Paying off the country’s burgeoning public debt will cost the Cayman Islands government an average of $34 million per year over the next four years, according to budget forecasts released last week.
Despite that hefty tab, the Islands’ outstanding borrowing balance at the end of 30 June, 2014, is expected to remain higher than $550 million.
The grim public debt picture is offset by government projections of a substantial operating surplus starting in the 2012/2013 budget year. However, the Cayman Islands is expected to remain non-compliant in at least three major financial management areas through mid-2014, according to government’s own forecast targets.
That essentially means the United Kingdom will be keeping a much closer eye on its overseas territories’ finances for the foreseeable future.
“There are principles of responsible financial management outlined in…the Public Management and Finance Law which are expected to be met,” Premier McKeeva Bush said last week. “But it must be recognised and understood that these principles are expected to be achieved through a broader economic strategy.”
According to government forecasts, it will cost taxpayers about $35.7 million to pay debt service and other financing expenses in the 2011/12 budget year, which begins in the middle of next year. After that, debt service payments will begin to shrink – but not significantly – through 2014.
Public sector borrowings are expected to decrease from $629 million to about $552 million between 2011 and 2014, according to Mr. Bush, who is also Cayman’s finance minister.
In the meantime, government revenues are expected to expand by more than $50 million over the three-year period, while operating expenses are expected to contract by some $45 million. If that happens, the government will be left with a budget surplus of nearly $60 million by mid-2014.
Mr. Bush said part of the cost-cutting plan means that government will not borrow to pay for new capital investment (construction) or operating expenses over the next three years. Moreover, Mr. Bush said government will limit all spending on construction projects to $25 million a year for the next three years.
“The government recognises the significance of managing public debt in order to keep it at manageable and acceptable levels,” read the government’s strategic policy statement for 2011/12. “Instead, the government seeks to maximise operating surpluses and to pursue other initiatives for financing.”
Some of those initiatives include plans for public-private partnerships and privately financed initiatives, which include proposals to divest some $47 million in government assets, including the planned privatisation of the country’s wastewater system.
A series of three separate laws to allow for that privatisation and to allow for the regulation of that industry is due to come before the Legislative Assembly when it resumes meeting next week.