Attempting to avoid a third straight end-of-year operating deficit, Cayman’s ruling government has ordered civil service budgets to be reduced again, less than two months before the end of the financial year.
Cayman Islands budget managers have been instructed to make up roughly $20 million in the next seven weeks prior to 30 June.
According to a memo issued Thursday, the details of which were shared with the Caymanian Compass, estimates taken at 5 May projected the government would end its current budget with a $4.6 million operating deficit.
That deficit figure includes only central government operations and does not take into account the performance of statutory authorities and government-owned companies. In recent years, those entities – taken collectively – have failed to reach an overall break-even position in the budget.
An operating deficit means government’s revenues are not sufficient to cover its spending for the period.
The memo indicated that Premier McKeeva Bush, who is also the minister of Finance, and the elected government found the projected $4.6 million gap to be “unacceptable” and stated that the government should seek to establish a $15 million budget surplus by fiscal year’s end.
“The Ministry of Finance will, in short order, develop reduced budgets for the ministries, portfolios and offices to adhere to,” read the memo, which was signed by Mr. Bush. “In the interim, it is expected that ministries, portfolios and offices will continue to practice expenditure restraint and will not incur expenditure unnecessarily.”
To reach the desired surplus figure, government managers would have to find an additional $20 million in the spending plan during the waning weeks of the fiscal year. It was not clear from the memo exactly how this would be achieved, but departments were advised that they would be given reduced budget limits. It was also stated that “ministries, portfolios and offices should not hire new staff” from the date of the 5 May memo until 30 June.
According to the document, the $15 million surplus was needed to cover three main areas:
$5 million to pay into the government’s general reserve fund
$5 million to pay into the public service pension past service liabilities
$5 million to assist with the 2011/12 fiscal year that begins on 1 July.
The Compass sent a list of questions to government regarding the budget situation Friday, but had not received a response by the end of the day.
Financial Secretary Kenneth Jefferson did contact the Compass by phone Friday to dispel rumours circulating in the Islands that the government Treasury had stopped signing checks for the time being. Mr. Jefferson said such statements were “nonsense”.
Cayman is in the midst of a three-year budget agreement that is being overseen by the United Kingdom’s Foreign and Commonwealth Office. The agreement, among other things, forbids Cayman from borrowing any more money in the upcoming budget year.
The UK also requires Cayman to enact measures that will reduce both its public debt and that will assist in balancing its yearly budget so that the government does not continue to incur operating deficits.
However, Opposition Leader Alden McLaughlin said Friday that he knew of no UK requirement for the Caymanian government to produce a budget surplus by the end of the 2010/11 fiscal year.
The three-year plan agreed in 2010 with the UK covers Cayman’s 2010/11, 2011/12 and 2012/13 budget years.