The Cayman Islands government will accumulate operating surpluses of more than $555 million over the next four years, according to estimates presented last week by Premier Alden McLaughlin.
The current budget year, which ends on June 30, is expected to wind up with a $128 million surplus – government revenues that exceed its expenses during the period.
Similar surpluses are expected in the next three budget years, with current estimates totaling $124.5 million in 2015/16, $134.8 million in 2016/17 and $168.3 million in 2017/18.
“This government is now operating on a cash basis without need for an overdraft facility,” Mr. McLaughlin said, referring to short-term borrowing measures government was required to undertake to “make ends meet” during low-earning periods of previous years. Interest costs on that short-term debt reached as much as $750,000 in the 2012/13 fiscal year.
The $128 million operating surplus for the current budget does not represent cash that government receives free of other financial liabilities, however.
Since the Cayman Islands is not allowed to use long-term debt until at least mid-2016, due to financial agreements with the United Kingdom, any capital (construction) works government undertakes during the year will have to be paid out of operating surplus.
“The projected operating surplus does not factor in captial expenditure [approximately $45 million] and debt principal repayment [approx CI$26 million],” Finance Minister Marco Archer said. “The operating surplus would reflect operational expenditure which only includes interest expense on debt.”
Current financial arrangements with the U.K. mean more than $71 million will have to be subtracted from the operating surplus of $128 million, leaving Cayman with about $56 million.
Still, Mr. McLaughlin said, it is evident that the country is producing “consistent and real surpluses” that allow it pay off current loans while having cash left in the bank.
“Government will also have the means to further reduce borrowing by 2017/18,” Mr. McLaughlin said. “These surpluses, coupled with reduced borrowing, will help ensure that the country will be better able to withstand any future economic downturns.”