Bond to help CIG meet social welfare costs

| 13/01/2022 | 205 Comments
Cayman News Service
Finance Minister Chris Saunders 2022-2023 Budget

(CNS): Finance Minister Chris Saunders has said the decision to consider issuing a US$400 million bullet bond in the US capital markets will enable government to restructure the public debt over a longer period and offer the flexibility it will need to meet the country’s growing welfare costs.

Saunders told CNS that PACT is considering offering retired homeowners reverse mortgages as a way of helping them access their own equity and reducing their dependence on financial support from government. Given that Caymanians are forced out of work at 65 on inadequate pensions, the welfare bill will continue to grow.

“We are very concerned about the growth in the level of spending on social welfare, especially for the elderly,” he said. “The government wants to offer those who own their own homes reverse mortgages that can support them through retirement. To do that we need to restructure the debt and over a longer period.”

Saunders explained that banks will not offer reverse mortgages to pensioners and that in order for government to do so it needs to borrow over a longer term than the current 15 years, which is why the finance ministry is examining the idea of a bond to enable greater flexibility and probably much better terms.

The minister said that the credit facility negotiated by the previous government has been fixed at 3.2%, but given the low cost of borrowing at present, he believes government can improve on that significantly.

According to a request for information on the government procurement website, the ministry is looking for independent financial advisors to serve as consultants for issuing a 30-year US$400 million bullet bond in the US capital markets in the second quarter of this year.

The main difference between a bullet bond and a loan is that the entire principal value is paid on the date of maturity instead of by regular payments. The RFI suggests that government is aiming to issue the bond in the second quarter of this year.

Over the next year, government has already committed to borrowing just under $300 million and another $50 million the following year, increasing the overall debt to around $485 million. Most of that debt is with local institutions and is due to be paid back during the current decade.

Following the publication of the tender, the opposition was quick to criticise the government for the proposal. Opposition Leader Roy McTaggart said it was “rushed and unexpected” and never mentioned during the recent Budget and Finance Committee meetings.

However, the government did say during those meetings that it was considering restructuring the public debt. McTaggart said that government’s previous experience with a bullet bond was costly and should have served as a lesson to future administrations.

“Such a bond is unnecessary and will become a significant financial burden to the people of these islands over the next three decades,” the PPM leader and former finance minister said. “This ultimately means less money available to assist families and businesses over the medium and long term, especially as we recover from the pandemic in what is still an uncertain economy.”

McTaggart accused the government of turning its back on prudent financial principles and disregarding the long-term financial interests of the Cayman Islands, claiming the government was undermining the work of the previous administration.

“Over the two Progressives-led governments, the national debt fell from around $560m in 2013 to under $250m on the day we left office,” he said. “The PACT Government seems set to undo in two years what it took us eight years to fix – leaving the country again with massive debt.

“This bond will saddle us with interest payments on $400m for the next 30 years and by my estimates, conservatively assuming interest rates of between 4% to 5%, will cost the country between $480 million to $600 million dollars in interest over the life of the bond. Far more than the amount being borrowed.”

But Saunders made it clear that government is seeking better terms, not more expensive ones, and the PACT Government is navigating very different economic waters than those faced by the previous administration.

He stressed the current government’s desire to help the people and the need to borrow in order to do that. He told CNS that he was disappointed with the opposition leader, who he said continues to play politics over the country’s finances at a very difficult time and the future social problems that will need to be addressed.

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Category: Government Finance, Politics

Comments (205)

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  1. Anonymous says:

    CIG income is not the pro
    Rampant spending and wanton management are the key.
    The public could show them how to save $10mil right now.
    Means Tests for all major CIG free benefits like health and scholarships.
    Deport expat inmates.
    Cut out Miss Cayman,there is a duplicate private pageant.
    Bring back the police Traffic Dept – they could make thousands daily in these roads.
    Cap LA benefits and double dipping.

  2. Anonymous says:

    If the Panton PACT Clown Car were serious about social welfare and not just seeking money to waste currying the favour of voters, they would seek to effectively address the very high cost of medical care and health insurance here. In a modern wealthy society, universal access to health care should be a basic human right. One should not have to go bankrupt in order to save their life or the life of a loved one.

  3. Anonymous says:

    Please explain to me why a couple making up to CI$400,000.00 per year require a Government scholarship to send their child to university???

  4. Anonymous says:

    Maybe if they stopped giving 100% scholarships to kids of parents that can more than afford to pay for Uni and wasting money on random government projects, they soundly need to issue a bond.

  5. Anonymous says:

    PACT and their policies do not have broad support amongst the populace. They only listen to a very small group of special internet and supporters.

