The public purse will break even by the end of the fiscal year, Cayman Islands Premier McKeeva Bush told members of a Finance Committee who this week approved an additional $49.1 million in public spending.
Instead of an expected deficit of $16 million, there would be “zero deficit and zero surplus”, said Mr. Bush, thanks to a combination of a $4 million gift from Dart, $8 million in revenue initially intended to be funnelled directly to the National Roads Authority and an additional $4.5 million in revenue.
However, statutory bodies and government-owned companies are expected to have a deficit of $6.9 million by the end of June.
The Finance Committee, chaired by Mr. Bush in his capacity as minister of finance, approved additional government spending of $49.1 million at the all-day meeting on Tuesday, 13 March.
The $49.1 million figure was reached as a result of appropriation decreases of $9.1 million in spending and an appropriation increase of $58.3 million, Mr. Bush said.
Recapping the government’s original sums for the budget approved by the Legislative Assembly last June, Mr. Bush said central government had earlier forecast a surplus of about $12 million and statutory authorities and government-owned companies were forecast to have a deficit of $8.4 million, combining to a forecast overall surplus for the public sector of $3.6 million.
“During the course of the fiscal year, the government has had to incur significant and necessary additional expenditures over and above the original budget appropriations, in areas such as crime fighting, social welfare-type expenditures and additional capital expenditures like a material amount for the completion of … Clifton Hunter High School by June this year,” Mr. Bush said. He added that increased operating expenditures amounted to $27.8 million.
He said government now expects to find itself in a “near break even position” by 30 June, with statutory authorities and government-owned companies having a reduced deficit of $6.9 million.
“In this climate, even though we had forecasted a surplus for central government, a break-even point is certainly better than being in a deficit … I would have much preferred to have the small surplus that we had indicated,” the premier said.
Additional government spending cannot be covered by borrowing, as the United Kingdom government has stipulated that the Cayman Islands, a British Overseas Territory, can take out no more loans.
Mr. Bush said there would be “constant and careful monitoring” of spending until 30 June, the end of the fiscal year.
The government has an approved overdraft limit of $25 million and currently has an overdraft balance of $9.2 million.
“It is sensible for the government to use the overdraft facility, which would be a temporary usage, rather than take on long-term debt to finance the requests and expenditures that have been asked for,” Mr. Bush said.
The premier said there had been requests for far higher public expenditure than what was included in the supplementary budget, but he could “not tolerate such expenditure at this time”.
The government’s reclaiming into its central coffers $8 million earmarked to go directly to the National Roads Authority drew questions from Leader of the Opposition Alden McLaughlin, who described the original arrangement of that revenue stream going straight to the NRA as a “curious” off-balance sheet exercise, which had not been approved by the Finance Committee.
Mr. Bush responded that during the development of the 2011-2012 budget, the government decided that instead of collecting revenue for the roads fund, from licensing fees, import duty and fuel charges, and using those proceeds to purchase outputs from the National Roads Authority, the money would go directly to the NRA.
However, during the fiscal year, after the NRA was subject to a public sector review, the minister in charge of Works, Juliana O’Connor-Connolly, determined the authority may be transformed into a regulatory authority at some future stage and could function at half its operating costs, so it would be accruing excess revenue that would not go to core government. Therefore, a decision was taken to maintain the status quo, Mr. Bush said.
In the meantime, during the year, Cabinet had been approving the expenditure of the National Roads Authority.
Mr. McLaughlin told Mr. Bush, “Do you not think this is a matter that ought have properly been brought to the attention of the Finance Committee? It is not up to the ministry to decide what happens to the government’s finances, it is a matter for the Finance Committee.”
The meeting continued until past 7pm on Tuesday night. A report on the meeting will be tabled at the next meeting of the Legislative Assembly, which Mr. Bush said was expected by the end of March.