Books balanced, cash in bank

| 19/05/2015 | 18 Comments
Cayman News Service

Marco Archer, Minister of Finance & Economic Development in LA

(CNS): In the 2015/16 budget address the finance minister said that government’s cash balance was expected to reach levels never before seen by any administration without having borrowed the money. Alongside a $121 million surplus, Marco Archer said, the debt burden will fall and government will be in full compliance with all principles of responsible financial management by the end of June 2016. He told the LA that government now has “a firm grasp” on its finances.

Speaking in the LA on Friday as he delivered the 2015/16 spending and earning plan for government in the forthcoming financial year, Archer said his budget represented “a historic milestone” and the PPM government’s “unwavering commitment to maintain accountability in its financial affairs”.

Archer said it was the first budget to achieve full compliance with all six Principles of Responsible Financial Management, as cited in the Framework for Fiscal Responsibility (the FFR) and reflected in the Public Management and Finance Law (PMFL). “This government has therefore successfully positioned the country to meet all six of these principles by the established target date of 30 June, 2016.”

He said tough decisions had been made to meet the requirements and as a result government had faced its fair share of criticisms but he was confident that the right decisions were taken in the best interest of the people.

Ahead of the new figures, Archer revealed that 2014/15 was expected to close with a $134.6 million surplus — $6.6 million more than the $128 million originally anticipated. This was sufficient to cover some of the unpredictable expenses, such as the cost of overseas medical care, refugee services and legal aid. Personnel costs are expected to come in below budget at $232.3 million — $9.5 million less than forecast.

“The government has continued its efforts to gradually downsize the civil service and has placed special attention on improving employee efficiency in order to enhance the value and the provision of government services,” Archer said.

He also pointed to an improvement in the position of statutory authorities and government-owned companies (SAGCs), as they are expected to generate some $13.1 million for the fiscal year ended 30 June, 2015.

“This amount is $6 million more than the $7.1 million included in the 2014/15 budget. The Cayman Islands Airports Authority, CINICO, and the Health Services Authority have all been performing better than expected. Cayman Airways has also been experiencing positive results, and this is due to increased air arrivals coupled with lower operating costs as a result of declining fuel prices. Increasing cruise visitor arrivals also positively impacted the Port Authority,” the finance minister stated.

As a result of increased revenues and reduced operating expenditures, central government is forecast to have closing bank account balances totalling $269.6 million. He said the preliminary results for this fiscal year show government on track to outperform the initial budget expectations, and poised to fulfil its obligations towards achieving FFR compliance.

Turing to this coming year, Archer said government would collect over $661 million while spending $525.2 million on operating expenses and some $27.6 on loans. With the help of the SAGCs there will be a surplus of over $121 million.

The 2015/16 net operating cash flows are forecast to be $139.6 million, which will be used to fund capital expenditure and equity investments of $50.3 million, make principal debt repayments of $20 million and improve the government’s bank balance.

“This government said from the outset that it would not introduce any new revenue measures. That is a commitment we’ve kept, and, all things being equal, one that we intend to keep for the duration of our term,” he said, adding that the very conservative 1% growth in revenue would come from the growth in the domestic economy.

Operating Expenses are up by $16 million compared to the 2014/15 budget but Archer said this was due to the 4% cost of living adjustment for the civil service and salary regards as well as to meet some extra needs of some SAGCs, including CIMA and CINICO. Additional recipients under the seamen’s ex-gratia regime and e-government plans will also push up government costs he said.

Outlining where the public money is going, he said that personnel costs are budgeted at $252.4 million, which also includes a provision of $11.4 million to be paid into the public service pensions fund past service liability as well as the 4% COLA, and some $89.5 million will be spent on supplies and consumables, including the e-government investment and cash for school facilities and other service delivery.

$98.7 million will go to SAGCs, some $4.6 million more than this financial year, which he said was down to falling expectations at CIMA regarding revenue on hedge fund directorship fees, leaving the regulator with a $3.8 million hole to fill. Also, government needs to pay an additional $1.8 million to CINICO for the for civil service pensioners.

Meanwhile, government will spend some $7.6 million on poor relief payments and vouchers next year and $700,000 on housing assistance as well as an additional $300,00 for needs assessment support,. Over $7 million has been earmarked for benefit payments to seamen and ex-servicemen and another $11.6 million for scholarships.

With the debt falling, financing costs have been cut and CIG is no longer paying for an overdraft facility as a result of improved cash balances. That, Archer said, meant government did not have to cut funding to the most vulnerable in society. He also said government was able to invest some $10 million for capital projects, including $5.3 million for the revitalization of Central George Town and $3 million to cover gazetted land claims and road surface upgrades.  The cruise project will receive some $4.2 million this year from government and $3.5 million will be spent on for various capital projects on Cayman Brac.

Meanwhile, government will spend $2.2 million on the plans for the solid waste-management project and work on the new John Gray High School will cost $5million. Another two million has been set aside for capital projects relating to national security; and another $1.5 million is being spent on upgrades to the Haig Bodden Play Field and to develop a walking track at the Bodden Town Primary School.

