Premier: UK says no more borrowing

Opposition questions asset divestment

The Cayman Islands three-year spending plan that states government will have zero “borrowing needs” in each of its next two budget years was forced upon it by the United Kingdom, according to Premier McKeeva Bush.

The plan was released last year and detailed some measures the government would take to balance its budget, boost cash reserves and cut down on public debt. At that time, the UK essentially told its overseas territory to take the no-borrowing position.

“The stance of nil or very little external borrowing by the government of the Cayman Islands is one that is being forced upon us,” Premier McKeeva Bush said in an address to the country Wednesday night.

Mr. Bush said the marching orders came in a 10 June, 2010, letter from the UK’s Foreign and Commonwealth Office.

“I was told that the FCO would not permit the government of the Cayman Islands to borrow in the financial year that will start on 1 July,” he said.

The Cayman Islands was authorised to borrow up to $155 million through the end of the current fiscal year, which ends 30 June. Government has already borrowed US$128 million in short term loans, but has paid back US$36 million and is due to pay the rest in April.

Opposition Leader Alden McLaughlin said Thursday that the pronouncements regarding the UK’s orders were nothing new, and that they were known to the government in early 2010.

“What the premier is seeking to do is to use all of this as a basis for continuing with the sale of [certain] government assets,” Mr. McLaughlin said. “He has to make a case.”

Mr. Bush said Wednesday that his government is “fundamentally averse” to borrowing and blamed the previous government – of which Mr. McLaughlin was a part – for saddling the current one with responsibility for finishing major public projects.

If the full amount of $155 million was borrowed through the end of the current budget year, Mr. Bush said the country’s total public sector debt would balloon to $626 million by June. Government is already beholden to pay nearly $40 million in each of the next two budget years to reduce some of that debt.

Going forward, Premier Bush said, if Cayman wants to do public projects, it will either have to pay out of available funds or convince someone else to pay for them via an arrangement like a privately financed initiative or public-private partnership.

“The introduction of more revenue enhancement measures by the government is not an optimal choice,” he said. “The country must move on other alternatives to obtaining the resources needed to develop and enhance the Islands’ infrastructure; that is, by using public assets and using the proceeds therefrom to continue the development of these Islands.

“If this strategy is not pursued, coupled with the fact that external borrowing by government is not possible in the immediate years to come, then the development of infrastructure in these Islands – by government – will come to a grinding halt.”

For instance, expansion of the country’s water system and sewage treatment plant are projects that government can’t afford at the moment, the premier said. But without those necessary infrastructure improvements, economic growth would be stymied, he said.

Mr. Bush also acknowledged that government and the public can’t expect a few private sector developers to carry the load.

“Whilst we are deeply appreciative of development efforts by private sector entrepreneurs, government must lead in this development effort because it is in line with our objective of increasing investment in these Islands,” he said.

Mr. McLaughlin said he’s not sold on divestment of the Water Authority, which is one of the government’s most profitable statutory authorities.

“The curious thing about all of this is that despite these assertions [about asset divestment]….he hasn’t said what are the benefits that will actually accrue.

“We are just very concerned about the divestment of such a profitable government asset.”

6 COMMENTS

  1. Mclaughlin is always complaining about the current governments efforts to fix the problems they created. They are the ones that left the islands in such a terrible financial state yet they still have the nerve to put in their two cents. At this point they need to just keep quite. Divesting the Water Authority may not be a popular choice but it may be the only choice. If you are going to try a sell a business you have to show that it will be profitable to the buyers. Who would buy something like the turtle farm which does nothing but lose money. At least hes trying to make sure Cayman gets something out of the deal in the long run. If McLaughlin and his boys want to blame someone for this, they need to blame themselves for throwing so much money away and committing Cayman to so many projects that they couldnt really afford. They obviously had no clue that sometimes you have to save for a rainy day and now that it raining and theres been nothing saved we have do whatevers necessary to keep afloat.

    Shame on You PPM

  2. So, another one form the Hororable Premier. If this was known 8 months ago, why is it news today. Thats history.

    While I am not a rocket scientist, I am a little confused by reports about a surplus budget and all is rosey in Cayman as recently reported. Words such as SURPLUS were even spoken. Oops, I forgot about the creative accounting which can take place when crud is needed to look like cream.

    The cowboy rides again with a solution that the best way to finance operations is to sell the countrys assets. How original. Its the equivalent of selling the land on which your house is built to solve your financial problems. I know I have made this sound a little absurd, but in reality its whats being done. Just imagine. Only yesterday the public was advised that the Turtle Farm cost the country 27 million over the past 3 years.Ill stop there. I have work to do.

  3. gee, lining up the bowling pins (ie, give something to make the poor people happy minimum wage is coming in) that takes care of those votes.

    Now hit em with we have to tax Its coming. Sure as sunlight.

  4. NJ2Cay

    Let me break it down for you in good, old fashioned Caymanianism (how you like my creative word usage ha ha ha !)

    The PPM comes from a background leadership of the old merchant class of Cayman who have always controlled Caymans economy since slavery was abolished; their leadership heirarchy have never known many days of want in modern Cayman.

    Their political base however, is in the mainly urban area George Town working class people who have always depended on this leadership for jobs and advice; the priviledged leading the blind, if you like.

    The one thing that this coalition will not tolerate is being told that they cannot have what they want, when they want it and how they want it.

    It is because of this culture that the budget deficit was run up to the astronomical level that it was under the PPMs term in power.

    This current UDP government, under McKeeva Bushs leadership represent the new self-made Caymanian culture who have known what it is to do and go without.

    McKeeva Bush is only being pointed in the direction in which the UK Coalition Govt. is now headed in divesting public assets and giving over the running of public services to private enterprise; McKeeva Bush understands the concept quite well and would take it on board now much quicker than the PPM would.

    What Alden McLaughlin is now doing is working up the emotional triggers of his local followers by appealing to their sense of patriotism in order to unseat the UDP, come the next election.

    And then the cycle starts all over again except that the no borrowing rules will apply to him and his government as well, if they win the next election.

    Then we will see what the PPM will use as a carrot for their loyal, George Town based-supporters.

  5. This is all very sad: the result of naked politics (that is, in this case, being mainly about buying votes to stay in power while mortgaging the future of the country; seriously incompetent financial planning and management; you name it, Cayman has had it) as we have seen in so many other countries without resources except their people. And of course, who suffers? – the people.
    I look forward to seeing the details of the FOI request regarding the pensions of politicians.

  6. I Must Say Very Well Put Firery. I as well would like to see how they would fair without being able to borrow when they seem to always be against anything that could be upwardly mobile for Caymans economy..I can only imagine what they would be doing now if they were still in office and told they had to cut back so much.

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