While it has helped drive down Cayman’s national debt over the past three years, a financial management agreement between the Cayman Islands and U.K. governments has delayed major public projects and may also delay repayment of further debts, Finance Minister Marco Archer said this week.
Mr. Archer said Cayman is in negotiations with U.K. foreign office leaders in an effort he hopes will make some terms of the government’s Framework for Fiscal Responsibility agreement less stringent.
“We spoke with the Foreign and Commonwealth Office and asked them if there’s some way to see if we can reduce the length of time it takes to get from concept to completion [of these public projects],” Mr. Archer said.
He said he did not intend to criticize the framework arrangement, which he believes has been positive for Cayman’s finances. Cayman has recorded budget surpluses of more than $100 million each year since 2013 and reduced central government debt from about $575 million to $500 in the past three years.
However, the framework agreement has caused some delays, particularly, Mr. Archer said, with the Progressives-led government’s efforts to get the George Town landfill remediation project off the ground. “We’ve taken a beating from a number of sources on the dump,” the minister said.
Various environmental and implementation studies required by the legally binding framework agreement have delayed the landfill and the port development projects’ start dates for years longer than the government expected, Mr. Archer said.
“All of those things combined for the landfill and the George Town cruise berthing facility and cargo dock have taken us several years and millions of dollars.”
“All of those things combined for the landfill and the George Town cruise berthing facility and cargo dock have taken us several years and millions of dollars,” he said. “But we’ve had to comply with every step … of the Framework for Fiscal Responsibility. We just want to be able to streamline the process.”
Following the cash surpluses generated in recent government budgets, Mr. Archer said it appears Cayman has some more money – perhaps between $8 million and $12 million – to pay off additional debts before they actually come due.
These are mainly “historical debts” amassed by separately operating statutory authorities and government-owned companies that accrue interest every year at a far greater rate than government’s cash accounts earn interest.
“We’re earning about 1 percent interest on our money, but the interest on the debt is accruing at 4 to 5 percent each year,” Mr. Archer said. “It doesn’t take a genius to figure out that’s not helping the country.”
The government’s Public Management and Finance Law would penalize the administration for paying more than 10 percent of its core revenues in any given year toward debt. If that occurs under the current arrangement, the U.K. could be placed back in direct control of Cayman’s government finances. Cayman just regained control of its annual budget, which it has had to present to the U.K. foreign office each year since 2010.
“We are awaiting the [foreign office’s] decision, but they agreed that what we were saying was not unusual,” Mr. Archer said.
Cayman has US$312 million in debt looming via a November 2019 bullet loan the previous government took out to help pay recurring costs.