Public sector finances in the first three months of this year were better than budgeted, exceeding the surplus reached during the same period last year, Finance Minister Chris Saunders reported at a press briefing on Wednesday.
Government earned a surplus of $196.2 million in the first quarter of 2021, benefitting from financial services fees that are predominantly due at the beginning of the year.
This surplus is $27.4 million higher than what was budgeted more than a year ago for the three-month period ending 31 March 2021. At the same time, the surplus was $23.9 million greater than the $172.3 million achieved during the first quarter last year.
Statutory authorities and government companies added a net surplus of $6.4 million so that the entire public sector surplus in the first three months of 2021 stood at $202.6 million.
Government’s debt position has also improved.
The size of total government debt of $243.8 million at the end of March represents about 5.1% of Cayman’s annual economic activity.
Saunders said the debt balance continues to decline and the debt-to-GDP ratio is one of the best in the world.
The finance minister noted that government will continue to refrain from borrowing as long as possible, but it may become necessary if the borders remain closed and the economy is not operating at its full potential.
Government’s cash balance and reserves reached $611.2 million at the end of March. Of these funds, $172.1 million are restricted, as part of government’s general reserve and the Environmental Protection Fund. Restricted reserves can only be spent with the approval of Parliament.
This means government maintains $431.9 million in operating cash that can be used freely. Together with a $330 million line of credit agreed last year with a syndicate of local banks, Saunders said, “there is no issue with cash”.
Government has been tracking both customs and stamp duties which have been driving the economy recently. Last year, customs duty revenue increased from a monthly average of $10 million, to $16 million after the government allowed almost $500 million in pension withdrawals that were injected into the economy. In the first three months of 2021, revenues from customs duties dropped to a monthly average of $15 million but increased again in April to close to $30 million.
Stamp duties showed another positive trend, Saunders noted. After revenues from stamp duties averaged $6 million a month in the first quarter, April recorded the highest government stamp duty income on record at around $12 million.
The last economic update released in March before the general election predicted an entire public sector budget deficit of $157.4 million for the 2021 financial year.
Reducing this projected deficit will depend on several factors, the finance minister said, including improvements to the country’s vaccination rate.
Saunders said there will be no cuts in domestic spending and the government will be looking at ways to encourage funds to remain in the local economy. He said motivating more people to support local farmers and being more energy efficient would help reduce the amount of monies sent overseas to buy agricultural and fuel products.
Saunders said, “We know that many people are still experiencing hardships from the high cost of living, which continues to impact their quality of life.”
He added that Cayman is in a much-better financial position than most countries. But the lack of half a million tourists a year coming to Cayman and spending money locally was clearly having an effect.
“Many people who are not in the tourism industry are not feeling it. But for people who are in tourism they are feeling it, especially now when it would have been high season for them,” he said.
Government has the funds and will extend the $1,500 monthly stipends to displaced tourism workers, he said. But the “genuine hurt from not being able to contribute as a productive citizen” is a cost that has not been quantified, Saunders added.
“We definitely need our tourism industry back. There are no ifs or buts about that.”
Best-ever public sector audit season
Government’s financial accountability and transparency are improving as well, according to the auditor general’s office.
Auditor General Sue Winspear reported last week that by the statutory deadline of 30 April, 35 public sector entity financial audits were completed and all received unqualified audit opinions.
“The improvement in public service entity financial reporting continues year on year and I am grateful to all involved for their efforts,” Winspear said in a press release. “I want to pay particular tribute to the outgoing Public Accounts Committee (PAC) under the Chairmanship of Mr. D. Ezzard Miller for their focus and commitment to delivering improvement in financial management. It is a testimony to them and their dedication that Cayman is now in this enviable position and our PAC is widely regarded as a global leader in its effectiveness.”
Saunders was also a member of the last PAC together with MPs Bernie Bush, Austin Harris, Barbara Conolly and David Wight.