The “cost” of the Cayman Islands government’s debt, what it either has already paid or is due to repay in interest and principal amounts between July 2015 and December 2019, is more than $443 million, according to a review of publicly available budget records.

That amount does not include $153 million government expects to borrow in late 2019 to refinance a portion of its debt.

The amount measured from the four financial years includes $127.35 million in “financing expenses” – this is the interest paid by government on the debt it owes. The figure includes amounts paid by the central government, as well as its associated statutory authorities and government-owned companies.

The remainder is $315 million in principal repayments. If all those payments are made as expected, they will take the country’s total debt down to about $318 million by December 2019.

The $318 million total debt would be the lowest amount government has held in more than a decade.

Averaged out over the four-and-a-half year period, the total debt repayments come to about $98 million dollars per year. That amount equals more than 10 percent of the entire public sector’s operating expenses for 2018.

Biting ‘the bullet’

The repayment of a $262 million (US$312 million) “bullet loan” during 2019 is the main reason the debt repayment amounts are much higher during the current period.

A bullet loan is a loan that comes due all at once on a specific date.

Finance Minister Roy McTaggart said last week that government was expecting to borrow $153 million to repay part of that loan and would pay the remainder out of cash reserves.

The long-term borrowing, the first Cayman has undertaken since 2011, will likely be necessary to ensure government does not spend all its available cash, he said.

“The government concluded it was not prudent to substantially deplete its entire cash balances in order to avoid external borrowing altogether,” Mr. McTaggart said.

The finance minister called it a “significant achievement” that by the time the “bullet loan” payment is due in November 2019, the government will have gone without using long-term borrowing for eight years.

“We have been able to fund all operating and capital investments from our own cash resources,” he said.

Cash surplus

The ability to fund government’s construction projects and operations from cash has been due, in part, to the accumulation of operating surpluses during each of the past four budget years.

The government is also expecting to achieve surpluses, meaning revenues will come in higher than expenses, during the next two budgets.

The cash surplus figures released by government include payments made toward annual interest on debt. They do not include principal debt repayments. Financial Secretary Kenneth Jefferson said this is in line with generally accepted accounting practices.

“It is quite correct and proper that the $55 million for operating surplus forecasted for the central government [for the current budget year] does not take into account principal debt repayments,” Mr. Jefferson said.

Mr. McTaggart said operating surpluses of $81 million in 2018 and $59 million for 2019 were expected to be achieved during the upcoming budget cycle.

“Some people ask – why must the government generate operating surpluses?” Mr. McTaggart said. “It is always wise to spend less than you earn … as it ensures that you will have the financial wherewithal to deal with unexpected circumstances.”