Cayman’s economy will fare well, unemployment will be below 4%, there will be significant budget surpluses and no new fees or taxes for consumers and businesses from 2020 to 2022. At least, that is the view of government’s Strategic Policy Statement.
The policy statement informs the development of the next government budget, consisting of the financial years 2020 and 2021. The budget will be presented later this year.
During the three-year period discussed by the government forecast, Finance Minister Roy McTaggart expects to bring down government debt to the lowest level in 20 years.
Presenting his fiscal strategy in the Legislative Assembly on Friday, McTaggart said, “Managing the government’s operating expenditure in a way that maintains healthy operating surpluses remains a critical component of our financial management strategy.”
In doing so, the government would steadily reduce debt, fund its capital investment program and maintain cash reserves well above the minimum required by the Principles of Responsible Financial Management and the Framework for Fiscal Responsibility set out in the Public Management and Finance Law.
To keep the tax burden, the cost of living and the cost of doing business as low as possible, government had made the decision not to introduce any new coercive revenue measures in the medium term, he said.
Key to this will be that government funds its operations and capital investments from cash flow and cash reserves alone.
The strategic policy statement forecasts government revenues of $829.1 million, $851 million and $836.9 million from 2020 to 2022, well above operating expenditures of $734.2 million, $741.7 million and $746.8 during that period.
The expected budget surpluses of between $90 million and $109 million in each of the three years will be used to finance a range of initiatives from enhanced community policing, reformed social assistance programmes and the new Workforce Opportunities and Residency Cayman department to the new ministry to promote foreign investment in Cayman.
Planned infrastructure projects include the completion of John Gray High School and other school upgrades, and the extension of the East-West arterial to the Eastern Districts.
The implementation of the Integrated Solid Waste Management System, which includes a public-private partnership with a consortium led by Dart for a waste-to-energy facility, and the construction and operation of a new long-term residential mental health facility will also require extra funding.
In addition, excess funds will be used to enhance policy functions of the Cayman Islands Monetary Authority to respond to international regulatory changes and to improve cybersecurity and e-Government initiatives, the finance minister said.
In education, government aims to dedicate funds to increasing the use of online and computerised testing and to strengthening the core curriculum across primary and secondary schools.
Money will also be needed to conduct the population and housing census in 2020 and for the general election in 2021.
At the same time, the finance minister aims to continue to pay down government debt. “In fact, the government is planning to reduce public sector debt by a further $104 million during the forecast period, bringing it to the lowest level in over 20 years,” he said.
Under the Public Finance Management Law the cost of financing the entire public sector debt each year should not be higher than 10% of government’s core revenue. This debt servicing ratio is expected to be below 7% during the period.
The low debt ratio, “means that more of government’s revenues will be available to fund the demands for services or capital projects”, McTaggart said.
The optimistic forecast is based on the expectation that Cayman’s economy continues to grow “in a stable and sustainable way” with gross domestic product growth rates of between 2% and 2.2% during the period.
“These forecasts are underpinned by the assumption that the three key sectors of the Cayman Islands economy: financial services, tourism and business services will all continue to evolve and maintain their global competitiveness,” McTaggart said.
He added that, during the forecast period, the construction sector will be boosted by new hotel building and the development of the cruise and cargo port in George Town.
The import duty reductions for fuel, building materials and consumer retail goods that were introduced by the last administration remain in place.
“By keeping in place these import duty reductions, the government is doing its part to keep retail prices as low as possible thereby keeping the cost of living for households and the cost of doing business as low as possible,” McTaggart said.