Against a backdrop of earlier fears that the government was at risk of a deficit, or at least a much diminished surplus outlook, the new United People’s Movement (UPM) coalition has presented a budget which projects a reassuring turnaround in the government’s finances.
Presenting her first budget, Hon. Premier and Minister of Finance Julianna O’Connor-Connolly reported to Parliament and the wider Caymanian community that “Core Government Operating Surpluses are forecast to be approximately CI$43.0 million in 2024 and CI$53.2 million in 2025. Closing Cash Balances are expected to be CI$388.7 million at 31st December 2024 and $412.1 million at 31st December 2025.”
Overall economic growth is projected at 3.1% in 2023 and to 2.2% in 2024.
Just a few months ago it was reported that the then PACT government of ex-Premier and Finance Minister Wayne Panton was aiming for savings of CI$47 million, estimated at 8.5% of the previous forecast expenditure up to the end of this year.
In her inaugural budget statement, Premier and Finance Minister O’Connor-Connolly updated on the government’s financial situation to the end of this year.
“Operating Revenues are forecast to be $1.034 billion, which is some $56.0 million higher than estimated in the original 2023 Budget. The higher-than-budgeted Operating Revenues are mainly due to favourable variances in investment, tourism and property-related revenues. Operating and Financing Expenses for Core Government are forecast to be $1.011 billion for 2023, which is $60.6 million greater than the original budget of $950.4 million.”
The outlook for the next fiscal period (2024/2025) includes several revenue-raising steps.
“The decision to implement new Revenue Measures was not taken lightly and efforts were made to ensure that they were non-inflationary and did not have a direct impact on the average citizen and the already high cost of living.”
NEW REVENUE MEASURES
As detailed by the Premier/Finance Minister, the new revenue measures are projected to yield additional revenues of CI$52 million in 2024 and CI$80 million in 2025.
Among the main services where increases will be applied include; work permit application fees, an increase to the import duty rate on hybrid and electric vehicles with a value of more than $70,000, and a hike in the environmental tax payable with respect to hybrid and electric vehicles with a cost, insurance and freight value (CIF) of $80,000 or more.
Other areas where increases will be applied are; Customs fines and procedural fines, immigration-related visas and extensions, the stamp duty rate is being contemplated for properties purchased in certain “high-end” geographical areas on Grand Cayman, and Administrative and regulatory-related fees, which are charged by the General Registry, the Department for International Tax Compliance, the Cayman Islands Monetary Authority and the Department of Commerce and Investment.
“In order to meet all of the Government’s planned capital investments over the Budget period, the 2024 and 2025 Budget includes borrowings of up to $150.0 million over the two-year Budget period,” Premier and Finance Minister O’Connor-Connolly stated.
However, she assured: “Even with this proposed level of borrowings, the Government’s Debt-to-GDP ratio remains under a 10% level – which few countries in the world can match…Government does not borrow to fund its day-to-day Operating Expenditures and, it will only use the proposed borrowings to fund Capital Expenditure and Investments.”
CHANGES AND CHALLENGES
According to the Hon. Premier and Finance Minister, “Over the last two and a half years, we have seen our economy on its way to full recovery primarily due to robust increases in most sectors led by construction, real estate and financial services. The prudent actions that were taken after the pandemic have borne economic fruit.”
She also credited her predecessor, former Premier Wayne Panton, whose PACT (People-driven Accountable Competent and Transparent) coalition of which she was a part collapsed recently and reformed as the UPM coalition which she leads.
“I want to pause and thank Hon. Wayne Panton, Member from Newlands, namely for his dedication and service during his tenure as Premier. It is through his leadership of the country in the second half of the pandemic that we were able to successfully reopen the country’s borders without having to re-implement any lockdown measures. This is another remarkable story, against all odds.”
Referring to the change in government against the backdrop of a [ending budget statement, Premier O’Connor-Connolly also said: “I am very grateful to my Cabinet colleagues who came together with the united purpose of finalising this budget. We have had to deal with a number of challenges over the past few months, weather many storms and we have made tough decisions. But the love of country and the interest of our people keeps us united - and we will continue to use this as our guiding light and principle.”
The Premier said her United People’s Movement (UPM) has “hit the ground running with a focus to deliver on Government’s priorities over the next fourteen months.”
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