Budget projects surplus of $68.6 million

Premier McKeeva Bush

The Hon Premier McKeeva Bush has announced that the 2012-2013 budget forecasts operating revenue of $651.4 million and operating expenses of $582.8 million, to yield a net surplus of $68.6 million.

In an exclusive interview with Cayman Net News on Wednesday, 15 August, Mr Bush noted that the forecasted operating revenues of $651.4 million include some 24 revenue measures that have been developed in conjunction with input and support from various private sector partners.

“These new revenue measures are a combination of increases to existing fees as well as the introduction of some completely new fees; together they are expected to generate approximately $90.4 million in new revenue for the government,” he said in the interview.

The main revenue measures being introduced for the 2012/13 fiscal year include fees to be charged to directors for various regulated and unregulated entities under the Companies Law. This is expected to earn some $21.3 million.

The measures also include increases in fees charged in respect of Exempted Limited Partnerships, which is forecast to earn some $13.0 million; introduction of a new set of fees for Professional Directorships, which is projected to earn some $10.0 million.

Others include increases in Bank and Trust License fees – expected to earn some $9.4 million; increased work permit fees, which are expected to earn some $6.2 million; and increased annual registration fees for Exempt Companies, forecasted to earn some $5.1 million.

“Other revenue measures included in the budget are: import duty on cigarettes; import duty on alcohol; tourist accommodation taxes; departure taxes; stamp duty on land transfers; stamp duty on property insurance policies; traffic regulatory fees; boat fees for non-commercial vessels; company registry fees and Monetary Authority transaction fees.

The country’s operating expenses are forecast at $582.8 million and includes provision to pay over some $16.9 million to the Public Service Pensions Fund as a contribution in respect of Past Service Liability, arising on plans that constitute the Public Service Pensions Fund.

The Budget provides some $56 million in capital investments by the government. Of this amount, some $23 million will be invested in Statutory Authorities and Government Companies mainly to fund debt-servicing obligations. A further $33 million will be invested in Ministries and Portfolios, with $13.9 million going to the Ministry of Education to fund the construction of the new John Gray High School in George Town.

In contrast with the past, the 2012/13 Budget does not include any provision to increase government’s long-term borrowings – in fact, the government will be paying down long term debt by some $26.4 million during 2012/13.

Mr Bush further noted that in compliance with Principles of Responsible Financial Management, the 2012/13 Budget is the first budget within a four-year frame agreed with the United Kingdom under the Framework for Fiscal Responsibility (FFR) to put the Cayman Islands Government’s financials on stable and sustainable footing.

“ Under the FFR, a revised set of Principles of Responsible Financial Management were established and the Cayman Islands is mandated to achieve full compliance by the end of the 2015/16 Fiscal Year — 30 June 2016,” he said.

These key principles include Net Operating Position, which should be positive for 2012/13. According to the Premier, this has been achieved with a $68.6 million surplus and this is expected to grow to some $144.7 million in 2015/16. The other is the debt service, which should be no more than 10 per cent of Core Government Revenue.

For 2012/13, government revenue is forecast to be 12.6 per cent but is expected to improve each year and be at 9.5 per cent by 30 June 2016.

Under the Public Management and Finance law, net debt should be no more than 80 per cent of Core Government Revenue. In relation to this, Mr Bush said that in the 2012/13 budget, this is forecast to be 93.0 per cent, but is expected to improve each year and reach 35.9 per cent by 30 June 2016.

Another condition is that of Cash Reserves, which should be no less than 90 days of estimated executive expenditure. Mr Bush said that this is expected to improve each year, rising to 118 days of cash reserves by 30 June 2016, thereby achieving compliance by the required date.

He noted that after the civil service incorporated into the budget new governance requirements including international treaties and obligations, there was an increase of $30 million.

“This will certainly push up our expenses,” the Premier stated.

Mr Bush also indicated that there will be an increase of 50 new police officers, adding to the need for new revenue measures.

“We have done our best not to introduce huge, painful cuts to infrastructural expenditure, but the government is on good footing now with $60 million going to loan payment and interest,” he added.

To stimulate the economy, Mr Bush said that new projects will definitely encourage consumer spending in the economy.

He promised that the Spotts jetty that will start between October and November.

He noted that China Harbour, Decco, McAlpine and Hurlstone Construction will be working on the project.

He also said that the Shetty hospital’s groundbreaking on 27 August would also enhance the economy.

Other projects include the ongoing Cayman Enterprise City and the hotel renovation project and new hotel construction under the ForCayman Investment Alliance. These hotels will inject some $3 billion dollars into the economy, he said in the interview.

Construction of the cruise ship at Cayman Turtle Farm is another of the projects government is expected to undertake, the Premier disclosed.