    • Anonymous says:

      So who are the political pigs feeding at the trough making the money off of this rich man’s nonsense.

      Some PACT people are following the Sir Alden’s foolishness sucking up to the rich in Monaco a few years ago.

      The PPM plants is PACT are in control.

  6. Anonymous says:

    Meanwhile CIDOT has sponsored a car race:

    Cant make this $hit up.

    • Hubert says:

      Money to burn. CIG does not live in economic reality.

    • Anonymous says:

      16 @ 4:17pm – Perhaps Kenny linked with some big contacts while on holiday? Access to over $40 mill can open some new doors!

  7. Anonymous says:

    Why they putting country into more debt to support people who don’t want to work? Start cracking down on all those useless baby daddy’s and women who think having a kid for everyone they sleep with is ok. No work no pay!

    • Anonymous says:

      6:06pm…👍🏽👍🏽👍🏽 And stop importing poverty. Start sending these parasite home. We are reaping the woes of the mass Status Grant. Big Mack and his corrupted government should be made to fund these parasites! NOT US!
      They are a Cayman’s cancer. We must deal with them now!
      Imagine borrowing this amount of money!!!!!!
      Imagine when the like of some of “them” get their hands on it!!!!!!!!!

  8. Fed up to the back teeth says:

    My employer is stealing from me to pay for my spouse’s health insurance. I have a signed contract that they would pay for this. Its over $1400 a month. You tell me how a retired person can survive on $1,000 pm from their OWN money. Prices have gone up by at least 7% as I don’t believe the official figures are correct. No raises for over 10 years. This is a yet another reduction in my pay of 1over 16%. How the ….. am I supposed to survive? There worst thing is the big shots at my firm are raking more and more in for themselves and piling more and more work on. You think CUC or FLOW give a XXXX, Even if you go to the labour board, all you will probably get is no more job and nothing repaid. Never thought I would see Cayman in such a mess. I can tell you that the politicians do not give a flying you know what about the ordinary person. First think they did was increase THEIR pay by around $5000 a month. What a joke. A lot of people have to survive on a lot less than their increase. The people suffering in Cayman are the poor and the middle class. The rich are getting richer and richer and looking down their noses at the “ordinary” people we need a real labour board or a union and a fair price commission. I thought this govt was going to sort this out. I do not want a reverse mortgage. I worked long and hard to pay my mortgage to leave something for my loved ones. I am not giving up equity to anyone else

    • Anonymous says:

      Hard times, hope you got a US or Canadian passport. Make money up where money gets made.

    • Anonymous says:

      Sorry to read your post 12.03, but you have to realise that Saunders MacKenny etc also don’t give a #### about you.
      All they care about is the 300 or so like minded idiots who vote for them to ruin Cayman.

  9. Anonymous says:

    The bond is the alternative to raising taxes which would be politically difficult. However, when the interest payments become due, it will be necessary to raise taxes but … that would be a problem for the next administration.

    • Anonymous says:

      No. Running the government efficiently, and preventing the mass importation of poverty, is the alternative to taxation.

    • Anonymous says:

      Or the CIG can cut back on spending. But that would make too much sense.

    • Anonymous says:

      It’s a bullet bond. There are no interest payments; they compound up and everything is payable on expiry; in other words they are planning to borrow $400m now to give to their friends, family and voters and our kids will have to pay back approximately $1 billion in 30 years!

      • Anonymous says:

        10:59am… EXACTLY. This is another corrupted move! May God help us that this doesn’t happen!

    • Hubert says:

      No 5:12, the alternative is cutting back on government spending.

      However, this requires real leadership.

  10. Anonymous says:

    Quote -“Over the next year, government has already committed to borrowing just under $300 million and another $50 million the following year, increasing the overall debt to around $485 million.”

    Note, this $400 million bullet bond will be in addition to the 485 million, taking Cayman’s debt to almost a billion. This does not even include the unfounded pension liability.

    I am very worried about the financial future of Cayman and so should you. These morons are in a race to bankrupt us! Clueless idiots.

  11. Anonymous says:

    Shouldn’t the Speaker of the House be forced into retirement at 65 like all Caymanians,plenty money stashed away so why still allowed to earn a salary? Law and rules only apply to the ‘common’ people.

  12. L.Roy Scott says:

    This will lead us rightto the world bank: goodbye Cayman dollar, hello higher inflation, lower value for the Cayman dollar and it will resuly in the Cayman becoming poorer!

  13. Anonymous says:

    I don’t know why this bond would be necessary. The government has proposed and engaged in new expenditures that it should not be engaged in under he current circumstances.

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