According to estimates revealed as part of the upcoming 2011/12 government budget, the Cayman Islands’ total public sector debt will remain well above $500 million by mid-2014, despite payments of more than $30 million per year until then.
During his budget address Friday night, Premier McKeeva Bush stated that at the end of this month Cayman’s public sector debt was expected to reach nearly $626 million (approximately US $726 million).
The country’s net worth was expected to be $485.6 million at that same time. By the end of the next budget year on 30 June, 2012, Premier Bush said public sector debt should have dropped to $599.3 million and net worth will have risen slightly to $489.3 million.
As a result of those figures, Mr. Bush said the ruling government would not take on any more borrowing in either the 2011/12 budget year – which begins on 1 July – or in the 2012/13 year.
“The country’s debt burden will fall,” Mr. Bush said Friday night. “This is another important first achieved by the government. It is difficult to remember the last budget in which there was no external borrowing proposed.”
During a February broadcast address to the country, Premier Bush stated the “no borrowing” position had been forced on Cayman by the United Kingdom.
“The stance of nil or very little borrowing by the government of the Cayman Islands is one that is being forced upon us,” Mr. Bush said at the time. “I was told that the FCO would not permit the government of the Cayman Islands to borrow in the financial year that will start on 1 July.”
Cayman was allowed to borrow US$185 million through 30 June, and has already paid back some US$36 million of that sum.
However, paying off the debt amounts at levels currently forecast will put a strain on the local government coffers going forward.
Cayman is already beholden to pay between $30 million and $40 million in each of the next two budget years just to pay off its debt. Some $33.8 million has been set aside in the 2011/12 year to do that.
Even with these large sums, Cayman’s public sector debt will remain large – nearly $550 million by mid-2014, according to Mr. Bush.
“For me, that is still too slow a progress,” he said during the budget address Friday night.
Going private
Opposition Leader Alden McLaughlin said earlier in the year that pronouncements about no more government borrowing were nothing new, and that the UK had decided this course in early 2010.
What the Premier was trying to do, Mr. McLaughlin said, was use the UK’s no borrowing position as a reason to divest government assets and enter into privately financed initiatives for certain government projects.
Mr. Bush indicated Friday that privately financed initiatives and public-private partnerships were still on the table with regard to several government projects.
“The primary objective of this strategy is to minimise the financial burden of these developments on the public purse while simultaneously creating new economic activities,” the Premier said Friday.
Among those projects were the long-debated George Town cruise ship berthing facility. Mr. Bush said it was also his government’s intention to put a cruise ship dock in West Bay and improve arrival facilities at the cruise landing in Spotts.
Other examples included the sale and development of a public-private sewerage system for Grand Cayman and the redevelopment of the Owen Roberts International Airport, he said.
Private projects being undertaken include the development of a medical tourism hospital and a special economic zone – Cayman Enterprise City.
“Once under way, the government’s proposals…will positively impact the previously subdued growth outlook and over the next three years, gross domestic product should grow with a positive impact on citizens and residents of the Cayman Islands,” Mr. Bush said.
When does it get better?
Cayman’s unemployment rate, estimated toward the end of last year at 6.7 per cent, is expected to remain higher than normal next year.
A jobless rate of 6.1 per cent was expected to persist through mid-2012.
Premier Bush said there would be a “firm upturn” in employment in 2012 and that “broad-based expansion” of the financial services and tourism industries would be seen in Cayman at that time.
However, local employment was also expected to “lag behind” the economic improvement, largely because of low-growth outlooks in the construction industry.
Through the middle part of 2013, unemployment was expected to stay above 5 per cent, although Mr. Bush pointed out this was still a better rate than many struggling western economies – including the US and the UK.
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Somehow I don’t seem surprised that Gov has this much debt.
The question that I have, How will government pay off this debt? Honestly speaking I have very little knowledge in this subject but, Do we actually have some sort of GDP to really sustain this country financially in the upcoming years?
I can clearly see that Tourism cannot sustain this island forever, we need something else other than tourism, But what is that something else? What does Cayman have to offer other than tourism to help sustain us in the future?
We could always introduce CASINO’s and a NATIONAL Lottery. Time to tell the One Day Christians that we have to do what is right to survive or they can hand over their life savings to the Govt. in the same amounts they hand it over to the Church and watch their Church Leaders spend it ever so wisely on private homes all over the world, private jets, living the lap of luxury!! Casino’s or College Towns!! Something along those lines will revive our community from this death row status it is on.
The cost of operating a business in Cayman is way too high. We have forced businesses to pack up and seek operations in other countries – how is the financial services to experience ‘broad-based expansion’ when there is negative incentive at play. We need to make Cayman more desirable than our neighbours in the financial world – time to roll back the fees! Go for business volume with lower fees rather than high fees and low business volume. The more people on the island, the more money will be spent in the public domain.
What’s the government going to do to generate income ?
1. Build the Shetty Hospital.
2. Build the Cayman Enterprize zone.
3. Build the new Cruise Ship Facility.
But no they just stall projects that will bring in millions of dollars to benefit Cayman — then complain about the financial situation. DO SOMETHING ABOUT IT — These opportunities will not be there tomorrow.