Gov’t pushes back budget due date

The Cayman Islands government’s spending plan for the upcoming 2014/15 budget year will be brought to the Legislative Assembly on May 19, according to Finance Minister Marco Archer.

Mr. Archer said the proposal still requires approval from the United Kingdom, which must occur prior to the scheduled Legislative Assembly presentation. It typically takes at least a couple of weeks to ratify the budget as lawmakers go through it line by line in finance committee.

The budget was initially scheduled to be unveiled on May 2. The government must pass a budget by June 30 to maintain legal spending authority.

If government sticks to its four-year financial agreement set with the U.K. last year, it will anticipate a $123 million operating surplus by the end of the next budget year – that’s June 30, 2015.

The plan seeks a $12.5 million cut in spending from this year’s budget, with most of the reduction coming in the areas of supplies purchases and in subsidies to public sector statutory authorities and government-owned companies.

Budgeted figures may change depending on how the Cayman Islands fared during 2013/14. For example, as of Jan. 31, the government’s account was in surplus by $80.5 million. That figure is based on revenues of $385.9 million and spending of $305.4 million in central government between July 2013 and January 2014.

The revenue figures were $11.2 million higher than expected, while spending was $9.3 million below what was anticipated. If the government ends up doing better, or worse, than it anticipated at the beginning of the year, spending would have to be adjusted accordingly.

Government was projected to have an operating surplus – meaning revenues would be higher than expenditures – of $100.3 million by June 30, 2014.

“We appear to be on track to meet or better the projected $100 million operating surplus for this fiscal year,” Premier Alden McLaughlin said in February.

Further updates on government’s financial position for the current year have not been provided. Typically, the Cayman government’s highest-earning months of a fiscal year occur between January and April, when tourism revenues peak and most fees paid to government by the financial services industry are received.

Privatization

Premier McLaughlin has signalled that change is coming. He said in February that government needs to stop making “temporary” budget reductions and reconsider the overall size of the civil service.

“The reality is that, if government is to significantly and permanently reduce its head count … government is going to have to hive off some of the services it currently provides to the private sector,” he said. “We are examining what agencies and services could possibly be privatized. There are no sacred cows.

“The only criteria is that what is done is in the best interest of the Cayman Islands and its people, and that the sale of the agency doesn’t wind up costing us more in the long run.”

The extent to which privatization of government services might occur within the 2014/15 budget is not known. Mr. McLaughlin has said only that Cayman Airways would not be sold off.

Mr. Archer has said that budget numbers, particularly those involving government’s statutory authorities and government-owned companies, could be used to make a case for privatization. He said, for the current 2013/14 fiscal year, 18 percent of government’s operating expenditure, or $100.1 million, will go to purchase outputs – referred to as subsidies by government economists – from the statutory authorities and government-owned companies. Nearly 50 percent of government’s capital [construction] expenditures, $24.6 million, will go to statutory authorities and government-owned companies.

“Collectively, the [statutory authorities and government-owned companies] are expected to generate a net profit of $5 million dollars during the 2013/14 fiscal year,” Mr. Archer said.

However, the minister indicated the administration would not support random privatizing of certain public sector services without “careful consideration” and that the government was only taking a “global” look at it presently.

Debts

The government will also have to sort out some payments for its lingering “bullet loan” debts – debts that have to be paid all at once – which start coming due in the 2014/15 budget year.

According to previously released government records reviewed by the Caymanian Compass, there are five bullet loans taken out on behalf of the Cayman Islands Development Bank that have due dates listed as: April 2015 ($20 million), June 2015 (two payments totaling $11.8 million), July 2015 ($5 million), and January 2016 ($5 million). That equates to $41.8 million due between the last quarter of the 2014/15 government budget and the first half of the 2015/16 budget.

The first two payments of $20 million and $11.8 million are due during next year’s budget. The remaining $10 million in payments are due during the 2015/16 budget.

Mr. Archer has said Cayman would look to refinance a portion of the debt, though he has not said how much government would seek to refinance.

1 COMMENT

  1. Curious these Bullet loans that were taken out by the Cayman Development Bank. Does anyone know what the money was borrowed and used for and which administration did the borrowing.

Comments are closed.