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.”