New gov’t will inherit CI$100M deficit
(CNS): The Government of National Unity will be leaving the next government with a hole in the operating budget for 2021, despite continued claims that the members of the outgoing administration have been a good stewards of public finances. While COVID-19 spending explains part of the deficit, government’s revenue is not anticipated to be as hard hit as the public might expect. The deficit is made worse by spending unrelated to the health crisis, which was obscured in the recent Finance Committee hearings.
According to the pre-election financial update that government is obligated to publish before Cayman goes to the polls, the public deficit is forecast to be CI$98.3 million, or $173 million less than expected in the original budget, as 2022 was supposed to return a healthy surplus.
“COVID-19 response and recovery efforts have had a significant impact on the forecast position,” officials said in the report that detailed the state of the public purse. “Government’s loss of revenue and increased expenditure related to COVID-19.”
The public is expected to have $287.2 million cash in the bank by the year end but the next government will likely need to use its line of credit at some point in the coming twelve months. This will add to the existing debt, which is now forecast to increase from $422.8 million in 2021 to $582.3 million at the end of the following year.
The deterioration in public finances, however, is not focused on the loss of revenue, despite a drop in tax revenue related to the tourism sector. The document suggests that government is still expected to collect CI$812.5 million compared to the near CI$790 million it has collected this year.
“The deterioration in the forecast deficit from $38 million for 2020 to $98.3 million… in 2021 is purely due to a forecast increase in Operating Expenses from $827.5 million for 2020 to $910.9 million for 2021,” officials said.
Explaining some of the non-COVID related spending, government said that an additional $26 million will be spent on the tourism stipend and other support for those out of work over the original expectations, as well as an increase on permanent financial assistance, scholarships and support for veterans and seamen. But more staff and general expenditure by the civil service, CI$6.3 million on opening Cayman offices in Europe, Asia and America, $6.1 million more on interest on the debt and new loans are the main causes behind the significant hole in the public finances that the next government will be forced to navigate until it can produce a budget of its own.
Looking ahead at the country’s broader economic fortunes, the report predicts that Cayman’s economy will grow by 3.2% next year and 6.3% the year after that. But given the significant variables on the horizon relating to how the pandemic will impact Cayman and the rest of the world, the report states that it is construction and development that will get Cayman out of the economic doldrums. However, depending on who is elected, public pressure for curbing the unbridled development may lead to a very quick change of policy regarding Cayman’s development dependency problem.
“The construction sector is expected to lead the economic expansion, with an acceleration in activity foreseen as the stimulus measures implemented in 2020 take full effect during 2021,” the report stated. “The sector’s expansion is expected to reflect several large-scale projects, including many high-end apartment complexes coupled with some hotel projects.”
How many of these projects which have not yet started will go ahead is not entirely clear and they could be impacted by new government policies that prioritize the environment.
The report points to the NCB Hilton Hotel on the waterfront in George Town, which is under construction, and work at the Hyatt Hotel at the Pageant Beach site, though this has been stalled since before the pandemic took hold. The government is also relying on the start of the Mandarin Hotel at Beach Bay, which has been a “soon come project” for almost a decade.
The runway extension at the Owen Roberts International Airport and construction of key government buildings, such as the John Gray High School campus, are much more likely to go ahead, regardless of who forms the next government. But government is predicting a further 10.2% in growth in construction in 2021, which translates to a great deal of development, which most candidates say they want to curb.
Government is also relying on construction and development to halt the increase in unemployment, with the demand for labour expected from planned construction projects, though there are continued concerns that although the sector still employs locals, it is increasingly dominated by expatriate labour in management posts and at the bottom with cheaper work permit holders. Even if the rosy economic scenario painted by government of a boom from development pans out, the continued closure of the tourism sector will require restructuring in the local labour market.
“The government’s policy to integrate displaced Caymanians into the workforce is also expected to shift the labour market dynamics and minimize the impact of displacements on the overall unemployment figure,” the report stated. though there is little evidence of this working yet and no guarantees the next government will pursue the same policies.
