The finances of the Cayman Islands government are in much worse shape than was publicly reported in March of this year, according to Leader of Government Business McKeeva Bush.
In a lengthy statement issued this afternoon, Mr. Bush identified three areas of financial management principles that the Cayman Islands government was currently not meeting, which included; exceeding the amount of public debt the country can have, running up a $74 million deficit, and holding insufficient cash reserves.
“The country is faced with enormous challenges,” Mr. Bush’s statement read. “Full fiscal transparency would have helped everyone better prepare to address these issues.”
It was unclear from Mr. Bush’s statement whether the $74 million deficit was the estimate for only the current 2008/09 budget year, or a combination of the projected deficits for 2008/09 and the 2009/10 years.
In Cayman, the government’s fiscal year runs from 1 July to 30 June.
Mr. Bush also said the country had incurred a “record-level” of public debt, some $590 million and had only a $17 million cash balance.
Calls and e-mails to Financial Secretary Kenneth Jefferson seeking comment on Mr. Bush’s statement were not immediately returned.
The immediate budget problems facing Cayman would require another CI $140 million dollars in borrowing, on top of the $185 million bond issue the previous government had already approved.
“As a result of the former administration’s failure to comply with the principles of responsible financial management that are stipulated in the PMFL (Public Management and Finance Law), the Cayman Islands government must now seek the explicit approval of the [UK] Foreign and Commonwealth Office before incurring further borrowings,” Mr. Bush’s statement read.
Former Education Minister and now-opposition government member Alden McLaughlin told the Caymanian Compass on Friday that the government’s projected operating deficit was CI $29 million in March, and that Mr. Jefferson had informed government members in May that the deficit projections had not changed substantially.
Major financial worries for the government included:
*A projected combined $19 million operating deficit for statutory authorities and government companies at the end of June, those entities operating outside of central government. Those included projected deficits of CI $10.1 million for the Cayman Turtle Farm, CI $12 million for the Health Services Authority and CI $3 million for Cayman Airways.
*Cost overruns of some $17 million related to the financing of the construction of new public high schools.
*CI $16 million owed in payables by Cayman Airways for things like landing fees, and payments owed to local and overseas suppliers.
Mr. Bush said, despite these difficulties, the government would honour all of its public debt obligations. He said some “short-term” fixes would be announced in the near future, but did not specify what any of those might be.
Longer term Mr. Bush said government would concentrate on:
*Bringing new business activity to Cayman.
*Deeply examining the performance of non-central government entities, i.e. statutory authorities and government companies.
*Undertaking a cost review in central government.
*Not hurt the local economy further by implementing “any serious system of major taxes.”
*Eliminate unnecessary attendance of people in delegations overseas for events such as the Caribbean Tourism Organisation. Mr. Bush said the government had already saved some $100,000 by restricting attendance to that event this year.