Finance Minister Roy McTaggart has forecast that the government will collect CI$825 million in revenue during 2020 and spend almost $760 million in its first ever US$1 billion budget. But that record-breaking earnings and expenditure will be broken again in 2021, when the minister is predicting the government will collect almost CI$850 million in revenue and spend in excess of a whopping CI$774.4 million across the two-year billion dollar budget.
In his Budget Address delivered in the Legislative Assembly on Friday, McTaggart said that the strong revenue position and spending plan reflected Cayman’s track record of economic growth, which is expected to continue. He said the budget complied with the law and was fiscally prudent without increasing the tax burden on Caymanian families. With no new cursive revenue measures and no borrowing, the minister pointed to existing revenue flows as the source of the historic record-breaking budget.
In both years core government is expected to deliver significant surpluses, despite the high spending. McTaggart is forecasting a surplus of $65.3 million in 2020 and $75.3 million in 2021, which he said would help with the track record of making capital investments from cash without the need to borrow.
However, he noted that the surpluses in both years would be less overall as a result of significant losses from the government’s collection of money at statuary authorities and government companies. The SAGCs are expected to deliver losses of around $17 million in both years due to losses at Cayman Airways and significant costs to government for health care.
McTaggart said that the forecasts are conservative, as his ministry has had one eye on emerging indications that there could be a global economic slowdown during this budget period. Brexit, the US-China trade war, disruptive public protests and impacts of natural catastrophes may fuel the slowdown and were some of the risks his ministry considered when setting the budget.
“I can assure the House that the 2020–2021 Budgets have taken these global factors into account as best we can, given the uncertainties,” he said, adding that he was, however, not going to be a “prophet of doom” about the future.
“There is every reason to believe that Cayman is in a good position to weather any coming economic storm. There are, after all, many things which are positive in our local economy. The Cayman Islands are currently enjoying a period of great economic prosperity,” he said, as he pointed to several consecutive years of solid, sustained economic growth, with an average annual growth rate of 3% led by the private sector.
Confident that this would continue for Cayman, he said government would remain cognizant of what is happening around the world, but the strength and robustness to Cayman’s economy was the the envy of many in the region.
That was underscored by the summary McTaggart gave for the end of year figures for 2019, which have provided the basis for the next two-year budget. The budget for this year is on track, he told parliament, to deliver better than budgeted results.
Operating revenues are forecast to be $824.2 million, well over $100 million more than had been predicted in the original budget.
“These results point to healthy performance in our core economic sectors and demonstrate how the healthy Cayman economy benefits all Caymanians through the increased revenue yields that government can then spend on vital public services. This is the strong economy, working for you,” the minister said.
Government spent $85 million more than the $657.8 million forecasted, but the revenue windfall has kept the pubic purse in the black. The bulk of the extra cash was spent on government workers and healthcare.
SAGCs are also expected to have lost around $6.5 million for the year ending 31 December 2019, compared to an original budgeted loss of $5.8 million. But the result is that government will end the year with an $80 million surplus, $15 million more than forecast.
With almost $438.3 million in the bank when it pays off part of the CI$261.3 million bullet bond due at the end of this month, government’s debt will have fallen below the amount of money it has in the bank for the first time in decades. It is, however, re-borrowing more than half of than bullet bond with a new $153 million loan.