CIG one step away from regaining budget control
Marco Archer, Minister of Finance & Economic Development in the LA
(CNS): The Cayman Islands Government is within reach of finally regaining control of the public purse and budget process after the cash reserves ratio required under the Framework for Fiscal Responsibility was met this fiscal year. Finance and Economic Development Minister Marco Archer said he had written to the Foreign and Commonwealth Office (FCO) about satisfying the reserves ratio. When bank account balances were at their lowest in the year, CIG had 116 days of cash reserves, easily exceeding the 90-day minimum requirement.
The minister said that government has already met the net debt ratio for the past two fiscal years and will do so again this year, leaving only the debt service ratio to be fully compliant with all of the requirements, which could see government regain control of its spending, budget and borrowing. Archer said that this last step is forecast to be in compliance but it will be assessed after the 30 June 2016 fiscal year-end.
In response to Archer’s letter, James Duddridge, the UK government minister with responsibility for the overseas territories, wrote on 18 February saying he was delighted over the compliance “with the Net Debt ratio” and that the government was “comfortably on course to maintain compliance with the Cash Reserve Ratio as defined in the FFR for the remainder of the fiscal year. This is a welcome achievement and a credit to the hard work and professionalism of your government and the civil service.”
The letter has not yet been released into the public domain, though CNS has requested a copy, and it is not clear if the UK minister is prepared to hand back full control, including the right of the Cayman government to borrow if it sees fit.
But in a release about the cash reserves Archer said, “This is clear, independent evidence of the steady and consistent progress the government has made to improve the economic and financial standing of these islands.”
The FFR is a financial management agreement that the UK introduced for its overseas territories to follow and adopt into local legislation as a result of concerns about the mother country’s contingent liability for its territories and their debt problems in the wake of the financial crisis. It caused considerable controversy and at first, then premier McKeeva Bush had been reluctant to sign the deal. He also took a long time to incorporate the agreement into local legislation after he criticised the requirements. Despite his own difficulties balancing the books as finance minister during the UDP’s time in office, he continued to blame the previous administration for the UK’s move, which tied the hands of his administration.
There were several conditions that came along with the FFR, including the supervision of Cayman’s budget, but the basic requirements for compliance were that the net debt ratio must not exceed 80% of government’s operating revenues, that its cash in the bank at their lowest revenue point must cover 90 days of governments operating expenses, and that the debt service ratio, the cost of servicing the entire public sector’s debt, should not exceed 10% of the revenue core government collects.
It is this last ratio that government will need to make by 30 June to regain control of the public purse strings and the preparation of its annual budgets.
Category: Government Finance, Politics
I wish that we could regain “control” of our fiscal affairs and planning but I am of the opinion that that day will never come again. Why should the UK Govt (Prime Minister and the UK Taxpayers) ever want to wake up and hear what they heard when they had to “bail out” the TCI.
I do not ever foresee the UK assuming any contingent liability exposure for any of their OTC’s where they can rightly avoid doing so.
Mr Archer , Mr Pollock just pointed out a other part of revenue that the Government do not know anything about.
Thank God for Marco’s honest and steady management. What a contrast to the mismanagement of an uneducated self serving Gardner.
thank God they followed mac plan and we will soon be free
obey your master!
Why complain about the FFR? A good government would follow these principles anyway.
The UDP govt. had “economic policies”? ROTFL!
What a laugh, the UK has always and will continue to have control and oversight over the budget of the Cayman Islands as long as we are a Crown Colony.
Any borrowings or election spend in the next years budget will make us non-complaint again. Remember the Government is bringing an 18 month budget to cover up their election spend not taking the fiscal conservative approach of 6 six months and twelve months which would allow greater scrutiny by the public of the PPM spending.
If I wanted to buy a piece of property and took out a bullet bond for a million dollars with a maturity in 10 years, then for the next 9 years, I put aside $1,000 per year to pay off that bond when it matures, would that be good financial management? How would a bank look at my debt service situation?
Marco, you are known as an honest man, tell the Country about the bonds that the Government has, and how much the Government is putting aside each year to fully settle those bonds when they mature.