The forecast document contains no new revenue measures, such as an increase in, or change to, the current taxation systems. The revenue predictions reflect estimates based on expectations about how the economy will grow as a result of development, the financial sector remaining steady, tourism resuming later this year and a continuation of the current administration’s policies. But there are many factors that could undermine the predictions.
“Any adverse change in those economic factors could negatively impact the forecast revenue,’ the government accountants acknowledge. “The expenditure forecast considers current policies and plans of the government including
response to, and recovery from, COVID-19. There is a risk that forecast expenditure could be higher or lower than planned over the forecast period… These forecasts have been prepared using a ‘constant policy’ assumption which means that all Government policies reflected in the 2021 Budget, and all Cabinet decisions made up to 16 March 2021, are reflected in these forecasts.”
See the full document in the CNS Library.
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Category: Government Finance, Politics
I challenge CNS and anyone else to honestly and truthfully tell us another territory or country in the western hemisphere that is in a better position economically and socially today than the Cayman Islands. The deficit was already covered out of reserve funds and there is still over $400 million left! Seafarers say “steady as she goes”. Vote wisely on 14 April my fellow Caymanians.
Switzerland, Luxembourg, Finland, Sweden, Netherlands, Denmark….
Are you sure? What about their Covid-19 status and their debt to GDP ratio? May be 10:02 gave too much latitude (pun intended). How about a bit closer home,i e. within the Caribbean and the Americas.
George Town west candidates owned by McKeeva please stand up ain’t that right Pearlina the jewel aaaah boy still trying to fool people yet again if it walks like duck and it talks like duck it must be McKeeva swamp they like to swim in nah true Nice try but you ain’t getting my vote! no vote for McKeeva ducklings
hate saying this because their performance has been so poor on so many issues:
but there is only one thing worse than a ppm led coalition and that is the opposition.
Dont vote for Mckeeva & PPM candidates in G Town Please !
…or anywhere for that matter.
12.38 And please don’t vote for Johan or Sammy, two very angry men. Johan claims to be for Caymanians but refuse to give Alden credit for the excellentjob done in handling the Covid pandemic. Suggesting instead that more
credit really should go to the Governor and his staff and the FCO. In other words he chose the expats over the Caymmanians. This was on Radio Cayman Talk Today. Sammy is now ranting about destruction of the environment yet he is listed as part of the FIN team. Cettainly we didnt hear him speak out about that in the past or present. In fact when has he ever spoken out in support of the environment before running for electon. Did he suddenly get Saul/Paul conversion moment. Johan once said ‘politicians will say anything to get elected’. I am going to take him at his word and believe that about him too, afterall. He politician now.
Boy you can hear some foolishness!
Alden was following orders. Do you really believe that Alden new more about Covid than Dr. Lee or the Governor. Alden simply implemented what they told him. Nothing wrong with it but please don’t say that Alden should take the credit for it. Alden himself should be be giving credit to Dr. Lee and the Governor.
As far as the crap with Sammy, is that all you could find? Alden and Al’t approved and gave Dale crighton and Mike Ryan the approval to build that monstrosity. Sammy worked for them on a legal matter. Now tell even if this were true about Sammy he would not even be involved had Alden and Al’t not approved it..
PPM continues to grasp at straws. Prepare for the final hours of the PPM and CDP parties..
It’s time Cayman, please vote wisely.
7.44pm That’s right he followed the the science and made the tough decisions; Boris Johnson didn’t and look how that turnd out. The question is this..Will we get an Alden or a Boris? I would simply keep the real Alden.
