The Cayman Islands government is projecting a revenue shortfall ‘in the region of $20-$25 million’ for the budget year which begins on 1 July.
Mr. Tibbetts |
Leader of Government Business Kurt Tibbetts said Thursday the net affect of reduced revenue estimates would be that some public construction projects which are not already underway would have to be rescheduled.
‘You were going to buy a new car in April, but something happened so you had to delay it until the month of September,’ Mr. Tibbetts said, providing an analogy of the situation for reporters at a Cabinet press briefing.
It was unclear what projects would be affected by a slowed construction schedule. Education Minister Alden McLaughlin was asked whether the completion date of four new public schools in Grand Cayman would be among those to be set back. The schools’ completion is currently planned for September 2009.
‘Contracts have not been awarded in relation to the schools,’ Mr. McLaughlin said, adding he did not wish to give further details until those awards were made. ‘My understanding is CTC (Central Tenders Committee) will make an announcement next week.’
Mr. Tibbetts said the revenue reduction from what was projected in Cayman’s December 2007 strategic policy statement made before the Legislative Assembly was largely due to conditions in the international economy, particularly financial troubles in the United States.
‘A consensus seems to have emerged that the US economy is in recession,’ Mr. Tibbetts said. ‘The US not only represents the biggest consumer market for the world’s exports, it is also a leading source of foreign direct investment for many countries; hence, the saying that when America sneezes, the rest of the world catches a cold.’
More than 80 per cent of Cayman’s stay-over tourism comes from the United States. Also, hundreds of US businesses are incorporated in the Cayman Islands. There has recently been severe pressure on those companies from some members of the US Congress who have accused the firms of using that incorporation to avoid federal taxes.
The US dollar, to which the Caymanian dollar is directly tied, has steadily fallen against foreign currencies for a number of months. Skyrocketing fuel prices have hit the US economy hard, even more so because of the dollar’s drop in value.
Despite the dire events abroad, Mr. Tibbetts said government expected Cayman’s overall economy to remain strong. He also said that government would not introduce any new revenue measures for the 2008/09 budget year.
‘There will be no new taxes,’ Mr. Tibbetts said. ‘Rather, government tends to emphasise fiscal prudence. We are projecting a balanced budget with a healthy operating surplus.’
Mr. Tibbetts said ‘fiscal prudence’ does not amount to job losses, and that government expected to maintain full employment through the 2008/09 budget year, which begins on 1 July 2008 and ends on 30 June 2009.
The budget for the coming fiscal year will be presented at Legislative Assembly Wednesday following Governor Stuart Jack’s annual Throne Speech.
Another major issue which could affect Cayman’s economy in the months ahead is the rapidly rising cost of food world wide.
Mr. Tibbetts said those prices were largely beyond government’s control. However, officials expected to meet with the islands’ major food importers on Monday afternoon to discuss ways to keep prices as ‘reasonable as possible’ and to discuss contingency plans in case supplies to Cayman were impacted.
‘We’ve had a look at the range of import duty on foodstuffs,’ he said. ‘The truth is the majority of our staple foods are duty free.’
However, Mr. Tibbetts noted that the rising price of food makes it more important for Cayman to nurture efforts to create as much of its own food supply locally as it possibly can.
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