Full Impact of Pound Sterling's Decline on Montserrat's Budgetary Aid to be Assessed

Montserrat is watching with bated breath as Britain's pound Sterling plunged to record lows on Monday and bonds were slammed for a second day, as investors punished UK assets after the government's mini-budget announcement last week.

Last Friday, finance minister Kwasi Kwarteng announced he was scrapping the country's top rate of income tax and cancelled a planned rise in corporate taxes - all on top of a hugely expensive plan to subsidize energy bills for households and businesses.

British government bond yields ripped higher in response, rising by the most in a single day in decades last Friday, as investors ditched gilts, while London-listed blue chips hit their lowest since early March.

Kwarteng on Sunday dismissed the freefall in the pound, saying his strategy was to focus more on longer-term growth and not short-term market reaction.

Sterling fell by more than 3% to its lowest since 1985 against the U.S. dollar last Friday, and weakened against the euro and Japanese yen as well, while government bonds recorded their sharpest daily sell-off in decades.

On Sunday Kwarteng defended the measures as supporting the economy in response to the once-in-a-generation shocks of the COVID-19 pandemic and the rise in energy prices following Russia's invasion of Ukraine.

Kwarteng says that as chancellor of the exchequer, he doesn't comment on market movements….adding that instead he is focused on growing the economy and making sure that Britain is an attractive place to invest,

defending the fiscal expansion despite the risks it fuels inflation further.

He explains that there's no way that a government... shouldn't respond in a fiscally expansive way (to) support the economy, support its people through these two unprecedented shocks."

Kwarteng says it is the responsibility of the Bank of England, and its governor Andrew Bailey, to deal with inflation.

The BoE raised interest rates by half a percentage point to 2.25% last Thursday, the day before Kwarteng announced his package.

Asked if he was worried about the level of inflation, Kwarteng said that he is confident that the Bank is dealing with tone doesn’t deal with people's rising cost of living by taking more of their money in tax."

Meantime, It is still not certain what the impact of the slumping value of the pound Sterling will have on Britain’s budgetary aid to Montserrat.

Successive Memoranda of Understanding (MOU) signed between the British Government and the government of Montserrat have stated that should there be any revenue shortfalls in the budget year caused by under-performance of revenue (which are not the outcome of extraordinary, external factors such as a hurricane), the government of Montserrat will be required to undertake spending restrictions, implement costs savings or use other methods to cover the shortfall.

The MOU also states that the Foreign and Commonwealth Development Office (FCDO) will not disperse extra funding to cover non-performance of revenue.