By Lindsey Turnbull
The cost of the Cayman government’s response to the Covid pandemic has seen its expenses grow greater than that anticipated in the 2019 Budget, and, as a result, as at the end of 2021, the Cayman Islands will now not be compliant with the Principles of Responsible Financial Management, as prescribed by the Public Management Finance Act (PMFA), the same principles as found in the Framework for Fiscal Responsibility (FFR) which is also part of the PMFA.
In his Budget speech in Parliament last Friday, Deputy Premier and Finance Minister, Chris Saunders, did say, however, that, commencing 2022, government would return to full compliance with the Principles. He also confirmed there were no new fees or taxes levied on the public.
Already facing an uphill battle given the impact of the Covid response and recovery on government finances, core government was forecast to achieve an operating deficit of $98.3m at the end of 2021 and $59.6m at the end of 2022. Minister Saunders said the forecast for the operating deficit for the end of the year was a “much improved” $29.7m, approximately $69m better than where it was first forecast when they arrived in office. They predicted a budget surplus of $19.4m for 2022, which represented $79m better than when they first arrived in government, which was a combined improvement (when taking the 2021 and 2022 forecasts into account) turning around $147.6m over the two years.
However, Minister Saunders acknowledged an operating deficit was a breach of the Principles of Responsible Financial management under the PMFA, as the PMFA required the government to achieve an operating surplus.
“Compliance with this Principle is a requirement. It is not optional,” he explained. “Failure to comply means that we will have to surrender control of the budget to the UK, stripping us of the most basic privilege of deciding for ourselves how to spend our own money.”
The Minister said the UK Government was aware of the likely deficit for the 2021 financial year, but it had not sought in any way to control government’s budget because it understood the deficit for 2021 was realistic in a global pandemic and had given its support to the PACT government anticipated budgeting.
“In 2022 and 2023 we will be in full compliance with the Principles,” he stated, adding that the PACT government was committed to getting the country back to being able to control its own budget.
In order to meet all of the government’s planned capital investments, over the budget period of 2022 and 2023, they would be borrowing up to $349.1m, with $299.1m in 2022 and a further $50m in 2023. None of day-to-day expenses would be met by borrowing. Such costs were met entirely by the Government’s operating revenue.
Core government was expected to earn operating revenues of $940.9m in 2022 and $978.1m in 2023. Together, operating and financing expenses were expected to be $921.5m in 2022 and $950.4m in 2023. Core government operating surpluses were forecast to be $19.4m in 2022 and $27.7m 2023
Closing cash balances would be $404.8m 2022 as at 31 December 2022 and $312.2m as at 31 December 2023. Core government capital investments would total $170.1m 2022, and $133.4m in 2023. Government planned on investing $30.4m in 2022 and $28.9m in 2023 in statutory authorities and government companies.