Having an operating deficit of $25.6 million for a four-month period might seem like a major financial hit, but in the parlance of the Cayman Islands government, it’s actually quite a success.
The results from the first four months of the government’s fiscal year, between July 1 and Oct. 31, resulted in an operating deficit of $25.6 million – that means government expenses exceeded revenues for the first four months.
That’s not unusual, according to Finance Minister Marco Archer. In fact, the government had planned to lose $37.8 million during that period.
Typically, the government loses money during the first six months of the financial year, between July and December, and earns more revenues during the latter half of the budget year.
The January through April period is usually when most revenues from the financial services industry fees are collected and when tourism-related earnings are highest.
“Despite the deficit expected in the first half of the year, the public sector is budgeted to have an overall surplus of $100.3 million for the entire year that will end on June 30, 2014,” Mr. Archer said. “Vigilant monitoring of results for the remaining eight months is required to make [this] a reality.”
The Cayman Islands government will cut $22.5 million in expenses during the next two budget years and will not enact any “new” revenue measures, according to Finance Minister Archer, who presented the government’s strategic policy statement for the 2014/15 fiscal year to the Legislative Assembly earlier this year.
Mr. Archer said the Progressives-led government would move forward during this budget year with plans to charge registration fees to hedge fund directors. He also said it was likely government would increase some other fees between 2014 and 2017 to keep up with the cost of delivering those services.
He did not say which fees might increase.
In addition, government debt payments will be front-loaded in the next two years, while public spending on capital projects will be limited and paid only out of government operating surpluses, Mr. Archer said. There is no plan to use long-term borrowing through the 2016/17 budget year and Mr. Archer said his ministry would minimize use of short-term borrowing through overdraft facilities during those years.
If all this is achieved, “government will attain financial independence within a few years,” Mr. Archer told the Legislative Assembly.
He said the government would particularly focus on paying off debt this budget year and next year, retiring at least US$10 million in outstanding government bonds before the 2015/16 budget year.
The government’s four-year financial plan also set goals of CI$340.6 million in cash balances by June 30, 2016, the date set by the United Kingdom for Cayman’s compliance with the principles of responsible financial management set out in the territory’s Public Management and Finance Law.