Despite the economic impact of the COVID-19 pandemic, Cayman’s core government has maintained a surplus of $30.4 million in the first nine months of 2020.
According to government’s unaudited third-quarter financial results, the surplus was $32.2 million for the entire public sector. This is about $53.2 million less than the surplus expected by government at the beginning of the year.
The impact of COVID-19 on the economy resulted in $74.6 million lower-than-budgeted coercive revenues and $20.6 million higher outputs from statutory authorities and government-owned companies, especially Cayman Airways and the Health Services Authority.
Compared to the first three quarters of 2019, coercive revenues were down by $66 million.
Cayman’s shrinking working population, for instance, is reflected in lower-than-budgeted work-permit fee revenue of $28.9 million and a $6.8 million shortfall in collected annual permanent-resident fees.
The absence of tourism, as a result of the border closure, hit government revenues from tourist accommodation charges ($17.8 million less than expected) and cruise ship departure charges (down $5.3 million). Import duties, and gasoline and diesel duties, were also lower than estimated – by $16.6 million and $4.4 million, respectively.
This was partially offset by a higher-than-expected collection of stamp duty on land transfers (by $12.2 million) and higher revenue from mutual fund administrator fees (up $4.3 million).
Although personnel expenses were higher than last year because of a 5% cost-of-living adjustment, government saved $9.7 million from the allocated $275.4 million, as vacancies in several ministries and portfolios remained unfilled.
In addition, government spent $28.5 million less than allocated on supplies and consumables.
Government maintained about $321.7 million in operating cash and deposits, and $177.1 million in reserves and restricted deposits at the end of the third quarter. As a result, government’s total cash position of $498.8 million was $160.8 million lower than at the beginning of the year but $145.4 million higher than anticipated in the 2020 budget.
Looking towards the fourth quarter, it is important to note that government’s expenditures tend to rise during a financial year, whereas a significant portion of revenue is collected at the beginning of the year.
In October, government expected that it would end the 2020 financial year with an operating deficit of $168.7 million and cash reserves equivalent to 65 days of expenditures, less than the required operating surplus and 90 days of cash reserves stipulated under the Public Management and Finance Law.
“The 2020 third quarter’s performance indicates the likelihood that the Government will not be able to achieve its initial 2020 budgeted performance,” the financial report said. “The country, and the world, continues to be greatly impacted by the financial and economic effects of COVID-19 expenditures which are expected to continue along with the fall-off of revenue due to slowed tourism and local economic activity for the rest of the 2020 year.”