$12 million up, or $61 million down
The Cayman Islands government and the United Kingdom’s Foreign and Commonwealth Office have a distinct difference of opinion regarding whether the overseas territory will end its current budget year in the black or in the red.
According to Cayman Islands Premier McKeeva Bush, the country should have a $12 million operating surplus by 30 June, 2012.
However, the UK foreign office considers the country to have a $61 million deficit, when factoring in items like projected earnings losses in government-run entities and spending on capital (construction) projects. That deficit must be made up in one way or another prior to the end of the fiscal year.
They’re both looking at the same set of figures. The different outcomes are essentially due to how one looks at the numbers.
The government’s Annual Plan and Estimates document has, for the first time this year, included a run down of government’s “financing requirements” – basically what it has to spend to pay for capital projects.
“When all is said and done, the government financing requirement is the additional money [Cayman Islands government] needs during 2011/12 to meet its commitments,” read a statement the governor’s office sent to the Caymanian Compass. “Last fiscal year they needed an additional $75 million and the $154 million borrowed was partly for this reason.”
In the current year, the foreign office prevented Cayman from borrowing further funds. So Cayman has to make up $61 million in financing requirements either from cash reserves or the divestment of certain assets.
“This year [government] indicated that the government financing requirement will be met not from borrowing, but from the reserves,” the governor’s office statement continued.
Government finance officials said this financing requirement for public projects has never been included in figures for operating revenues and operating expenses.
Considering those alone, including losses from statutory authorities and government companies, Cayman expects to end the year with a $3.7 million operating surplus. Premier Bush’s estimate of $12 million did not count the spending to cover operating losses of the government authorities and companies.
Mr. Bush has said the UK’s approval of Cayman’s budget was contingent upon government controlling its operational spending – keeping it to approximately $490 million for the year, which runs from 1 July, 2011 to 30 June, 2012.
The 2011/12 budget contains one new revenue measure, a $1,500 per year fee on certain “master fund” hedge funds. The proceeds from that fee would be used as a rebate to Caribbean Utilities Company to offset residential electricity bills, Mr. Bush said.
Following the Premier’s budget address on 10 June, Financial Secretary Ken Jefferson said the Cayman Islands met all of the United Kingdom’s demands with regard to central government operating expenses for the coming year.
For the 2010/11 fiscal year, which ends on 30 June, central government operating expenses were forecast to be $490.2 million, Mr. Jefferson said.
In the budget plan for 2011/12, which starts on 1 July, central government operating expenses are CI$489.9 million, he said.
However, those figures do not include debt service payments, foreign currency exchange costs or any projected debts from statutory authorities and government-owned companies that might arise.
According to budget documents – when those amounts are factored in – the Cayman Islands’ total forecast operating expenses in the 2010/11 budget year were stated as $520.7 million.
For the 2011/12 year, total expenses were budgeted at $532.2 million, about $11.5 million higher than the year before.