Government is projecting a larger budget deficit of $192 million this year, because previous forecasts of a $157 million funding gap did not factor in tourism stipend payments to workers displaced by the pandemic for all of 2021.
Currently, the monthly tourism stipend payments of $1,500 to more than 3,000 workers cost government approximately $5 million each month.
If this figure is used for each of the seven remaining months this year including June, the projected combined deficit, which also includes $98 million for core government and $59 million for statutory authorities and government companies (SAGCs), will grow by $35 million to $192 million.
Finance Minister Chris Saunders said if the monthly tourism stipend was increased to $2,000, as demanded by the Opposition, the projected deficit would rise well in excess of $200 million this year.
Speaking at a government press conference on Wednesday, 16 June, Saunders noted that during the first five months of 2021, core government had an operating surplus of $175 million, which is 18%, or $11 million, higher than budgeted.
Government’s total operating revenue of $525.5 million was 9% higher than budgeted but operating expenses of $351 million were also 8% over budget.
Budget surpluses at the beginning of the year are not unusual because that is when most financial services fees are collected. For the remainder of the year, however, government tends to run at a deficit.
In April and May of this year, the operating deficit averaged $11.7 million each month, which is lower than the $27 million monthly average shortfall government saw between June and December last year, Saunders said.
But SAGCs, including the Cayman Islands Airports Authority, Cayman Airways and the Cayman Turtle Centre, are expected to operate at a deficit because they are heavily dependent on a vibrant tourism sector, the finance minister added. SAGC figures were not included in the financial update because of a delay in their reporting.
Government maintained close to $571 million in cash reserves, which Saunders described as “healthy”.
“We are definitely watching our cash very, very closely. And that’s one of the reasons why we don’t want to do anything crazy at this point. Because for most of those SAGCs, we would probably be the lender of last resort, in terms of making sure that they can pay salaries and everything else.”
Given that Cayman is facing another active hurricane season, he said, government needs to make sure that it has the necessary resources to meet any challenges the country may face.