According to budget figures examined by the Caymanian Compass, the Cayman Islands government badly missed estimates on both the amount of cash it would have as of 30 June and the money it would take in.
The 2008/09 Annual Plan and Estimates document, released in May 2008, and later approved by the Legislative Assembly showed projections of an operating surplus expected to total CI$13.4 million at the end of the fiscal year, on 30 June, 2009.
The government’s operating deficit looks poised to end the year at CI$74 million, according to figures released last week by Leader of Government Business McKeeva Bush. That’s a turnaround of some $87 million in the course of the budget year.
Core government revenues were expected to come in at some $528 million during the 2008/09 fiscal year, according to the Annual Plan and Estimates issued in May of ’08.
Financial Secretary Ken Jefferson said this weekend that revenue projections for the year had dropped to $490 million, a difference of $38 million.
There was less of a difference over the course of the year with core government operating expenses, which fluctuated as government cut back to deal with a number of issues. However, at the start of the year, those expenses were estimated at $501 million. In the latest projections, government is expected to spend $513 million for the 2008/09 year.
Government reported in March 2009 that it expected an operating deficit of some CI $29 million by 30 June. But Mr. Jefferson said Saturday that the number had nearly tripled, largely due to declining core government revenues and increasing expenditures.
March’s report wasn’t the first sign of trouble for government finances.
In the annual economic report for 2007, released in September 2008, there were some early warning signs noted in the area of government spending.
Although Mr. Jefferson commented in that report that Cayman’s overall economy was holding up well during turbulent international financial times, the report also pointed out that government’s financial position was suffering even during 2007.
‘The fiscal performance for the Cayman Islands deteriorated as strong growth in expenditure outpaced the moderate increase in revenue,’ the report read (see Caymanian Compass, 16 September, 2008).
According to the report, total central government revenues in 2007 reached $512.9 million, while expenditures came to $552 million.
‘This resulted in an overall fiscal deficit of $39.1 million or 1.8 per cent of gross domestic product as compared to a surplus of $67.3 million in 2006,’ the report stated.
The report stated that the overall deficit was financed by disbursements of loan funds totalling $52.3 million during 2007.
In late March 2009, former Leader of Government Business and now Opposition Leader Kurt Tibbetts said that no one could have foreseen the events that led to the projected $29 million deficit.
Mr. Tibbetts argued that government was saddled with some $15 million in ‘extraordinary expenditure’ during the year, including rebuilding efforts on Cayman Brac from Hurricane Paloma, and ongoing police and judicial investigations being conducted by outside entities.
‘Many of those matters are things over which no one has control,’ Mr. Tibbetts said during a Cabinet press briefing.
Government revenues also continued to plummet through the last half of 2008 and early 2009 as tourism numbers dropped significantly and company registrations declined.
‘No one simply knew that nine months into the fiscal year this is exactly the situation we would be in,’ Mr. Tibbetts said in March. ‘No one knew that.’
Current Leader of Government Business McKeeva Bush warned in early 2008, as then-Opposition Leader, that government should reduce its levels of capital spending and borrowing in light of global economic concerns.
Mr. Bush said at the time: ‘It does not take an economist to understand that the Cayman Islands are very susceptible to global economic conditions.’