally, their report indicated that the bank’s liquid assets grew massively because residents began to save more money.

“The increase in the sector’s assets was funded by customers’ deposits, which grew by 26.5 percent,” it said. That pushed assets between the six banks to $2.7 billion. Banks are turning a profit, just not as much as before COVID-19. Still, the cash was good enough that they could shutter loan loss provisions they had made.

Not only were customers depositing more money, but with the improved state of the local economy, residents wishing to borrow were resilient to the impact of COVID-19.

Also, fewer residents were defaulting on their loans, the FSC found, with a 29 percent drop in non-performing loans (loans in default), and because of that banks spent 40 percent less on provisioning (money used to cover loans in default). Only four percent of all the loans in the country were listed as non-performing, a decline from five point four (5.4) percent the period prior.

Despite this, fearing rising inflation, and health crises globally, banks responded with ‘conservative lending practices and risk appetites.’

This was at the height of the COVID-19 pandemic.

Residents locally have complained bitterly about the difficulty they face in securing loans and Washington Misick, TCI Premier, has repeatedly put local banks on blast for de-risking and vowed to have the UK step in, to date there has been no change.

Meanwhile, five of the six banks recorded increases in assets and loan portfolios were smaller for four of them.

The FSC also revealed that with banks holding tight to the purse strings, an unregulated credit market had been allowed to flourish locally, which they said was a cause for concern.

“A growing non-bank lending market has emerged in the TCI, which creates competition for the banking sector. This increases the risk to the financial sector if left unregulated and should credit conditions deteriorate,” they explained.

Another concerning revelation is that Money Sending Businesses (MSBs), which are heavily patronized in the country because of the high level of expatriate workers, are taking a hit as well. This time because of high banking costs, de-risking and the emergence of alternate ways to send cash.

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