OAG issues warning over debt and future liabilities
(CNS): The Cayman Islands Government is heading for significant fiscal challenges because of increasing public debt to cover its growing list of capital projects and the liabilities to cover the healthcare cost of retired civil servants now and in the future. In her most recent report about the sustainability of public finances, the departing auditor general, Sue Winspear, raised the alarm on a number of issues, including the debt balance.
This has increased in recent years after a period of decline, and Winspear warned that the CIG could find it difficult to meet public spending obligations and service its debt.
While government debt peaked in 2011 at well over CI$630 million, it gradually declined over the next decade until 2021, when the pandemic led to the first new government borrowing for many years. Since then, the debt has more than doubled with the outstanding balance sitting at around $420 million at the end of September last year.
But the government announced that it plans to borrow a further $150 million in this current budget cycle to support planned capital and infrastructure projects. Given the possibility of cost overruns plus other projects that have not been budgeted for yet, Cayman could soon find itself with a debt burden that exceeds its 2011 peak.
The auditor warned that the repayment of this growing debt could put pressure on finite resources and might need to be prioritised over other policies and programmes in the longer term.
In addition to its debt, the government also has significant long-term liabilities for civil servants’ pensions and post-retirement healthcare insurance. As at December 2023, the CIG’s post-retirement healthcare liability was estimated to be $2.4 billion, and the present value of the unfunded pension liability for defined benefit plans was $328 million.
In November 2024, the Office of the Auditor General reported that the post-retirement healthcare liability for ten SAGCs was $401 million as at December 2023. Some SAGCs also had pension obligations for their staff, amounting to almost $16 million.
There are a range of debts and obligations including those for the SAGC loans. The CIG government had worked on reducing debt from its CI$630 million peak to just $223 million in 2011.
Things changed in 2021 when the former Progressive administration secured a line of credit worth $330 million as a back-stop for any possible economic fallout from the pandemic. However, it was drawn down by the PACT finance minister, Chris Saunders, in June 2022. By the end of 2023, government debt had more than doubled.
The CIG is planning to borrow even more money this year and next, and also holds debts for various SAGCs of around $20 million.
Much of the debt has been incurred as a result of capital projects. In its capital project tracker, which is included in the financial report for the second quarter of 2024, the government reported that 38 capital projects with an estimated total cost of $460 million were in progress or planned.
Of these 19 had started by 1 January 2024 and had incurred expenditure of $141 million. The capital expenditure on all projects for last year is estimated to be $79 million, and over the medium term (2024–2026) it is estimated to be $160 million.
“However, we noted that the timescales of several of these projects were still to be determined, and costs had not been estimated for any of the years,” Winspear said in her report.
The tracker includes information on the annual operational costs of a few of these capital projects, which is estimated at $7.7 million a year. This includes $6 million per year for the Poinciana Rehabilitation Centre, the long-term residential mental health facility. The Ministry of Health and Wellness budget for 2024-25 includes an output for the facility of $4.3 million in 2024 and $7 million in 2025.
The government is also embarking on the East-West Arterial extension. The draft environmental statement has estimated that the cost of building and maintaining the road could be more than US$1 billion over the next 50 years. “If the Government goes ahead with this project, it could lead to additional pressures on public finances over the next five decades,” Winspear warned.
Since 2017, the OAG has advised the government to prepare a long-term capital investment plan to inform capital investment decisions, including the affordability of major capital projects and the capacity of the government and industry to deliver them.
“This would significantly improve the Government’s ability to plan for and report on its long-term financial sustainability. However, despite agreeing with this recommendation, the Government has not developed a long-term capital investment plan,” Winspear said.
See the report in the CNS Library.
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Category: Government Finance, Politics
Here is my two cents on recovering the growing CIG’s Debt:
1. Implement Property Tax on properties owned by non-resident foreign owners.
2. Cut Parliamentarian Salaries by half going forward.
3. Force PRs to pay their outstanding Fees. If not revoke their PR and send them on their way. To ensure this nonsense does not continue, implement a proper system to ensure monitoring and collecting PR Fees are adhered going forward. No more BS on this matter.
Any time the government puts out a press release about the “surplus” the press should put a massive asterisk next to it to point out that it is before capital expenditure, interest on the debt, “investments” in SAGCs, and movement in unfunded liabilities; i.e. not a surplus at all.
