Concerns about Cayman not being able to borrow money have at least temporarily gone away with Legislative Assembly’s approval of the 2009/10 budget.
However, Leader of Government Business McKeeva Bush cautioned that the country will have to meet both its revenue and expenditure goals throughout the remainder of the budget year if it wants to escape further borrowing restrictions.
Mr. Bush set out Cayman’s borrowing plans over the course of the fiscal year in an 8 October letter to the UK’s Foreign and Commonwealth Office.
In the letter, he noted government intends to proceed with the following borrowing appropriations: CI $15 million to refund the central government bank overdraft facility; $154 million to convert an existing short-term loan into a long-term debt facility; and $106 million to fund current activities of the government, including on-going construction projects.
‘I wish to register my government’s gratitude for the attention paid by the UK government – the (Foreign and Commonwealth Office) to be specific, in particular your advice on various matters of cost cutting and a way of ascertaining sustainable revenue – in achieving our common goal of improving the state of public finances in the Cayman Islands,’ Mr. Bush wrote
UK foreign office Under-Secretary of State Chris Bryant, still in his post despite media reports to the contrary earlier this month, replied the same day in a somewhat contradictory letter in which he appeared to both approve and disapprove of Cayman’s further borrowing plans.
‘As you know, so far I have only agreed to permit borrowing of CI $50 million,’ Mr. Bryant’s reply letter stated.
The foreign office under-secretary continued to assert his earlier position that Cayman’s budget forecasts were ‘highly optimistic on both the expenditure and revenue sides.’
Mr. Bryant also stated that he still expected to see an independent report completed on Cayman’s options for ‘new revenue’ and asked that the terms of reference for that independent review be completed and sent to the foreign office by 31 October.
‘Thus far, none of the measures you have taken would introduce any form of direct taxation,’ Mr. Bryant wrote. ‘I remain firmly of the view that this is a mistake.’
Mr. Bryant then went on to reiterate that he would approve further borrowing capacity for Cayman, provided certain conditions were met.
‘However, I see that the budget was presented to the Legislative Assembly,’ the FCO minister continued. ‘If…you are genuinely confident that (the Cayman Islands government) can deliver the budget presented, I will be prepared to approve further borrowing of CI $225 million.’
Mr. Bush said last week, that as far as he was concerned, Cayman no longer needed UK approval to sustain borrowings as long as the country’s budget remained in compliance with the principles of responsible financial management set forth in Cayman Islands law.
The law requires the UK to grant the Cayman Islands permission to borrow money any time it operates outside of those financial principles which set limits on the amount of debt the country can have, and the cash reserves it must maintain, among other measures.
The previous People’s Progressive Movement government ended its term in office in violation of three of the six principles of responsible financial management.
Concerns about PFI
As he has stated previously, Mr. Bryant indicated his concern for government plans to divest itself of certain assets, including its unfinished office accommodation project and sewage plant.
Mr. Bryant indicated he would have a keen interest in examining such public-private partnerships or privately financed initiatives (PFIs) in the future.
‘In the current market you (referring to the CI government) may not get a good price for the new government administration building and other assets,’ Mr. Bryant stated. ‘No longer owning these assets will also have future implications for future operating expenditure.’
‘This is also the case if a (public-private partnership) arrangement is made for the schools, as seems to be under consideration,’ Mr. Bryant added, referring to two new public high schools being built on Grand Cayman.
In Legislative Assembly’s Finance Committee earlier this month, government ministers were questioned about the proposed sale of certain assets including the government office accommodation project.
Works Minister Juliana O’Connor-Connolly said no plans had been finalised and that government could not state when during the current fiscal year such an agreement might take place.
Still the minister
Governor Stuart Jack’s office confirmed Friday that Mr. Bryant is still the minister with responsibility for the UK overseas territories, including Cayman, despite reports in the UK press which indicated otherwise.
Governor’s office representative Steve Moore said that some additional responsibilities had been added to Mr. Bryant’s portfolio to include the European Union, but he would remain the under-secretary of state in the UK Foreign and Commonwealth Office.
Mr. Moore said Baroness Glenys Kinnock would also have her portfolio responsibilities within the foreign office changed, but she would not replace Mr. Bryant.