The United Kingdom has given its approval for the Cayman Islands to immediately borrow $50 million and it conditionally approved an additional $229 million of borrowings.
Leader of Government Business McKeeva Bush, speaking at Mary Miller Hall and to a live television audience, said the UK minister responsible for the overseas territories, Chris Bryant, had sent him a letter with the news on Monday.
The $50 million will allow the Cayman Islands pay a $15 million overdraft facility and to use $35 million for recurrent needs.
Of the other $229 million, if the Cayman complies with the UK’s conditions, $154 million would be used repay a temporary loan due 31 December 2009 and $75 million would be used to fund existing capital projects.
Among the conditions set out by Mr. Bryant – in a letter Mr. Bush called an ultimatum – were for the government to make real cuts in expenditure during the remaining portion of the 2009/10 financial year and to commit to further ambitious expenditure cuts.
Another condition of receiving the approval for the loans was an assessment of the public sector.
Mr. Bryant also insisted the government add a substantial sum of additional revenue in the current financial year and to commit to further broadening the revenue base for the 2010/11 financial year.
Although the Cayman Islands did not have to agree to direct taxation at this point, it did have to agree to an independent assessment of various methods of direct taxation to create a significant diversification of the government’s revenue base.
‘There will be no community enhancement fee, now; no income tax, now; no property tax, now; no death tax, now;’ Mr. Bush said, adding that at some point that could change.
Instead, however, Mr. Bush said he wanted to bring investment revenue into the island so none of the taxes would be necessary.
Mr. Bush said the government intended on meeting all the conditions for the loans approval.
With regard to new revenue measures for the current financial year, Mr. Bush said the government, consulting with the private sector, had come up with a plan to raise an additional $100 million of revenue.
‘The specific details will emerge in the budget,’ Mr. Bush said, adding that the budget session is expected to begin Thursday.
Some of the new revenue measures will include: a two-per cent increase on import duty; the elimination of duty-free exemptions on some specific items; an increased duty on cigarettes; an increased duty on non-essential watercraft; an increased duty on some other luxury goods; an increase in passport fees; the introduction of a small fee on overseas money remittances; and increased work permit fees.
With a simultaneous cut down on government expenditures, Mr. Bush said he hoped to present a 2009/2010 budget that showed a small surplus in the end.