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CIG aims to cut public debt by half

| 06/09/2017 | 33 Comments

(CNS): The government has revealed its latest plans to tackle what was once a serious debt problem, but in order to do so it will find itself temporarily falling foul of the Public Management and Finance Law. Government’s core debt is expected to stand at just over $451 million at the end of this year, but according to Finance Minister Roy McTaggart, by the end of this administration it will be less than half that, at $221.4 million. However, as government pays down the borrowing it will also need to tackle the problem of a $261.3 million bullet bond that matures in November 2019, which will cause a technical “non-compliance” with the law.

The Framework for Fiscal Responsibility, which forms part of the PMFL, states that the cost of servicing government’s debt cannot be more than 10% of core government revenue. And although McTaggart is confident that government will be in compliance for the best part of the next three years, at the point when government pays off the bond and refinances half of it, that debt-service ratio will be in technical breach for a short period, jumping to 48.2%.

“This technical breach has been thoroughly discussed with, and agreed by, the UK government’s Foreign and Commonwealth Office. After the repayment of the bullet bond in November 2019, the government’s debt service will decrease to approximately 9.1% in 2020,” the government’s Strategic Policy Statement says.

McTaggart, a former auditor and accountant, has taken over the job of finance minister from his PPM colleague, Marco Archer who, despite winning numerous accolades for his management of the public purse over the last four years, lost his seat. But delivering the SPS in the parliament at the end of last month, McTaggart appeared confident that he could keep government coffers on the straight and narrow over the next four years, despite this technical glitch.

He explained that between now and December 2020 he will cut the public debt by $229.7 million. He, like his predecessor, said there would be no new borrowing, but he explained that in 2019 the government will refinance half of the bullet bond with a loan of $130.65 million and will pay off the rest from revenue. But even with this loan, the overall amount government owes will still fall.

As well as reducing the burden and the threat to net debt and borrowing ratios under the law and the FFR, cutting debt also cuts the amount of money government has to find to cover the cost of interest. And with government projecting a growth in cash balances over this administration, McTaggart believes it should not have any difficulties meeting its debt service obligations.

“During the SPS period the government will pursue a debt management strategy which seeks to aggressively pay down the outstanding core government debt,” McTaggart told his parliamentary colleagues and the listening public when he appeared in the LA to present the SPS last month. He said the only new borrowing was the $130.65 million to deal with the November bullet bond. “This borrowing will be specifically for this purpose and no loan proceeds will be used to finance operating activities or capital investments.”

McTaggart said government had learned from its experience with the 2009 bond, which had been organised by McKeeva Bush when he was premier and took over government at the peak of the financial crises when the public purse was in a bind.

Addressing Bush in his current role as speaker of the House, McTaggart made a dig at his approach to debt when he was premier, saying that “future borrowings are best structured as amortizing instruments with regular principal payments being made over the life of the debt”. He explained, “That approach smooths out cash-flows and reduces interest expense.”

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Category: Government Finance, Politics

Comments (33)

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  1. Anonymous says:

    still paradise. .can you immagine the insursnce rates next year? after these hurricanes…




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  2. Anonymous says:

    hey guys…we live in paradise!!!😄😃😅😆




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    • Anonymous says:

      Not anymore!




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    • Concerned says:

      80% illegitimate children, high crime rate, high social issues, failing education system, Caymanians becoming 2nd citizens, low moral Police Service, national security failing, homelessness, unemployment of our youths, gun crimes , tell me is this Paradise?




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  3. Anonymous says:

    Can Govt please remove the .25 cent tax on fuel? This would help everyone on the island in these tough financial times.




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    • Anonymous says:

      Walk more and drive less




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      • Anonymous says:

        To walk more and drive less,- the fuel tax that 11;58 am is talking about is the diesel tax that cuc is charged by Govt.and passed on to us. Gasoline tax is 75 cents.




