At Wednesday’s inaugural post-election Legislative Assembly meeting, Cayman Islands Finance Minister Marco Archer not only declared the end of unemployment, but detailed an interim budget of nearly $194 million through 31 October.
The interim budget was approved unanimously by lawmakers late Wednesday afternoon.
Forecasting a “significant operating surplus” by the close of the 2013/14 fiscal year on 30 June, 2014, Mr. Archer listed broad expenditures, the largest of which was $153.5 million for “output groups”, services supplied to government by various departments throughout the year.
Among the highlights were another $13.6 million for “transfer payments”, such as scholarships, housing assistance and poor relief; almost $8 million to finance government debt; $6.6 million for “other executive expenses” such as salaries, medical care, pensions and expenses for the judiciary, the premier, the governor, legislators and the financial secretary; and nearly $9 million in “equity expenses”, which includes payments to the various ministries, a $1.7 million subsidy to Cayman Airways, $2.7 million for the Turtle Farm, $600,000 for the National Housing Development Trust and various sums for CINICO, the Office of the Premier and various statutory authorities.
Mr. Archer also announced a $30 million overdraft facility for the 1 July to 31 October interim period. The overdraft is a short-term loan used to bridge the gap during government’s lower-earning revenue months of July through November.
“We have a $15 million bank account,” he said, boosted by the overdraft, “making a balance that adds up to $45 million.” Coupled with non-cash outgo of $8.5 million in depreciation allowances for fixed and long-term assets, Mr. Archer said, government expected an overall deficit – pegged at $56 million – to be reduced to only $2.5 million at the end of the interim period on 31 October.
“That overdraft is adequate to deal with a possible $56 million deficit [during the four-month period],” he assured the chamber, saying any shortfalls during the four-month period “should not cause alarm. They are perfectly normal.”
Government expenditures between July and October, he said, traditionally outpaced revenues. January through March, he said, “is when government revenues far outstrip expenditures – and the full-year budget shows a significant operating surplus”, although he stopped short of naming a figure. Cautioning that the July through October budget did not comprise one-third of the 2013/14 accounts, Mr. Archer said the administration would “encourage savings”, while the local economy “had rebounded to a full-employment level”.
The government’s current budget year ends on Sunday. Mr. Archer said he expected the 2012/13 budget cycle to end with an operating surplus, but again would not commit to naming a specific figure. Earlier estimates from April had put the surplus number at $51 million – down from the $82 million surplus former Premier McKeeva Bush’s government had projected last year.
The Legislative Assembly will meet sometime in mid-September to review the full year budget for 2013/14, Premier Alden McLaughlin said.
However, there are a few matters to clear up prior to the regular budget meeting.
Mr. McLaughlin revealed Wednesday that some “exceptional expenditures” from the previous United Democratic Party administration, dating back as far as mid-2009, had not been approved in supplementary appropriations before the LA’s Finance Committee. Although the money for most of those items has likely already been spent, Mr. McLaughlin said some “cleaning up” was required for those items.
He did not specify exactly what “exceptional expenditures” had not received approval. It was expected the special Finance Committee meeting would be called sometime in August.
Mr. McLaughlin told the House that the previous UDP budget had set “overly ambitious” targets to reduce spending and investment, stifling the rebound in the Cayman economy.
“We believe a more gradual phased approach should be taken,” he said.
Without detailing any financing arrangements, Mr. McLaughlin nonetheless named downtown cruise ship berthing and airport expansion as his top priorities and alluded cryptically to “another major infrastructure project that would be structured as a public-private partnership” serving as a “catalyst for economic development in the eastern districts”.
Revenue raising, the premier said, should not burden the private sector, discouraging investment. Streamlining performance at statutory authorities and government-owned companies could offer savings.
Public debt would be refinanced, he said, moving away from “interest-only bullet bond-type borrowing instruments”, and creating a “sinking fund” to pay off “non-amortised debt as it comes due”. He also reiterated administration opposition to any form of taxation, saying “we stand behind the Cayman model and do not support the introduction of income tax, payroll tax, property tax or value-added tax”.