The Cayman Islands core government has maintained a $147 million budget surplus during the first eight months of 2021. That figure is $16 million higher than budgeted.
Considering that this two-year budget was done pre-COVID, back in November 2019, the results are “really good”, Finance Minister Chris Saunders said at the government press briefing on Thursday.
The surplus resulted from $731 million in revenues and $584 million in expenditures.
Revenues are $92 million higher than during the same period in 2019, the last financial year before the pandemic impacted both the economy and government finances.
However, the finance minister said only two revenue lines were responsible for most of the increase. Private fund fees alone, which were only introduced last year, contributed about $50 million and proceeds from liquidations added an extra $26 million.
These higher revenues made up for the shortfall in tourism-related revenues, such as the tourism accommodation tax, which in a normal year would have produced approximately $28 million in government income, as well as $8 million in cruise departure taxes and $2 million in additional duty on fuels that would have ordinarily been collected.
Despite the higher revenues, the lack of tourists depressed the volume of Cayman’s duty-producing goods, for example alcohol and fuel, Saunders noted, adding that is why government is anxious to bring tourism back.
On the expenditure side, government is looking at spending more than $900 million this year, compared with $875 million announced in government’s Strategic Policy Statement in July.
This compares with only $702 million spent by government in 2019. About $100 million of this projected $200 million increase over two years is COVID-related.
“That level of expenditure is basically unsustainable over the medium to long term,” Saunders said.
But the finance minister added that given government finances have improved, this allows for the continued support of businesses and employees affected by the pandemic and additional spending on the Tropical Storm Grace clean-up, as well as the start of the free school meals programme in primary schools.
Government maintained $510 million in cash balances at the end of August, of which $172 million was reserved and $338 million was unrestricted. This strong cash position means government’s US$403 million credit facility remains untapped.
“So from a cash standpoint, we are in a very good position to weather the storm,” the finance minister added.