Try to imagine that for many candidates running to be Members of Parliament tomorrow, this pledge (already law), was TOO CONTENTIOUS for them to sign, or associate with, or risk having any voters find out that they declined to sign:
“As an electoral candidate in the Cayman Islands I recognize that corruption is a complex economic, political and social challenge that threatens democracy, sustainable development, the rule of law, and the welfare and health of our citizens, and that the corrosive influence of corruption extends to the spread of financial crime and other illicit activities that pose threats to the security, good order and well-being of our society;
I believe and reaffirm the need to establish and nurture a culture of integrity among citizens, public officials and private sector officials; and
I pledge to do my part as a responsible candidate by saying no to corruption and reporting any incidents of corruption or election-related offences to the Anti-Corruption Commission or the Elections Office.”
Mind blowing.
Is this including or not including the projected +/-600,000 severance to get them out?
Same old ppm scare tactics and trickery now we see UDP/CDP substitutes and prostitutes offering solutions if we elect them too ! Ain’t that right Miss& Mr George Town West Don’t be fooled voters those who can’t govern themselves cannot govern you !
I was wondering when this threat was going to materialize yet again Ppm must be fretting yet again Using the same old political tactic search and destroy mission. where they burn down the natives houses to punish them for their ungratefulness and not recognizing the great things they have done to enrich themselves and political minions. F you ppm selling out Cayman has been your only successful policy !
Everything the PPM touches is corrupted!!!
No we know the reason why Berksoys Red Bay Development and Dart’s Indigo and others were rubber stamped quickly by Al’T and Alden’s group.
They were hoping this revelation would have been left to the last minute after the had hoodwinked the country into believing we were swimming in money.
Same old PPM tactics and results. Make it look look like all wine and roses to their supporters to get re-elected with the hope of covering up the losses by offsetting them by ramrodding through developments prior to the election to make themselves look good after the elections and to sure up their lies to the people.
uk will hopefully step in and control our finances again….
Won’t be long, probably right after the first attempt at forming a Government falls apart less than three months in.
Pretty funny 7:47 👍
It would be funny if it wasn’t the truth.
Don’t hold your breath on that. The way the UK is burning through money they haven’t got to try and control the pandemic they’re going to paddle themselves further up s*** creek than we ever could.
https://youtu.be/yq_E3HquRJY
If anything, we should be talking about whether it’s time to recognize the opportunity afforded by our incredibly strong financial position to engage our local economic drivers with public spending (particularly capital investment). Debt is extremely cheap and we should be investing in our future by utilizing it. The above video link helps put some of this in simple terms 🙃
The Hilton and Hyatt across from Kirk’s is being built extremely slow!
A second pension fund withdrawal would necessary stimulus to Cayman! Easy cash injection into the economy and no debt to the Government.
No kidding. If I had bought one of the “70% sold” residences, I’d be pretty miffed at the lack of movement there. Wtf is the problem?
“Opening Spring 2022”🤣
They’re going slow on purpose, so you’ll want your deposit back and they can then resell at twice the price. BE PATIENT!
“No debt to the Government” just a debt to the future Government when these people run out of pension sooner than they already will and go on state aid that much longer. Pension fund withdrawals are not a good solution.
Then just offer 2nd pension fund to expats
If expats are in need of 2nd pension fund withdrawal, that means they should have headed home when their income flow ended.
No it just means we’d rather invest it in something that’s actually accrues gains.
Dam right! Cayman pension funds are utterly pathetic. Grossly underperform the markets and over charge 1.5% MER annual fees. Blatant theft and ripping off every pensioner of tens of thousands of dollars of capital appreciation.
I want my motherf$cking money in my hands to invest
Is this an example of having incompetents and/or thieves in charge of the public’s money? The only things I think that our politicians might be good at are theft and obscuration . Not much of a recommendation, is it !
…plus a billion or two in unlogged public healthcare and massively underfunded pension liabilities, but don’t worry, we’ve rubber stamped all the developer projects and given them unlimited waivers and untracked concessions to reclaim nothing…PPM logic.
$100 million deficit is nothing to cheer about but it could have been so much worse but in terms of money and health.
