UK sets 2015/16 deadline 
to fix Cayman’s finances

McKeeva Bush signs framework Cayman Islands 300x250

The United Kingdom’s recently-published Framework for Fiscal Responsibility document – signed Wednesday by Cayman Islands Premier McKeeva Bush – will require Cayman to meet debt limits set out in the country’s law by the government’s 2015/16 budget year.  

That budget year begins three and a half years from now.  

According to Cayman’s current spending plan, the government is out of compliance in three of the six areas measuring responsible financial management. In short, Cayman is paying too much each year to service its debts, its overall debts are too large compared to government revenues, and it does not have enough cash reserves to comply with legal requirements.  

Government financial records show Cayman almost reached the legal requirement for cash reserves in the current budget, having 87 days worth rather than the required 90 days.  

However, it is somewhat farther from meeting legally required limits for paying off debt and for overall debt limits as compared to revenue.  

According to budget records, Cayman’s “net debt” – the government’s total debts as compared with revenues – was estimated at 108 per cent for the current 2011/12 budget year. According to the Public Management and Finance Law, the Cayman Islands should maintain a “net debt” ratio of 80 per cent when compared with its revenues.  

Government estimates show the Cayman Islands’ total public sector debt will remain well above $500 million by mid-2014, despite payments of more than $30 million per year until then.  

During his budget address this summer, Premier McKeeva Bush said, as of 30 June, Cayman’s public sector debt was expected to reach nearly $626 million 
(approximately US$726 million).  

The country’s net worth was expected to be $485.6 million at that same time. By the end of the current budget year on 30 June, 2012, Premier Bush said public sector debt should have dropped to $599.3 million. 

The government has projected operating revenues at $535.8 million for the 2011/12 budget year. If that figure is achieved, public sector debt will still be well above the 100 per cent “net debt” level.  

The second serious problem area, debt servicing, will see government paying $33.4 million to pay off central government debts in the current year, making its debt service payments 11.2 per cent of core government revenues. That figure is supposed to come in at 10 per cent, according to the law.  

Cayman is already beholden to pay between $30 million and $40 million in each of the next two budget years just to meet debt service requirements. Even with these large sums, Cayman’s public sector debt will remain large – nearly $550 million by mid-2014, according to Mr. Bush.  

“For me, that is still too slow a progress,” he said back in June.  

The overall situation will make it “challenging to achieve” the 2015/2016 deadline set by the United Kingdom to comply with debt limits, according to a former external consultant to the Ministry of Finance.  

Paul Byles, the managing director of Focus Consulting, worked as a ministry consultant for more than a year and assisted with the government’s 2009/10 budget. He said the Cayman Islands’ government will face some tough decisions if it is to meet the 2015/16 deadline set by the UK.  

“You’re either going to have a lot of revenue or you’re going to have pay down some of your borrowing, or both,” Mr. Byles said. “I’m not saying it’s impossible, but I am saying it’s going to be challenging.”  

Mr. Byles said the divestment of certain government assets may be the only way to drum up enough revenues to pay off Cayman’s existing debts.  

“The other option would be to cut [government] expenses significantly,” he said. “But [cutting civil service jobs] wouldn’t be a good thing, because of the way the economy is right now. It needs to be done over the long term.”  

Mr. Bush has long maintained that privately financed initiatives and public-private partnerships are still on the table with regard to several government projects.  

“The primary objective of this strategy is to minimise the financial burden of these developments on the public purse while simultaneously creating new economic activities,” the Premier said during a speech to the Legislative Assembly earlier this year.  

Cayman’s opposition political party remains unsold on the prospect of divesting certain government assets in a process which Opposition Leader Alden McLaughlin has said looks to him like a high-interest, off the balance sheet loan deal.  

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

McKeeva Bush signs framework Cayman Islands

Premier McKeeva Bush and British Overseas Territories Minister Henry Bellingham sign the framework for fiscal responsibility agreement Wednesday. – Photo: Submitted

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  1. Now that the UK has thoughtfully outlined a framework and broad suspense dates for Caymans financial healing. I believe it is important to now set milestones and assign owners to each detailed objective..

    If the old crew was unable to keep the books, there may be a need to look down the chain for some new blood with newly acquired financial learning and motivation.

    The formation and assignment of these objectives should be done in house, no consultation should be needed or had.

    Government should as a back-up; formulate and configure its financial services to a trigger stage, a flat payroll percentage tax, to be ready for implementation if and when it is needed. Revenue there from to supplement financial obligations not met by fugal financial management and for national projects.

  2. Mr. Bush where are the jobs for the Caymanian people?

    Why are you generating revenue from work permits for jobs Caymanians
    should have?
    Where are the jobs for our 19 young lawyer grads who cannot get articled in the local law firms you keep granting work permits to employ x-pat lawyers? Why have you not pulled their license or impose a 200,000 fine?
    You promised these students faithfully that you would pressure law firms and mandate them to hire these young people.WHAT HAVE YOU DONE TO HELP THEM? ‘ N o t h in n g’!
    Whether our people are skilled, unskilled, professionals with Law degrees business degrees, or otherwise. Your UDP government is AGAINST CAYMANIANS BEING EMPLOYED. Rolston Anglin is the Poster Child for Joblessness amongst Caymanians as the minister for Labor and Educationdisenfranchising our young people by labeling them ‘UNEMPLOYABLE
    THE UDP GOVERNMENT HAS FAILED and your pension dipping package along with your Housing package will not suffice nor give Caymanians any good reason to re-elect the 2013.
    Caymanians do not need to dip into their pension they will need in their retirement years. Neither can Caymanians afford to be hood winked with the UDP housing scheme. Caymanians need opportunity to work in their own country and what part of this do you not understand. Passing legislation that certain jobs are to be reserved for Caymanians only is a confirmation that the UDP is a complete failure as they havn’t the intelligence to perceive that ALL JOBS SHOULD BE FOR CAYMANIANS unless the position cannot be filled by locals at that point and time an X-pat should be hired. This CORRUPT WAY OF RUNNING THE COUNTRY MUST COME TO AN END IN 2013.Every young person in the Cayman Island,s, old and young, rich and poor BE PREPARED TO VOTE THE UDP OUT OF OFFICE and do whatever is necessary to get Mr. Ezzard Miller into the seat of the Premier. IT IS A MUST if Caymanians plan on continuing living in the Cayman Islands.