Yikes! Gov’t deficit at $73.1M

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The
Cayman Islands financial position has not improved in the first six months of
the current budget year.

According
to figures presented by Premier McKeeva Bush in response to a parliamentary
question posed Thursday morning in the Legislative Assembly, the total
operating deficit in Cayman’s public sector had reached more than $73 million
between 1 July, 2009 and 31 December, 2009 – the first half of the fiscal year.

Total
government revenues were $179.7 million during those six months, while expenses
totaled $233.7 million.

Financing
expenses during the period totaled $11.8 million and extraordinary expenses
were $3.7 million, according to Premier Bush.

In
addition, the operating losses of statutory authorities and government
companies reached $3.4 million in the first six months of the year.

“The
country is in a precarious situation,” Mr. Bush told Legislative Assembly
members Thursday.

Typically,
Cayman’s big revenue earning months occur in January, February and March.
However, government projections for the last half of the financial year can
hardly be described as rosy.

According
to projections completed on 23 February, Mr. Bush said a $72 million dollar
drop off in government revenues was projected by 30 June, 2010 – the end of the
fiscal year.

Initial
revenue projections from central government dropped from $562 million to $490
million.

Government’s
financial forecasters were predicting a total public sector operating deficit
of $56.1 million by 30 June, Mr. Bush said.

On
the expenditure side, projections were that some $9 million would be cut from
government’s operating budget.

“But
I’m not content with that,” Mr. Bush said, adding that additional reductions
and cost-cutting strategies would be considered in the coming four months.

Of
crucial importance, the premier said, was the need to divest certain government
assets – including the under construction government office accommodation
project – to ensure a $151 million bank balance by fiscal year end.

If
those sales did not occur, Mr. Bush said the bank balance would drop some $111
million to a mere $39 million by the start of the next fiscal year.

“What
it means is that the budget of this country would fail,” he told the House.

Opposition
party member Alden McLaughlin questioned why the premier was so adamant about
the asset sales, since government was already going to be out of compliance
with legal financial requirements – including requirements to propose a
balanced budget for the year.

Mr.
McLaughlin said proceeds from the sale could not be used to help offset
government’s operating deficit in any case.

“How
will the sale prevent the need to lay off significant numbers of civil servants?”
Mr. McLaughlin asked.

Mr.
Bush said government would need cash to pay the salaries of some 3,800 civil
servants.

“A
country cannot wind up cash strapped….and uncertain how to make ends meet,” he
said.

Mr.
McLaughlin questioned whether Mr. Bush, when he meets with UK representatives
next month in London, would ask if Britain might temporarily relax certain
financial requirements for Cayman – including those that would restrict it from
borrowing more money in the next financial year.

Mr.
Bush has previously said that he doubted the UK would go for such a plan
without Cayman first agreeing to implement direct taxation, and in any case, he
said borrowing more would only add to the country’s financial problems.

“We don’t have any evidence
the UK is going to agree,” Mr. Bush said. “The country has over $500 million in
loans and less than $500 million in revenue.” 

1 COMMENT

  1. There is talk of cutting jobs in the government sector. This means more unemployment for Caymanians, and who is going to support them? Why shouldn’t higher paying civil servants take a freeze on pay increases for the next couple years? How about people earning over 50,000 taking a cut back of even 1,000 per year for a period of time to keep from laying off other fellow-Caymanians?

    Why not have multiple forums and “town meetings” with educated Caymanians, both born here & those who have adopted the island as their home to discuss and come up with practical, workable suggestions? Get people involved in working for their country? People should think about these issues before meeting and come prepared with action points and summaries of how to implement workable suggestions. The leaders of each of these meetings, (chairs) could then summarize and report back to our Government Ministers.

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