Government surplus comes with message against overspending

Government’s latest unaudited financial records have shown higher-than-projected surplus figures for the first half of the year. The Ministry of Finance, however, has cautioned against overspending as 2024 rounds off.

Government registered a $203.2 million surplus for the core government and a $216.4 million surplus for the entire public sector, bolstered by an increase in financial services fees, in its quarterly financial report for the six-month period ending 30 June.

Officials behind the unaudited report have cautioned that while the fiscal performance has positioned the government to be “optimistic” about its performance for 2024, costs will “continue to increase as more personnel/staff vacancies are filled and projects come online over the remaining two quarters of 2024”.

The report advised that these costs will “have to be diligently monitored” to ensure spending is not incurred unnecessarily.

“Should planned increases in activity, in both Operating and Capital, materialise during the remaining months of 2024, the current surplus to 30 June 2024 will be significantly reduced,” according to the report, produced by the Ministry of Finance and Economic Development.

Surplus performance improves

Based on figures released on Tuesday, 13 Aug., the entire public sector surplus of $216.4 million was $55.3 million or 34% higher than the 2024 budget anticipated for the period, a Finance Ministry statement said.

“This favourable position was due to actual revenues being higher than budgeted revenues by $27.6 million for the period. Additionally, Statutory Authorities & Government Companies (SAGCs) contributed $13.2 million to the overall surplus for the EPS [entire public sector]; exceeding their estimated results for the first half of 2024 by $14.0 million, when compared to an expected deficit of $0.8 million,” the ministry said.

The statement said comparing year-on-year numbers, the EPS surplus was $50.2 million higher than that achieved for the same period in 2023 with SAGC second quarter results being $12.9 million higher than the prior year.

The financial report, published in the Gazette on 9 Aug., pegged government’s net assets at $2.4 billion, with overall bank account balances of $584 million in cash and deposits.

When compared to the same period the year prior, the report said total revenues of core government increased by $58.6 million, which was largely due to increases in various categories of coercive revenues.

The first six months of 2024 generated coercive revenues of $673.1 million, which was $15.7 million more than budgeted expectations and $51.9 million higher than the prior year-to-date actual results, it said.

Part of the variance came from an $11.7 million increase in exempt companies fees from increased registrations, a $6.5 million rise in partnership fees and a $3.8 million bump in private fund fees. This was due to an increase in the volume of funds registered.

“The aforementioned [private fund] fees are regulatory licences due at the beginning of each calendar year and tend to be favourable to budget throughout the Second Quarter. These regulatory licence fees then level out for the remainder of the year,” the report said.

The second quarter generated coercive revenues of $183.6 million, which was 11.1% or $18.3 million more than the second quarter of 2023, the report stated.

“The majority of this change is attributable to higher Domestic Levies on Goods and Services with a $16.5 million positive variance and increased Levies on Property with a $3.9 million positive variance,” the report added.

For stamp duties on land transfers, the government coffers enjoyed another boost as figures were $11.9 million higher than budgeted through the second quarter. This was due to higher volumes of property transactions coupled with increasing property values.

“The 2024 stamp duties of $45.7 million are $9.2 million more than collected in the comparable time period in 2023,” the ministry said.

Shortfalls registered

While the overall fiscal results were “favourable”, the report indicated there were also shortfalls in projected expectations in the 2024 budget.

Other import duty fell short by $11.4 million against the budget projection, but was still $1.7 million more than collected in the same period in 2024.

A new government revenue stream through the Department of International Tax Cooperation filing fees came in $6.3 million under budget due to the commencement date being deferred to 2025. This was initially slated to be introduced this year.

Over the six-month period, government also gave up $4.6 million in revenue through stamp duty waivers for first-time Caymanian property buyers, duty refunds and waivers on planning fees.

Regarding expenses for the first six months of 2024, figures amounted to $511.6 million, which was $13.7 million lower than budgeted. However, the total expenses of core government have risen by $21.4 million when compared to the same period in 2023.

Costs relating to personnel for the first six months of 2024 amounted to $227.1 million, thereby resulting in a savings of $22 million when compared to the budgeted $249.1 million.

This was the result of established posts remaining vacant across several ministries, portfolios and offices.

The 2024 personnel costs were still higher than those for the same period in 2023 by $11.1 million.