The Government may be able to dance around those poor people in the FCO with this rhetoric, but some of us actually have a little intelligence and can see through the smoke and mirrors.
That said, the finances of the country are stronger today than they were 5 years ago. A key reason for the improvement of the finances is the fact that the UK has restrained the spending of the Government under the FFR. I am very concerned that the Government will use some fancy math and misdirection to get from under the watchful eyes of the UK, then the spending flood gates will open up and we will once again find ourselves where we were in 2009.
The Finance Minister deserves credit for achieving near compliance. It is a pity that the Progressives who put us in the financial mess in the first instance did not have him on board during their rambunctious spending spree. The economy has not grown, the state of finances for this country are in part due to the prudence of Minister Archer, but, the reality is that without the taxes imposed by the previous Administration we would have seen a bleaker picture today, I’m sure if the Minister who is a truthful man, would no doubt agree with this statement.
Still with all of the fanciful accounting, the country still has a huge obligation to fulfill in the form of the Civil Service pension liability and yes the Bonds. With an economy that is at present visibly sinking., Number of banks has dropped, funds administration dropping etc, we are not out of the woods. This is the time to start creating some specific Reserves to cushion the economy and indeed stop talking about it and implement visible and tangible streamlining of the Civil Service as a means of maintaining costs at a reasonable level.
This is really the time for those who wish to represent us after the nextt election to start thinking strategically of where we want this country to be in the next twenty years, and creating a plan with sensible priorities. Far too long we have had Governments in place who are not thinkers and doers but only rake and scrape rabble rousers with no defined objectives for the country. People of this country need to understand that we must elect representatives not on their vocal ability but on the merits of their knowledge and experience and indeed true love for their homeland. Anything or anyone short on these attributes will be of no use to our future well being. Caymanian Patriots come forward and be counted.
It would be interesting to hear comments from a former Premier/Minister of Finance, whose failure to comply with FFR parameters put us in the situation we have endured for the past few years.
The irony is FFR was in place to put belts and braces on BOTH PPM and UDP. Best thing the UK has done for the Cayman’s.
What makes me SKEPTICAL is that you conveniently forgot to highlight the PPM’s uncontrolled expenditure during 2005-09. Where was the business case for the Clifton Hunter High school that costs tax payers for CI$110 million?
What about the Millions spent on buying marl from supporters for a school in WB that PPM could not afford?
What about the John Gray High school that is still incomplete nearly 8 years after the former Education Minister and current Premier started his expensive vision with no direction or financial management discipline.
When it comes to waste and fiscal mismanagement the PPM and UDP are the same irresponsible and very poor.
Hopefully, the FCO will demand that the FFR is kept in place. None of your politicians have the maturity and discipline to do the right thing in managing Cayman’s finances history proves this. CI$50 million spent on social services and nobody can confirm details proves the lack of accountability and poor processes continues. Mr. Archer has no choice but to comply hence the improved results but do not be fooled without the FFR there would be no AAA credit rating for the Cayman Islands
Wake up Marco. The UK’s concerns over its Contingent Iabilities means the FFR isn’t going away any time soon for the Cayman government.
The PPM and UDP fiscal mismanagement over the years and lack of proper processes caused the UK to mandate the FFR be passed into local legislation.
The FFR is the only thing preventing Alden and Marco from going on another ppm campaign spending spree like they did the last time in the run up to next years 2017 elections.
marco…thank you for not changing the economic policies of the last administration….
i know its not easy sitting on your hands for 3 years….busy trying to look busy..etc……
fco: don’t give them control…keep them within your set limits….
caymanians are not fit to run their own affairs….
thank you.
23,000 expats
What a nimrod!! Marco is doing it and ooh yes he is Caymanian. Stop bringing down our people or please leave, you leech.
It is sad that 23,000 expats keep this country solvent with the work permit fees, rentals, car purchases, utility payments and other associated economic benefits for Caymanians and we still get the comments “please leave”. Messers Watson, Webb and their cronies bring your people down not the expats that keep the finances of this country going. Your fellow Caymanians mentioned above just steal it to line their own pockets!