I have just been reading the news out of Bermuda where their relatively lax approach to quarantine has coincided with a surge of hundreds of Covid cases, dozens of hospitalisations including ICU and at least 4 deaths in the past 10 days or so.
https://www.gov.bm/articles/covid-19-update-premiers-remarks-11-april-2021
Even their Premier now has tested positive for Covid
Those who wear socks with shorts get what they deserve.
The surge in Bermuda is mostly from the locals having parties and local gatherings at Easter.
even when faced with the economic nightmare of covid…the ppm continued to spend us into bankruptcy.
welcome to wonderland
ppm strikes agian…second time in 12 years they have bankrupted the country.
and till the very last day in office they continue to spend-spend-spend….
lucky they have left us with a re-opening plan….ooops!…no-plan-ppm strikes again!
ppm bot alert!
We will have two pandemics if the PPM is elected.
It’ll be border lockdown forever so they can claim to be saving people.
Cleverly worded with just the right sprinkling of innuendo and a dash of rhetoric. Seriously though, stating that a government (any in this world) is running a 2021 deficit and has a shortfall in earnings and therefore is somehow lacking in stewardship is kind of like diving into the ocean, coming out wet and then complaining about the obvious dampness of your hair eh!?! This isn’t news.. this is pre-election messing about.
If we vote the PPM back in, they will just sell more PR and grant another 2000 work permits while dog eats our supper. 🤷🏻♀️
in addition to the severance of the losers..of which I truly hope there is many
You can be sure that will be only 19 winners!
What’s even more certain is that there will be 60,000 losers.
It is only losers of existing seats that get paid
The unintended consequence is that no one will ever voluntarily stand down. Even if they plan to quit they will always put their name in to pick up that last check. Truly a moronic law.
Not moronic if you are one of those who voted for it. Win win for them.
This is normal, people are acting like this is coming out of their paycheck’s as well.
Where do you think it’s coming from? Do you think the government has a money tree planted at the government house? They tax us for the money and then spend it unwisely.
The mone comes from stamp duty on those high end condo and apartment sales.
All the waved stamp fees? Right.
Let’s see the numbers on the increase in civil servants over the last 12 months which I understand is significant. If this is true why was it not reflected in a reduction in unemployed Caymanians?.
Legalize and tax recreational Cannabis. The deficit will be covered one week after tourists start buying pre-rolled spliffs.
Cannot happen until the US legalizes it on a Federal level. We will not be able to bank the proceeds. The first step the new Government can take, which is long overdue is to decriminalize cannabis and force the insurance companies to cover medical cannabis prescription costs.
This is nonsense. There’s a huge difference between medicinal and recreational cannabis. If the latter was legalised you’d have an even worse problem on your roads than you do now – as has been proven in the US in states where traffic injuries and deaths have risen in line with cannabis use.
>”There’s a huge difference between medicinal and recreational cannabis”.
Lol no there isn’t, only difference is who sells you it. Spoken like good old Aunty who’s never seen weed in real life but watched Reefer Madness back in the 60s.
The prescribed vape I get gives me the same high as smoking an illegal spliff, and I can dose as I please just as I would recreationally.
My driving is not impaired at all by it. In fact I actually drive slower with more care.
Medicinal – yes to legalization
Recreational – no to legalization
You think that’s bad? Make Chris Saunders get his hands on the purse strings.
Chris Saunders has already said he would do a better job than Roy..!
God help us if a man who can’t meet compliance regulations is given the National purse to splurge Jamaica style.
Ya mon, no problem and so on.
Jamaica does not claim Chris. Keep in Bodden Town West!
Sincerely,
A sensible Jamaican
Thank you ‘sensible Jamaican’…so even you don’t want him….Respek.
Exactly! Sure hope it doesn’t end up in his hands!
So when did Chris say this? Damn lie! Prove it!
PPM is grasping at straws now.
Chris needs to get away!
He be gone tomorrow. Vincent for life!
Bring back Marco archer