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    • Anonymous says:

      No. We need that money to pay for the free education of all the expat government employee children who we are educating in our schools without regard to the cost and without regard to the fact that we do not allow that benefit to the children of work permit holders.




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      • Rick Berns says:

        Which country are you living in? Expat children attending government schools pay school fees. They do not get a free lunch from anyone. Not that the fees are worth it, because the schools are very poor value for money.




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  4. Caymanian says:

    Well we will have to wait and see people. So far PPM has delivered on its financial statements and we will have to wait and see this play out. My question is this….No new borrowings…..does this mean No dump solution and no dock solution….somewhere somehow money will be needed within 3 years for both of these…..




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    • SSM345 says:

      I believe the solution you seek is called DART.




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    • Anonymous says:

      I’d rather the Government put off financing the dump and dock until there is a viable solution so not to indenture the younger generation. Not everyone can keep up with the Kardashians.




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  5. Anonymous says:

    So proud.

    Only a fool would make major cuts to the civil service. Where would all these people go? Who is going to do their jobs? Please don’t tell me the whacky private sector.

    Look at the UK they have finally realized that their cuts were too deep and is now giving civil servants pay rises and bringing on more staff.




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    • Anonymous says:

      the whacky civil service???…where people have to preform for their jobs and are held accountable on a daily basis????




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    • SSM345 says:

      that’s probably because they got rid of the dead weight; which accounts for at least 1/3 of every Govt. Dept we have; you only have to deal with one to know that there are people on the payroll who do absolutely f’all and still collect a cheque and free benefits every month or in some cases for life.




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  6. Sharkey says:

    Mr . McTaggart , sounds now that you are going to have to put you experience where your mouth is and bring the debt down , or next Election Mr Archer will take his seat back from you .




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    • Anonymous says:

      Roy is far more able than Marco (who did not distinguish himself in the civil service) and he is not arrogant like Marco.




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      • Anonymous says:

        Roy did the same as Marco, shooting down Mr. Miller, about allowing Caymanians to bring back home more duty free allowances.. I wonder if it was for only expats what he would did.




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  7. Anonymous says:

    property tax???? maybe they worki g for caesar? knock knock….here to collect caesars taxes??!!!😧




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  8. Anonymous says:

    and we the poor people going have to pay for a quarter billion in 3 yrs??? while politician salariestemain same? omg😮😣




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    • Anonymous says:

      Err, no you won’t pay a thing. Do you have an inkling as to how this works? Its mostly going to be those expats you hate paying for it with their WP fees, the things they buy here, stamp duty on houses etc. You really got to hate those guys for daring to be here and paying off your debts for you. You wonder why they mostly have little trust for Cayman?




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      • Anonymous says:

        1;31 pm, if most have little trust in Cayman ( i think you means YOU) why don’t you go back to your heaven where you came from.




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  9. Anonymous says:

    they do what they want anyhow? so why comment? make poor poorer…y rich richer😕




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  10. Anonymous says:

    how??….
    all i have heard from ppm is that they are going to increase the civil service and increase social welfare payments….




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    • Anonymous says:

      work permits for everyone!! Hip hip hurray..for Adlen’s the jolly good fellow…..for Adlen’s the jolly good fellow…sang no young Caymanian ever




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  11. Anonymous says:

    How about cutting work permit revenues? We would like same incredible opportunities you as a Caymanian had Roy.




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    • Anonymous says:

      It’s not enough to have the same opportunities as everyone else in the country. You have to have the same “opportunities” as one of the most successful people in it.

      Can I respectfully suggest you stop bemoaning the opportunities you think you don’t have and start making the most of the ones you do.




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      • Anonymous says:

        You don’t understand the word opportunity…yes I should have the same opportunities that were available on the basis of being Caymanian…whether I become as “successful” as Roy will be up to me.




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        • Anonymous says:

          10:52 am, why don’t you go back home where you would have the same opportunities as your fellow country people.




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    • Anonymous says:

      Oh, don’t worry. They are cutting work permit revenues. They are making all the work permit holders Caymanian!




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