Today’s Editorial for November 23: Realistic forecasts or wishful thinking?

After last week’s presentation of the Strategic Policy Statement, the Opposition questioned the government’s financial projections for the next two years, saying they might be a bit optimistic.

Ignoring the fact that the PPM asking this question was akin to the pot calling the kettle black – after all, they did the exact same thing when they were in office – we, too, must wonder how realistic the projections are.

The government said it expects its core revenues to go from an estimated actual $487.4 million at fiscal year end 30 June, 2009 to $562 million next year and $590 million by 2012/13.

The government also projects its expenditures to fall from $537.4 million at 30 June, 2009 to $522.3 million in 2012/13.

There’s a bit more than seven months left in the current budget year. We find it highly unlikely that the sum total of government’s new revenue measures, even if they are all put into effect by January, will earn the kind of cash government is banking on.

Also, this government proposes to do what no other has managed in at least the past decade: cut the budget by nearly CI$15 million over a three-year period. Considering the continually rising costs of items like health care, fuel, pensions and the like, we wish them good luck in that endeavour.

The strategic plan makes a seriously risky wager: that there will be a substantial recovery in the world financial markets by the last half of 2010. True, most finance gurus have predicted it, but they are cautious about the extent to which that recovery will occur, particularly in the US and the UK.

The FCO Director for the Overseas Territories Colin Roberts, who visited Cayman last week, noted that the Revenue Commission report will be due in early 2010 and that the impact of the various new revenue measures will then become apparent.

In the end, we hope the Cayman Islands is not forced into a corner where the UK can effectively control our financial destiny because of overly optimistic budget forecasts.