*£500 million public loan will not be paid in time, refinancing needed
*Budget deficits affect ability to repay and need financing
*Need to return to budget surpluses to allow repayment
*Tightening of public and individual belts will be necessary


The GSLP-Liberal Government has confirmed that it will not pay the £500 million revolving borrowing facility with RBS/NatWest, secured by a UK guarantee, within the repayment due date, being 3rd December 2023.

It so said in answer to a question put to it by Roy Clinton in Parliament last week.

It seems that the intention is to crystallise the huge debt into a single facility, which will include a sensible and affordable longer-term repayment plan.


Crystallising that huge borrowing is the only way forward, but that will require that the Government demonstrate an ability to repay it, and will also likely need a continuation of the UK guarantee.

The UK guarantee ensures a lower interest rate, and provides the comfort needed by a lender to make the needed advance over the needed extended period. The UK, and any lending institution, because a lender does not like to resort to a guarantee for payment, will need to be satisfied that the loan will be repaid over its term.

Ability to repay is currently an issue due to the budget deficits that Gibraltar has been running.


The deficit in the 2020/2021 financial year was estimated at £158 million. The deficit in the 2021/2022 financial year was estimated at £55.3 million.

The GSD believe that the latter figure is substantially underreported, but let us leave that argument aside, as whether the amounts are bigger or smaller make little difference to the overall issue of the ability to repay.

A government that is running a deficit does not have the capacity to repay amounts borrowed, except through refinancing or increased borrowings.

The primary concern of any government in that situation, in the absence of an ability to refinance or borrow more, must be to ensure sufficient revenues to service and pay down the debt that will be crystallised by new longer-term borrowings negotiated on or before the 3rd December 2023.


What is known is that the Government estimates that, in the coming year, 2022/2023, it will make a saving of 6% on expenditure, when compared to the same amount in the last financial year, 2021/2022.

The million-dollar question is whether, it will be achieved and if so, whether it will be enough to reverse recent deficits, and allow for the start of repayments of hugely increased public borrowings.

Estimated expenditure in 2021/2022 amounted to £664.692 million. Estimated expenditure in 2022/2023 amounts to £623.954 million. It represents a projected saving of £40.758 million.

Two things need to be seen still, first whether the 2021/2022 estimate of expenditure has proved accurate, secondly, what the outcome of the 2022/2023 will be. Additionally, we must wait to see that Government revenues will have recovered sufficiently to result in a surplus.

The Governments ability to start repaying the £500 million revolving borrowing facility with RBS/NatWest, as refinanced over the longer period, which still seemingly needs to be negotiated, in large measure, will be connected to meeting the estimated budgetary constraints, and a recovery in public revenues.


At the start of this month, GSLP-Liberal Chief Minister, Fabian Picardo, when presenting the Appropriation Bill 2022/2023, said that 2021/2022, “was not a year of recovery, as many had wished and anticipated … economic recovery was … impaired and revenue did not return as expected to the traditional heads of revenue, such as duty and corporate taxation.

He went on to say, “… we will work to return our economy to surpluses as soon as possible, and to reduce the debt, in order to ensure that we put our public finances back onto the sound footing on which they were before the pandemic begun.”


There is no doubt that the sentiments and objectives explained by Mr. Picardo are the right ones, but achieving them will not be easy.

It is unlikely that the suffering of businesses over that period will allow for duty and corporate taxation government revenue to recover quite as quickly as to allow for Mr. Picardo’s aims to be met.

Businesses will need time to recover their turnover, and so increase imports on which duty is paid. In turn time will be needed by businesses to recoup any loss of business, and losses incurred during the pandemic and return to profit. That will mean that corporate taxation will take a longer time to recover.

A longer period will be needed before Mr. Picardo’s objective is attained, and that lag needs to be paid for from one source or another. In the time going forward public borrowings will be more difficult to negotiate.

The other option is reductions in public expenditure. Some are projected, but will they be achieved, and will they be enough? We shall see.


As the cloud of the pandemic fades, another possible cloud comes into greater focus, that is whether a treaty will be achieved over Gibraltar between the UK and the EU.

If no treaty is reached the consequence is that our economy will need to adjust to whatever the new circumstances might be. That time of adjustment will affect business.

If business is affected those revenue streams that Mr. Picardo speaks of, duty and corporate taxation, will be affected. Recovery will take longer.


There is one certainty, which is not exclusive to Gibraltar, recent events will result in the need for the public purse to be carefully managed, which will require difficult, but important, decisions to be taken by Mr. Picardo and his Government.

All and any reduction that may become necessary will have a direct impact on each one of us. The likely need for widening the personal tax net, and increasing taxation in many areas, is staring us in the face also.