The Cayman Turtle Farm will get its usual $9million for debt servicing and operational losses, will Cayman Airways will get $5.1million in addition to its regular outputs. $2.4 million is going to the National Housing Development Trust to fund debt servicing obligations and the Cayman Islands Development Bank as part of the re-capitalization.

With cash balances expected to grow to a whopping $341.6 million by the 30 June, 2016 which Archer described as “unprecedented for a year in which the government undertook no new borrowings”, core government debt is expected to fall to $503.4 million by June 2016.

Having balanced the books, the minster said government’s overarching fiscal policy for the 2015/16 Budget was based on controlling operating expenditures, limiting capital investments, decreasing public debt and no new long term borrowing.

“The people of these islands were called upon to make sacrifices during the difficult period of the recent global recession. As minister with responsibility for finance, it is my duty and honour, along with my colleagues, to ensure that those sacrifices are not in vain, and to do my part in making sure that every dollar counts,” the minister said, adding that unless there are extenuating circumstances, in order to ensure no further borrowing and to balance future budgets, government’s must ensure expenditure never grows faster than the country’s economic growth.

“Our goal ought to be that we control government expenditure so that it grows at a slower rate than the overall economy for any given period. This is the only way of avoiding the risk of increased taxation or deficit spending financed by borrowing,” Archer said, as he drew his presentation to a close.

2015-16 Budget Address (delivered in LA on 15 May 2015)

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Category: Economy, Government Finance, Politics

Comments (18)

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  1. Anonymous says:

    lies lies lies! Come on people show real facts to the community!

  2. Anonymous says:

    Marco for Premier!

  3. Archie says:

    Publish unaudited financial statements for all government departments and entities and then you will have cause to brag. Until then, I take this all with a pinch of salt.

  4. Anonymous says:

    So can we expect the government to announce shortly that the millions of dollars (approaching some $50,000,000) held in the Encironmental Protection Fund (and employed since its inception to create an illusion of cash on hand for accounting purposes) may now be put to use for its intended purpose?

  5. BeanCounter says:

    Budgets are financial plans.

    We need auditable books to see how the financial plans are actually executed.

    Good plans are a start; so a pat on the back goes to Mr. Archer. Now let’s work on the execution of the plan.

  6. Anonymous says:

    If there is really a surplus, are we getting OUR money back, or is this reserved for “friends of the family”.

    • Anonymous says:

      You could have asked that question of the former minister of personal finance, but not Marco.
      Be grateful that we have a govt. Of honest Caymanians serving their people…you don’t want to go back to the days of hundreds of thousands spent in casinos and millions on travel jollies you…?

  7. C. Carter says:

    Here’s the newsflash for the PPM there is no surplus! UDP told us the same garbage.

    You only get a surplus after government pays all of its bills. Mr. Marco Archer please tell the people the truth. Stop lying to the people the Cayman Islands this country has not had a real surplus for nearly three decades. Read the many Auditor General reports since the early 1990’s for what has really happened to government finances and debts.

    The cash balance position may look good to politicians but if I do not pay my mortgage, utilities, credit card bills and school fees my cash position would look good as well at the end of the quarter but that doesn’t make it a surplus. C’Mon Maaaaaan!!!

    • Anonymous says:

      If the accounting is done on an accrual basis, s is my understanding, it would reflect the accounts payable for government and its related authorities and companies. I am not certain though if government is providing for pension liabilities for those employees/former employees whose pension plans are on a defined benefit basis.

    • Anonymous says:

      Hey BoBo, you need to look up the definition of surplus. A surplus is when income is greater than expenses. The Country is still in debt, that is not denied – I’ll give you another accounting lesson – debt repayment is a capital payment and not an expense.

      • Bean Counter says:

        If you read through this carefully it looks like any surplus will simply go to servicing historic debts so at the end of the year there will still be a $multi-million deficit that, thanks to things like interest, will continue to grow.

        There is also no indication how this will impact the predicted long-term shortfalls in things like health care and civil service pensions. It’s an interesting exercise in smoke and mirrors accounting – in fact I suspect that this ‘surplus’ has already been spent several times over and both PPM and UDP know this full well.

  8. Anonymous says:

    Marco actually believes the nonsense he is spouting. SMH

    • Anonymous says:

      Boy we sure put a lot of faith in the people we elect to run our country. This is understandable after our experience with mckeewa bush but please dont class Marco with him. And please dont class the PPM with the UDP. And PLEASE thank God we are finally rid of them.

      • Anonymous says:

        Your nation is not well served by its politicians, any politicians but at least Marco does not seem to have his nose in the trough unlike McKeeva.

      • da-wa-u-get says:

        PPM talks about the 50 cents fuel duty imposed by the UDP due to a deficit but neglects to mention that it was a deficit left by the PPM’s outrageous spending when they were last in power between 2005-09.

        The Minister also neglected to mention that the FFR that was put in place by the UK was due to the PPM’s excessive borrowing. I am No UDP fan they were were a mess but don’t make it seem like the PPM does everything right and is so much better.

        As for as the surplus, we seem to hear this every year, I’ll just wait for the true picture to come out but won’t hold my breath.

        A surplus is no surplus when you still still owe millions above that number, over all that makes it actually a deficit!

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