PREMIER PRESCRIBES SPENDING CUTS

The emergence of a leaked government document in which Hon, Premier Wayne Panton has directed Chief Officers and Chief Financial Officers to rein in spending and consider areas of possible cutbacks, has sparked ripples of concern not just about the true state of government finances, but more importantly, the implications for the economy.

These concerns have been further underlined by a detailed statement from the opposition Progressives party in response to the Premier’s leaked circular and its implications.

FROM SURPLUS TO MINUS

The August 11th circular from Premier Panton innocuously titled Operating Expenditure Targets for 2023, states in part that “based on the current run rate of actual operating expenditure reported at June 30th 2023, the Government is on the path of exceeding the CI$1.0 billion in operating expenditure in 2023 with further growth in expenditure for the 2024 and 2025 operating years.”

Simply put, the government’s spending at current levels, unless curtailed, risks pushing the finances into deficit.

The spending reduction instruction follows the recent upbeat report on the state of government finances with a CI$47.7 million surplus at the end of 2022 due to revenue totalling CI$80 million more than expected in the November 2022 budget statement.

With the November 2023 budget just around three months away, that CI$ 47.7 million surplus is being turned on its head with the PACT coalition seeking savings of CI$ 47.1 million (or 8.5 per cent) effectively to balance the books by the time Budget Day rolls around.

This potential reversal of fortunes has not gone unnoticed and comes shortly after the government announced a series of spending increases and commitments. These include higher social support payments, increased funding of home repairs, the huge expansion to the Owen Roberts International Airport, and support for Cayman Airways as it expands its horizons.

“It is important that Ministers/Official Members play a part in reinforcing this message to all of the agencies under their respective areas and take clear actions to restrict operating expenditure,” stated the circular addressed to Cheif Officers and Financial Secretaries and copied to Ministers, Parliamentary Secretaries, and Caucus Members.

The opposition Progressives have pounced on this as expected, questioning the PACT coalition’s revenue projections as unattainable and warning of the risks if corrective action is not taken.

In a press release the Progressives leader, Roy McTaggart, stated: “The six-month financials indicate that at the half year, with a majority of government income already banked, only $27 million in extra revenue has been received. That leaves a whopping $32 million more that will be needed for Government to meet the Premier’s new revenue target.”

ECONOMIC IMPLICATIONS

According to Mr McTaggart, this is now an issue that extends beyond the implications for government finances to potential risks to the wider economy.

“Let us dig deeper - the Government’s latest figures suggest that growth in a key part of the economy is slowing,” the Progressives (People’s Progressives Movement) leader - and former finance minister - added.

“Last year, the Government boasted of significant surplus income from property and construction activity, making government finances more buoyant. Construction is known to be the third pillar of our economy. The Progressives have warned for months of an apparent slowdown in the sector.”

With the PACT administration under Premier and Finance Minister Panton (who took over the role following the controversial departure of ex-finance minister Chris Saunders earlier this year), keen to balance the books by November, the opposition Progressives see the upcoming budget in November as critical.

“With question marks over the state of government finances and concerns over a large part of Cayman’s economic prospects, the Government must take a long, hard look at its budget for 2024-25 that it will bring to Parliament before the end of the year,” the opposition said.

At the same time, the opposition party agrees with the move by the Premier to force his ministers to curb spending.

“The Opposition has consistently argued that the priority for spending needs to be support for Caymanians facing the cost-of-living crisis. Ministers seem more concerned about pursuing their pet projects. That must stop. There will be hard choices that have to be made. The Premier now seems to understand that, given his recent memo. We have repeatedly warned the Government of the need to prioritise their spending.”

According to Opposition Leader McTaggart, to cut close to $50 million in spending over the last four months of 2023 is a huge task.

“To achieve this, the PACT Government must show an unusual unity of purpose and collective restraint. Despite the huge ask, I do pray that the Premier can make it happen. The country does not need to enter a new budget period with concerns about a possible budget deficit for this year.”

It has been observed that with the areas of cutbacks yet to be determined, the implications for businesses and others in the economy and society dependent on government contracts and payouts could be severe.