The government’s revenue and expenses in 2024 and 2025 are both projected to surpass $1 billion for the first time.
Capital expenditure and investments are forecast to total $160.5 million in 2024 and drop to $117.9 million in 2025.
And the administration is set to record surpluses of about $43 million in 2024 and $53.2 million in 2025.
Those and other figures were revealed by Premier Juliana O’Connor-Connolly, who presented Cayman’s budget for 2024 and 2025 to the House of Parliament on 8 Dec.
In her budget address, she summarised the projected revenues, expenses and investments for the next two years.
Revenue
Core government is forecast to earn operating revenues of $1.095 billion in 2024 and $1.137 billion in 2025.
Part of that will come from new revenue measures which the government is introducing to yield an additional $52 million in 2024 and $80 million in 2025.
These include increases in work permit application fees, customs and procedural fines, administrative and regulatory fees, and immigration-related visa and extension fees.
A rise in the import duty rate and environmental tax on some hybrid and electric vehicles is also budgeted, while a stamp duty hike on homes in ‘high-end’ areas is being considered.
The decision to implement the new revenue measures was “not taken lightly”, O’Connor-Connolly said, describing them as “challenging necessity”.
The premier added that efforts were made to ensure that they were non-inflationary and did not have a direct impact on the average citizen and the already high cost of living.
She explained the generated revenue will fund critical public services, healthcare, education, and other essential programmes that contribute to the well-being of society.
Operating expenses
Core government operating expenses are forecast to be $1.052 billion in 2024 and $1.083 billion in 2025.
The major cost drivers of the operating and financing expenses are projected to be:
Personnel costs
These are budgeted to be $500.7 million in 2024 and $522.3 million in 2025.
The money will fund planned recruitment activities for additional mental health staff, enhanced remuneration for educators, and increased resources for Border Control.
It will also pay for more resources for the promotion and regulation of the financial services industry, and increases in health insurance premiums payable to civil servants.
Supplies and consumables
These are budgeted to be $175.4 million and $178 million in 2024 and 2025.
Depreciation
This reflects the increase in the value of the government’s assets as various capital projects are completed, and is projected to be $59 million for 2024 and $59.5 million for 2025.
“It is important to remind honourable members and the general public that depreciation is a non-cash expenditure item,” the premier said.
It recognises the cost of assets through the operating statement, in a systematic way, over the expected useful life of the asset, she continued.
Financing costs
The 2024 and 2025 budget allows the government to borrow up to $27 million in 2024 and a further $123 million in 2025 – for a total of $150 million over the two financial years.
The premier said the money will go to capital expenditures and investments, and not day-to-day operating expenditures.
With this proposed level of borrowing, the government’s debt-to-GDP ratio remains under a 10% level, O’Connor-Connolly said.
The $150 million will be added to the projected unused borrowings from 2022 and 2023 of $106 million to fund capital projects during 2024 and 2025.
As a result of existing and the new borrowings, the government is expected to incur financing costs of up to $18.4 million in 2024 and $24.7 million in 2025.
About $49.9 million and $58.1 million in debt will be repaid in 2024 and 2025.
Outputs from statutory authorities and government companies
This is expected to total $179.1 million in 2024 and $186.2 million in 2025, and will be used to fund the following:
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- $58.9 million in 2024 and $64.2 million in 2025 to CINICO for the provision of health insurance benefits to civil service pensioners, and qualified seafarers and veterans.
- $46.3 million per year in 2024 and 2025 to the Health Services Authority for the provision of various medical services.
- $33.8 million in 2024 and $35.5 million in 2025 to the Cayman Islands Monetary Authority for enhanced regulatory capacity.
- $18.6 million per year in 2024 and 2025 to Cayman Airways Limited for the provision of international airlift to the Cayman Islands and domestic airlift between the three islands.
