The Cayman Islands has asked the United Kingdom government for permission to extend its overdraft borrowing facility from $15 million to $30 million starting in February, according to Premier Juliana O’Connor-Connolly who spoke about the issue at a press briefing Thursday.
In addition, Mrs. O’Connor-Connolly said local officials had asked UK Overseas Territories Minister Mark Simmonds for permission to spend additional monies – outside the agreed 2012/13 budget – for various law enforcement purposes. She did not specify how much funding or the specific policing purposes for which government needed money.
With regard to the overdraft, which functions as a temporary borrowing facility to provide sources of revenue in anticipation of government earnings coming in later in the year, Premier O’Connor-Connolly said government revenues had been quite robust since the start of January. However, she said a few new revenue measures proposed by former Premier McKeeva Bush had not yet been put into place and so earnings from those had not yet been realised.
Mrs. O’Connor-Connolly said the remainder of those measures, including new legislation regulating Cayman Islands fund directors, should be put in place shortly.
According to government Budget and Management Unit officials, Cayman has the ability to go into an overdraft position of up to $66 million between 1 July, 2012, and 31 January, 2013. That means government can borrow up to that amount to cover short-term expenses until the higher-earning revenue months of the year.
“The proposed overdraft facility in the budget is simply a Treasury [Department] cash management tool,” Budget Management Director Ronnie Dunn stated in an e-mail explaining the situation last year. “It is necessary due to the seasonal nature of our revenues.”
Cayman gets most of its revenues from the financial services industry and the tourism industry during the first four months of the calendar year, January through April. However, the territory’s public sector budget year begins on 1 July and ends on 30 June.
The Cayman Islands government had placed an additional overdraft facility – or short term borrowing measure – of $15 million in its budget with availability between 1 February, 2013, and 30 June, 2013. Mrs. O’Connor-Connolly’s request would push that maximum amount to $30 million.
The UK had not agreed to that request by Thursday afternoon.
There is no long-term borrowing contained in the 2012/13 government budget, indeed the UK has forbidden that for Cayman until after the 2015/16 budget – four years from now.
That means government intends to pay back the amount of the initial $66 million overdraft borrowed when cash receipts from the high-earning revenue months of January through April start coming in.