The Cayman Islands Government is running a $25 million-a-month deficit as a result of the coronavirus crisis.
Premier Alden McLaughlin said lost revenues and new expenses associated with the virus had hit government finances. But he said the picture was not as bleak as many had feared.
He said the country’s strong pre-COVID financial state had put it in a good position.
Though a new ‘line of credit’ that could provide $500 million in emergency funding has been negotiated with a consortium of banks and is expected to be announced in the coming weeks, McLaughlin said his government did not believe it would have to dip into that reserve until the middle of next year.
He said the $25 million per month loss was actually not as bad as feared at the outset of the crisis.
“It is less than we projected but we are still very much in the red,” he said.
“If things don’t get any worse than they are in terms of government revenue we should not need that line of credit during the balance of this term,” he said, referring to the electoral cycle which comes to an end with a general election in May 2021.
But he warned there was a risk that the crisis could continue both globally and locally well into next year.
“There is going to be a massive challenge for the next administration,” he said.
“When you look at what is happening around the world there is going to be real work to do…
“Anyone who believes things are not going to be difficult in the coming years has not quite grasped the gravity of the situation.”
Despite that diagnosis he said the Cayman economy was, in general, doing better than expected. He said construction was doing well, staycations were providing some income for struggling hoteliers and financial services was going through one of its best periods on record.
He said people should balance ‘saving and spending’ and spend in local businesses if they could afford to do so in order to help the economy, while ensuring their own financial situation remains secure.
He added that there was currently no consideration of allowing people to dip back into their pensions.
The ‘holiday’ on paying pension contributions will be extended to the end of the year, however.