Output from non-governmental suppliers
This is expected to be $43.8 million in 2024 and $39.1 million in 2025. The major items in this category are:
- $18.6 million in 2024 and $14.4 million in 2025 for tertiary medical care at various local and overseas providers for uninsured, underinsured and indigent people.
- $11.5 million in 2024 and $11 million in 2025 for the public school meals programme.
- $2.8 million in 2024 and $2.9 million in 2025 for legal aid services.
- $2 million per year in 2024 and 2025 for the care of indigent and disabled elderly people.
Transfer payments
These are forecast to be $66.5 million in 2024 and $64.3 million in 2025.
Funds will be used to deliver critical social programmes for young people and vital financial support to the most vulnerable.
The major transfer payments budgeted are:
- $23.8 million in 2024 and $24.3 million in 2025 for local and overseas scholarships to about 2,500 students per year.
- $15.2 million in 2024 and $12 million in 2025 for financial assistance to support about 1,500 households.
- $10.9 million in 2024 and $10.8 million in 2025 for ex-gratia payments to about 900 people for past service provided by seamen and veterans.
- $3.2 million per year in 2024 and 2025 for youth, sports and heritage programmes.
Surplus vs deficit
For 2024, the forecast operating revenues are $1.09 billion and the forecast operating and financing expenses are $1.05 billion.
As a result, core government is forecast to earn an operating surplus of $43 million.
Collectively, public entities are forecast to incur a net deficit of $1.7 million in 2024 and $2 million in 2025. Most notably:
- The Cayman Islands Airports Authority is forecasting operating surpluses of $20.2 million in 2024 and $21.1 million in 2025.
- Cayman Airways is forecasting operating deficits in 2024 of $13.1 million and $12.1 million in 2025.
- The Cayman Turtle Conservation and Education Centre Limited is forecasting operating deficits of $9.5 million in 2024 and $10.1 million in 2025.
When factoring in the forecast $1.7 million deficit, the entire public sector is forecast to have an overall net surplus of $41.3 million in 2024.
For 2025, the forecast operating revenues are $1.13 billion and the forecast operating and financing expenses are $1.08 billion.
As a result, core government is forecast to earn an operating surplus of $53.2 million.
When factoring in the forecast $2 million deficit of public entities, the entire public sector is forecast to have an overall net surplus of $51.2 million in 2025.
Capital expenditure and investments
The government intends to make capital investments into ministries, portfolios and offices of about $125.3 million in 2024 and a further $93.7 million in 2025.
These will be funded largely from borrowings and a small amount from operating revenues.
The major investments include:
- $31.9 million in 2024 and $33.9 million in 2025 for the continued expansion of educational facilities, including a new high school on Cayman Brac, a West Bay high school and the continued expansion of John Gray High School.
- $15.1 million in 2024 and $13.5 million in 2025 for the expansion, maintenance and improvement of the road network.
- $11.8 million in 2024 and $8.6 million in 2025 for the Central Scranton Park, other park and district upgrades, civic centres and jetties, and infrastructure and development.
- $7.4 million in 2024 and $4.2 million in 2025 for improvements to the prison facilities.
- $3.8 million per year in 2024 and 2025 for land acquisition for farming and the conservation, protection and securing Cayman’s natural environment.
The Finance Committee will also decide if it allows the use of $10 million from the Environmental Protection Fund for the acquisition of land for conservation purposes.
Meanwhile, the government is planning to make capital investments into public entities totalling $35.2 million in 2024 and a further $24.2 million in 2025.
These investments include:
- $12.1 million in 2024 and $9.1 million in 2025 to Cayman Airways Limited to cover debt servicing and operating expenditures.
- $8 million in 2024 and $7 million in 2025 to the National Housing Development Trust to cover debt servicing obligations and the construction of affordable homes.
- $8.4 million in 2024 and $5.3 million in 2025 to the Cayman Turtle Conservation and Education Centre Limited to cover operating expenditure.
- $2.1 million in 2024 and $1.1 million in 2025 to the University College of the Cayman Islands to fund operational deficits.
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