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Cash crunch hits Cayman
By Camilo Thame
Friday, September 04, 2009
Sizeable operating deficits racked up by the Caymanian government over the last two months have turned its CI$14.4 million (J$1.6 billion) positive cash balance on July 1, 2009 to a CI$4.3 million (J$464 million) overdrawn account at the beginning
of September.
McKeeva Bush, Cayman's Premier Designate
What's more, a CI$49-million (J$5.3 billion) projected shortfall in revenue for the current month has pushed the government to increase its bank overdraft, which can go as high as CI$15 million, pursue an aggressive privatisation programme and once again approach the UK Government to access a CI$372-million (J$40.1 billion) loan facility made available at a private bank, after the UK Foreign and Commonwealth Office (FCO) last week said it would unlikely approve further borrowing by its Caribbean protectorate.
Yesterday, the Leader of Government Business (Premier Designate) McKeeva Bush said at a press briefing that operating expenditures and loan repayments could total CI$79 million while revenues are expected to be in the region of CI$30 million during the month of September.
To meet the shortfall in September, McKeeva said his Government plans for, among other things, "advancing our discussions that we have already commenced on 'private financing initiatives' in respect of the two new high schools and the new Government Administration Building" - projects which have been blamed for ballooning cash outflows.
"The UDP Government believes that the schools could have been far more modest and less costly - this would have significantly alleviated much of our cash outflows on capital projects," said Bush.
But even payments on those projects had to be held back in order to meet government's payroll in September.
Bush also plans to seek approval from the UK Government to use some of the loan fund's facility that was put in place with a local bank.
"In this respect, Government will be making the submission requested by the UK FCO, next week," said Bush.
Last week, the UK FCO told Bush via a letter dated August 27, 2009 that the office would have to be "absolutely convinced that there is a sustainable medium-term plan for turning around the public finances and paying off the debt before being able to consider any extension of borrowing."
The FCO also strongly recommended that Bush consider new taxes, such as payroll and property taxes while the Cayman government should, not presume it could remain prosperous as an off-shore tax haven, given possible outcomes of the next G20 summit and Michael Foot's report on the UK offshore financial centres and given Cayman's heavy reliance on income made from fees on trust fund which have been declining in recent months as a result of the global economic downturn.
Bush, yesterday, flatly rejected the concept of imposing property taxes as it was not considered "in the island's best interest" but said that the current "financial year will see the introduction of some new revenue measures as well as enhancement to existing revenue sources" and will be decided on later this month.
According to Cayman News Service, the Government "was also looking for proposals from the private sector in the privatisation of or private-public partnerships for certain public sector services, including the sewage system, prisons, cruise ship facilities, cargo port, the airport, roads, and the Turtle Farm."
By Camilo Thame
Friday, September 04, 2009
Sizeable operating deficits racked up by the Caymanian government over the last two months have turned its CI$14.4 million (J$1.6 billion) positive cash balance on July 1, 2009 to a CI$4.3 million (J$464 million) overdrawn account at the beginning
of September.
McKeeva Bush, Cayman's Premier DesignateWhat's more, a CI$49-million (J$5.3 billion) projected shortfall in revenue for the current month has pushed the government to increase its bank overdraft, which can go as high as CI$15 million, pursue an aggressive privatisation programme and once again approach the UK Government to access a CI$372-million (J$40.1 billion) loan facility made available at a private bank, after the UK Foreign and Commonwealth Office (FCO) last week said it would unlikely approve further borrowing by its Caribbean protectorate.
Yesterday, the Leader of Government Business (Premier Designate) McKeeva Bush said at a press briefing that operating expenditures and loan repayments could total CI$79 million while revenues are expected to be in the region of CI$30 million during the month of September.
To meet the shortfall in September, McKeeva said his Government plans for, among other things, "advancing our discussions that we have already commenced on 'private financing initiatives' in respect of the two new high schools and the new Government Administration Building" - projects which have been blamed for ballooning cash outflows.
"The UDP Government believes that the schools could have been far more modest and less costly - this would have significantly alleviated much of our cash outflows on capital projects," said Bush.
But even payments on those projects had to be held back in order to meet government's payroll in September.
Bush also plans to seek approval from the UK Government to use some of the loan fund's facility that was put in place with a local bank.
"In this respect, Government will be making the submission requested by the UK FCO, next week," said Bush.
Last week, the UK FCO told Bush via a letter dated August 27, 2009 that the office would have to be "absolutely convinced that there is a sustainable medium-term plan for turning around the public finances and paying off the debt before being able to consider any extension of borrowing."
The FCO also strongly recommended that Bush consider new taxes, such as payroll and property taxes while the Cayman government should, not presume it could remain prosperous as an off-shore tax haven, given possible outcomes of the next G20 summit and Michael Foot's report on the UK offshore financial centres and given Cayman's heavy reliance on income made from fees on trust fund which have been declining in recent months as a result of the global economic downturn.
Bush, yesterday, flatly rejected the concept of imposing property taxes as it was not considered "in the island's best interest" but said that the current "financial year will see the introduction of some new revenue measures as well as enhancement to existing revenue sources" and will be decided on later this month.
According to Cayman News Service, the Government "was also looking for proposals from the private sector in the privatisation of or private-public partnerships for certain public sector services, including the sewage system, prisons, cruise ship facilities, cargo port, the airport, roads, and the Turtle Farm."
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