FIRST-QUARTER GOVERNMENT SURPLUS EASES DEFICIT FEARS

By Staff Writer

Earlier fears that the government was at risk of a massive deficit this year have been considerably offset by a better-than-expected first-quarter report.

The unaudited financial results for the First Quarter of 2025 show a $262.2 million surplus for the Core Government and a $268.1 million surplus for the Entire Public Sector (EPS).

This contrasts with the CIG’s 2025 Pre-election Economic and Financial Update, for the financial years ending 31 December 2025 and 2026.

In what became one of the key issues in the peak closing stages of the recent election campaign, that report projected a looming deficit. “For the 12-month period ending 31 December 2025, Core Government’s Operating Deficit is forecast to be $26.2 million. This represents a negative shift of $80.9 million from the $54.7 million Operating Surplus originally budgeted,” it stated.

The then-terminally-fractured outgoing United People’s Movement(UPM) coalition - by then split into three distinct camps - was consequently severely attacked in the campaign over its fiscal management.

But now, the report for the quarter ending March 2025 - notably before the April 30th election - paints a reassuring picture of the state of government finances then under the former UPM minority government at that point. The new Q1 2025 Financial Report may have exonerated it somewhat, if not fully, from the accusations of mismanagement of the national finances, especially over-spending on what were seen as vote-winning pet projects.

However, it does show that in the first three months of this year, government spending actually exceeded what was budgeted. “Expenses for the first three months of 2025 amounted to $291.9 million. This amount was $17.3 million more than the year-to-date budget of $274.6 million. Compared to the prior year-to-date actuals, expenses for Q1 are $31.3 million higher.”

It also gives the new National Coalition For Caymanians (NCFC) administration (comprised in part of ex-UPM members) enough headroom to avoid the projected deficit with fiscal prudence.

FAVOURABLE POSITION

Reviewing the government’s finances for the period under review, the gazetted document states: “This favourable position was due to actual revenues being higher than budgeted by $65.7 million for the period, with coercive revenues accounting for $60.6 million.”

It further shows that comparing year-on-year numbers, the EPS(Entire Public Service) Surplus was $7.9 million higher than that achieved for the same period in 2024.

On the revenue side, the first three months of 2025 generated ‘coercive’ revenues - fees, duties, taxes and other compulsory payments to government - of $534.3 million, which was $60.6 million more than budgeted expectations and $44.8 million higher than the 2024 year-to-date actual results. Most of this revenue to the government is paid in the first quarter of the financial year by businesses and other entities.

According to the new report, several revenue areas performed better than expected, especially in the robust financial sector. The section ‘Other Company Fees – Exempt Companies’ reported revenue $30.9 million higher than the $79.1million budgeted amount for the first quarter due to increased registration. When compared to prior year-to-date performance, the 2025 results were $16.0 million better.

Partnership Fees exceeded budget by $16.0 million owing to higher than anticipated registration in this category. Compared to the prior year, there is an $8.0 million positive variance.

Private Fund Fees performed $9.3 million better than the $55.3 million anticipated due to an increase in the volume of funds registered. The current year results for these fees are $6.5 million higher, when compared to the prior year-to-date performance.

Stamp Duty – Land Transfers revenues were $7.7 million higher due to larger volumes of property transactions coupled with increasing property values. The 2025 stamp duties of $26.7 million collected in Q1 are $5.0 million more than the comparable quarter in 2024.

SOME TARGETS MISSED, OTHERS SURPASSED

The report also shows that, notwithstanding the overall favourable results in coercive revenues collected, when compared to the 2025 Budget, some categories fell short of projected expectations. These include Work Permit Fees showed a $2.6 million decrease compared to what was expected in the budget, and were $1.2 million less than prior year-to-date revenues in this category. The category labelled ‘Other Import Duty’ showed a $10.0 million shortfall with $1.8 million less than prior year-to-date revenues.

On the other hand, total Investment Revenue almost doubled, producing $6.1 million, which was $3.8 million more than anticipated for the three-month period.

“Higher cash balances held by the Government have afforded larger values to be placed on deposit and this has increased income earned on investments,” the report also showed.

The report concluded that the first-quarter revenue results of $554.1 million are expected to be the highest revenues earned in any single quarter for 2025. It explains that this is due to the cyclical nature of the Cayman Islands Government’s revenues especially with Financial Services sector fees being due at the beginning of each year.

(All images via Min of Finance)