Government has issued a request for proposal for a standby line of credit of $500 million which it intends to use as a contingency plan should its reserves be significantly impacted by the COVID-19 pandemic.

The RFP was posted Thursday in government’s public procurement portal and has a closing date of 2 July.

According to the brief synopsis accompanying the request, government is seeking access to a standby line of credit in the “amount of US$609,756,098 (the US$ equivalent of CI$500,000,000), to address the Government’s potential needs as a result of the possible loss of revenue and increased expenditure related to COVID-19”.

Finance Minister Roy McTaggart, in response to queries from the Cayman Compass, said government cannot access the line of credit without permission from the United Kingdom.

“We will need to seek approval of the FCO [Foreign and Commonwealth Office] to draw on the [line of credit] if there is a breach of the Framework for Fiscal Responsibility as contained in the Public Management and Finance Law at the time of borrowing,” he said on Friday.

Last month, McTaggart, in outlining Cayman’s economic picture as a result of the pandemic, announced the proposed line of credit over an 18-month period.

He said Cabinet authorised the RFP in light of the significant deterioration in government’s fiscal performance and in order to give the country the financial security and build the resilience that it would need.

“This line of credit will be utilised, or drawn down, only if we find ourselves in the unfortunate position of having exhausted all of the cash reserves available to us,” he said at the 25 May COVID-19 press briefing.

He pointed out that government also needs to seek the approval of the Legislative Assembly “if and when” it needs to use the line of credit.

McTaggart said if the standby line of credit is utilised before the expiry of the 18-month period, the government intends to convert the amount used into a 15-year fixed rate amortising loan.

Amortising loans allow principal and interest payments to be made together in one sum.

The minister said the line of credit is effectively “a security blanket” to give Cayman the resilience and the ability to access funding quickly if needed.

“I do not want the country to be placed into a position where we have to be scrambling to find or to borrow money when, in effect, every other country in the world right now and every major business is seeking to borrow money in the commercial markets and in the banking systems worldwide,” he added.

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