Reporting a “healthy surplus” every year just makes everyone (including government depts and authorities) line up with their hands out and leads to the people voting for more spending.
Cayman urgently needs to change course.
Government can save a lot of money if they do not buy my land. They offered me a pittance whereas it is worth very much more. Their legal costs in trying to seize my land will cost them even more.
Can no one stop their spending. They are out of control.
Any better reason why we shouldnt elect a PPM with Kenny and Ju Ju in it!
Kenneth has promised his new best friends the wealthy merchants in GT that he’s going to give them cruise piers.
free money making solutions:
allow sunday trading
bring in weed tourism(to protect the fine caymanian christian ‘heritage’, only tourists and expats are allowed purchase)
bring in casinos at top hotels (to protect the fine caymanian christian ‘heritage’. only tourists and expats are allowed)
treble all traffic fines
treble duty on cigarettes
implement any recommendation of miller-shaw or e&y reports.
sell loss making cayman airways
sell loss making turtle farm
sell goab
double stamp duty for non-resident property purchasers
Instead of looking at making money – we already have enormous government revenues – we should look at stopping how government wastes it, to say nothing if all those suspect projects that cost way more than initially budgeted.
Like the $8Million fees for a $200M prison we don’t need/can’t afford..?
read again…
implement any recommendation of miller-shaw or e&y reports.
sell loss making cayman airways
sell loss making turtle farm
Keep asking….
How many recommendations of the miller-shaw or ernst & young reports have been implemented?
what does the ppm(or any other ‘party’ manifesto say about this???
any comment Mrs governor?
any comment chamber of commerce?
No government actually listens to the OAG. Reports are made and they collect dust. No improvements or suggestions are ever implemented.
Maybe the government should look at closing down the OAG office? I mean…why have one when they are not taken seriously ?
Just remember it was Marco Archer followed by Wayne Panton who reduced the debt. Julianna and McKeeva always leaves us in a financial hole after they wrap up their term.
Wayne spent a lot of money from the public purse.
Wayne never put us in a financial hole.
Vote Dan and his party all the way. We need a change mow.
Perfect!
Solutions:
End Darts DUTTY FREE CONcessions! Woww..When?!
2pc Annual Luxury tax on ALL properties $1million-plus (Caymanian or not).
BiAnnual Referenda to approve any spending over $1million.
Do a preemptive national audit with new AG, or UK will come do it!!
Freeze blue collar work permits.
Subsidize FREE Public Bus for U18 and over 60yo LOCALS.
Prioritize Loval Hiring and Spending, eg DOT PR Contract$$$
Graduate high school.
Juju already declared there were too many financial constraints on Cayman.
So her new gang ain’t exactly going to be restrained , even by common sense , when it comes to spending.
They’ll have Saunders in charge of finance just to test the UK’s patience with these kids in the candy store.
The old restyled UDP now calling themselves PPM….don’t be fooled Cayman.
Vote for the entire CINP team aka Dan Scott Group they have there heart in the right place it’s not about greed they are all about helping our country VOTE Cayman Islands National Party
Anyone but PPM honestly.
If PPM needs to start horse-trading after the election there is a massive chance McKeeva ends up controlling things again.
It is clear now that any vote for any PPM candidate adds to the likelihood of Kenneth and his spend spend band will be in charge of the check book.
Here comes the cruise port to break the bank and destroy GT and the public beach.
Save Cayman, don’t vote PPM.
I will not back ppm now with Kenny, Donkey & Curtains running with them
But you backed them when they were standing on the backs of Caymanians holding us down for cheap labour and claiming to “justify” it with permit fees, while giving away tens of millions in untracked duty concessions to wealthy foreign developers?
With Julianna running again our finances are doomed for sure.
Only if she wins her seat.
She will win. She is a Goddess in Cayman Brac just like McKeeva is a God in West Bay.
They are our best and brightest in the Cayman Islands.
Add another $450,000,000 for the cruise piers so Kenneth can keep his promise to his favorite GT merchants, and of course Mac’s promise to his favored Chinese contractor.
Ever notice that it’s one particular cruise taximan and one particular diamond store owner who are the most vocal about the port?
Things that make you go hmmm
It will take years to get the land they want for the cruise ship pier. All the way to Privy Counsel. They started a war they cannot win.
Stay Strong Chris!
#leggewasright