The COVID-19 pandemic has had a major impact on all of the Overseas Territories, including Gibraltar, where it has impacted on around 60% of its economy. The Government of Gibraltar also instituted a lockdown and financial support package broadly similar to that in the UK. The cost of maintaining this support and related measures, combined with the loss of revenue from its key sectors, has put a significant strain on the Government of Gibraltar’s finances. Consequently, the Chief Minister of Gibraltar sought financial support from the UK Government (HMG), as the sovereign power.
The UK Government was clear at the outset of the COVID-19 pandemic that it was looking to Overseas Territories to make full use of their financial resources in order to address the needs of their people: we also indicated that we would consider requests for further support on a case-by-case basis, to complement comprehensive local responses. Following discussions with the Chief Minister, it was agreed that HMG would provide a Loan Guarantee for a lending facility of up to £500m. This will provide resilience to the Government of Gibraltar’s finances by enabling it to borrow at more favourable rates, by leveraging HMG’s high sovereign credit rating as the guarantor, confirming the Government of Gibraltar’s capacity to repay the principal loan, providing HMG with the reassurance regarding its liability under the guarantee.
A Contingent Liability Checklist has been approved by HMT and FCDO ministers. The Government of Gibraltar has identified a bank prepared to open the requested drawdown facility, under acceptable terms, and contracts are being prepared for signature. The Government of Gibraltar has made commitments on transparency and information sharing and has ensured compliance with all relevant international standards in this respect.
The serious impact of Covid-19 on Gibraltar’s economy means that it is important that these contracts are signed at the earliest opportunity. I have written to the Foreign Affairs Committee and the Public Accounts Committee explaining that it has not been possible to consult Parliament in advance on this occasion.
A departmental Minute has been laid in the House of Commons providing further detail on this contingent liability. I will keep the House informed of further significant developments in the case.