The Cayman Islands has gone from a projected central government surplus of $13 million in February to a now-estimated $4.6 million operating deficit as of 5 May, according to Premier McKeeva Bush.
Addressing the country in a broadcast speech Monday night, Premier Bush said he intended to end the year with a budget surplus regardless of what happened during this two-month period.
“It is completely unacceptable to me that in February we achieved an unaudited actual surplus of $13 million and, with four months to go in the budget year, we could end up with a deficit result,” Mr. Bush said. “I am not accepting a deficit in the last four months of the year.”
Cayman’s current budget year runs from 1 July, 2010, to 30 June, 2011. Typically, the highest-earning revenue months for the government are between January and April.
An operating deficit means that central government’s revenues are not sufficient to cover its expenses in any given year.
Opposition Leader Alden McLaughlin said the government’s figures should be viewed with caution.
“My experience has taught me these figures cannot be trusted, absent an audit,” Mr. McLaughlin said.
Mr. Bush said Monday that he is tightening the purse strings through the end of 30 June, asking all government departments not to hire any new personnel.
“I have instructed the civil service to spend money only on the most vital of necessities,” he said. “If they spend unnecessarily the Treasury will not honour it.”
Financial Secretary Kenneth Jefferson said Friday that he wished to dispel rumours circulating in the Islands that the government Treasury had stopped signing checks altogether for the time being. Mr. Jefferson said such statements are “nonsense”.
To reach the desired surplus of $15 million – which Mr. Bush detailed in a 5 May memo that was obtained by the Caymanian Compass – 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.
According to the document, the $15 million surplus is 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, and $5 million to assist with the 2011/12 fiscal year that begins on 1 July.
Mr. Bush spoke about the progress made in reducing Cayman’s yearly operating deficits incurred since the 2008/09 fiscal year.
“Given all our circumstances, it is truly remarkable that we can now even think about achieving a surplus,” he said.
Operating surpluses or deficits are not carried over between years in government budgets. Typically, if there is a deficit, government must cover it with cash reserves, borrowings or a combination of the two. As at 30 June, 2009, the Cayman Islands public sector – including central government, statutory authorities and government-owned companies – finished the year with an $81 million operating deficit. That was about a month after Mr. Bush’s United Democratic Party government took over.
A year later, 30 June, 2010, unaudited budget figures from government show the operating deficit for that year to be $15 million for the entire public sector.
“This is a substantial improvement from the previous administration’s parting gift to the country of a deficit of $81 million,” Mr. Bush said.
Mr. McLaughlin took exception to those comments.
“The projected deficit of the current government is only for central government, not the entire public sector,” Mr. McLaughlin said. “So we are not comparing apples to apples.”
Mr. McLaughlin said last week the United Kingdom has issued no requirement for Cayman to end the 2010/11 budget year with a surplus.
The agreed upon three-year plan covers the current year, as well as the next two years, and forbids Cayman from borrowing any more money in the upcoming 2011/12 fiscal year.