Financial Secretary Kenneth Jefferson said in the Budget Address last Friday that Government would seek an appropriation to borrow up to $94 million in the 2006/07 fiscal year.
This figure is $5 million more than the $89 million envisaged in the Strategic Policy Statement released by the Government last fall.
Mr. Jefferson said it would be ‘hasty and unjustified to criticise the anticipated borrowing of an additional $5 million.
‘Government has an appropriation to borrow $63 million in the financial year that will end 30 June 2006,’ he said. ‘To date, only $24 million has been drawn down of the $63 million borrowing ability.’
Mr. Jefferson noted that Government does not anticipate the need to borrow any further amount in this fiscal year.
‘The unused borrowing ability is therefore expected to be $39 million in respect of the 2005/06 financial year,’ he said. ‘Since the $63 million appropriation for 2005/06 was intended to assist in the financing of the capital expenditures during that year, coupled with the fact that a significant portion of those expenditures will not occur until the upcoming financial years, it is only fair and reasonable that the Government seeks to borrow, in 2006/07, a portion of the unused loan appropriation of $39 million that is likely to exist at 30 June 2006.’
Mr. Jefferson said the borrowing complies with the Principles of Responsible Financial Management contained in Section 14 of the Public Management and Finance Law.
‘The third principle requires that the Government’s interest and other debt servicing expenses, plus principal repayments of its borrowings, should not exceed 10 per cent of its revenues,’ he said. ‘The Government’s forecast debt servicing ration for 2006/07 is 7.1 per cent, which complies with this principle.’
In addition, Mr. Jefferson said the Government’s Net Debt Ratio should not exceed 80 per cent under the PMFL principles. That ratio is determined by taking the existing balance of Government’s borrowing, adding a risk-weighted portion of public authorities’ debt, subtracting Government’s cash balances and then dividing by Government’s revenue.
‘The forecast Net Debt Ratio for 2006/07 is 60 per cent, which complies with (the) Principle,’ he said.
Leader of Government Business Kurt Tibbetts called the Budget prudent, and noted the planned borrowing was ‘well within the parameters of the Public Management and Finance Law.’
During the 2006/07 fiscal year, Government proposed a capital expenditure of $130 million, something Mr. Tibbetts called ‘the largest capital budget of any government in the history of the Cayman Island.’
The spending is necessary to address the country’s critical infrastructure needs, Mr. Tibbetts said.
Leader of the Opposition McKeeva Bush said Monday that he believes the Government is borrowing far too much money.
‘I am concerned about spiralling debt,’ he said.
‘I’ve seen many countries in the region get into problems with debt when they could make the argument that there were good projects to spend on,’ he said. ‘But you can only afford to spend so much.’
Mr. Bush said the capital spending programme was too ambitions.
‘What they’re trying to do all at one time will be a (debt) burden to the future generations of this country,’ he said. ‘They’re going about it wrong. It can be done in a different way.’
Mr. Bush said he believed the projects could be funded through private sector investments.
The budget debate in the Legislative Assembly starts Wednesday.