Government spending is expected to top $1 billion-a-year by 2026, Premier Wayne Panton revealed Wednesday.
Despite the increase in spending – partially to offset the costs associated with Cayman’s planned new waste management system – the premier projected that government would continue to run budget surpluses for the foreseeable future.
He said the economic projections for the next three years also kept government in line with the principles of the Framework for Fiscal Responsibility – the guidelines for responsible public spending which it is legally mandated to follow.
Government expects to spend around $3 billion over the three financial years covered by the policy document, 2024, 2025 and 2026. Core government spending for next year is forecast at $982.9 million, rising to $1.02 billion by 2026.
The biggest areas of expenditure outlined include $162 million each year to the Ministry of Education and $119 million annually to the Ministry of Health and Wellness.
Government projects it will continue to be in the black, at least in terms of its annual balance sheet, anticipating it will net $3.3 billion in revenue over the same period.
Government’s reliance on the strength of its financial services industry to support is plans and operating expenses is exemplified in a breakdown, supplied by the premier, of the key sources of revenue over that period.
Company fees, partnership fees, private fund fees, and mutual fund fees, collectively account for almost $1 billion in anticipated revenue over the three years. Import duty accounts for almost $600 million over that time while tourism accommodation fees are expected to bring in around $136.4 million.
Panton said, “Operating expenditures are expected to increase modestly to fund a number of new government initiatives in improving education, maintaining our market share in tourism, funding tertiary health care at local and overseas institutions, commencing full operations of the long-term mental health facility and starting operations of the integrated solid waste management or ReGen facility.”
A sinking fund has been set up in an effort to sock away $75 million over the next four years to help cover the costs of the waste management system if and when it becomes operational mid-2026.
Meanwhile, government plans to spend around $300 million on various capital project between 2024 and 2027, including on the East-West Arterial expansion and new school buildings in Cayman Brac and Grand Cayman.
The premier also indicated that the impact of inflation – which has had a ruinous effect on household bills from groceries to mortgage payments over the past year – is expected to lessen.
The Consumer Price Index – which measures the change in cost of key household items – is forecast to increase by 5.3% in 2023, but more modestly thereafter – between 2% and 3%.
Caymanian unemployment is also moving in the right direction, hitting a “record low” of 3.6% in recent labour force surveys. Panton expects that to be maintained over the next three years, with the overall unemployment rate – including guest workers – expected to hover between 2% and 3% over the next four years.
He said there were 8,900 more jobs in the economy than in 2019, pre-pandemic, and 14,700 more jobs than in 2020 – at a time when COVID-19 left many unemployed and saw thousands of expats leave Cayman.
Overall, Panton said the broad policy and spending plan, which will help inform government’s more detailed two-year budget, to be brought to Parliament later this year, ensured prudent use of the public’s funds, while enabling needed investment in public services.
He added that Cayman’s GDP per capita, at last count, was higher than the US and many other advanced economies.
He acknowledged though that increased population, vehicle use and other factors associated with that wealth, didn’t always have a positive impact on people’s lives.
“Yes, most Caymanians are well off enough to afford a car as a result of low unemployment and a high GDP per capita, which are both accepted indicators of a strong economy. But how much does driving a car improve their overall quality of life if they have to sit in that car for several hours each day travelling to and from work?” he said.
Quoting former British Prime Minister Tony Blair, Panton added that his government’s aim was to ensure people benefitted from the strong economy.
“Real progress cannot be measured by money alone,” he said. “We must ensure that economic growth contributes to our quality of life rather than degrading it.”
Interactive graphics created by Stephanie Ditta
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