2024-2025 Budget Passed in Parliament

20 December 2023, 05:21 AM

Government

The Cayman Islands 2024-2025 budget was passed in Parliament on Friday, 15 December after two days of debate followed by a two-day Finance Committee deliberation.

Premier and Minister for Finance & Economic Development Hon. Juliana O’Connor-Connolly first presented The Appropriation (Financial Years 2024 and 2025) Bill, 2023 to Parliament on Friday, 8 December.

It was passed following the Third Reading of the Bill on Friday, 15 December. The next legislative steps are for the Governor to Assent to the Bill and to Gazette it as an Act.

Premier O’Connor-Connolly introduced the 2024-2025 budget as one that provided “a united sustainable path to recovery, hope and prosperity.”

Responding to concerns the Opposition expressed during the debate over borrowing to fund capital projects, the introduction of new revenue measures and increased personnel costs, the Premier noted the current dire necessity for infrastructure projects to catch up with population growth and cautioned that the leaders of today must look further ahead to plan for the problems of the future.

She said, “We are seeing in today’s Cayman some of the effects of previous generations not recognising burgeoning problems. Granted, some of these problems were unforeseeable. But, if we have the luxury of time and the gift of foresight now – why not plan ahead and ensure we have adequate schools and other facilities for our continually growing population?”

The Premier explained, “With our planned capital projects, we are not only trying to catch up, but also to adequately prepare for future growth. We are, in short, ‘future-proofing’ since we have the resources to do so today. Why should future generations of Caymanians be in the situation many Caymanians feel they are in now with our facilities and resources stretched to capacity and beyond due to unforeseen growth?”

Premier O’Connor-Connolly repeated that, inclusive of the planned borrowing, that the 2024-2025 Budget is in full compliance with the Principles of Responsible Financial Management as prescribed by the Public Management and Finance Act, or PMFA and those specified in the Framework for Fiscal Responsibility (the FFR).

She noted that Government still has an unused $106 million from a previously arranged loan facility available, and said, “Even if borrowings were to occur at the full $150 million, Cayman's debt to GDP ratio will still be under 10 per cent - making it one of the best ratios in the world. To illustrate this point, Japan’s debt ratio is over 200 per cent and the United Kingdom’s is just over 100 per cent.”

Turning her attention to the concerns raised regarding increased personnel costs in the 2024-2025 budget, Premier O’Connor-Connolly said, “Much has been said by the Opposition about the spending on personnel in this budget. But how do we deliver more services, and better services, without people?”

She listed several areas in which expanded services and new facilities would require hiring of new staff, including the long-awaited residential mental health facility slated to open next year.

The Premier underscored her point, saying, “There is no way to provide more services to the public without more spending on personnel. Regardless of the strides in Artificial Intelligence, there is currently no replacement for actual humans to care for the sick, teach our children, patrol our streets, or rehabilitate our prisoners.”

Regarding the new revenue measures deemed “unnecessary” by the Leader of the Opposition, Premier O’Connor-Connolly said, “How is this or any Government supposed to offer increased social support as well as new and expanded public services without increasing any fees or taxes?”

She explained, “The proposed fee increases and new revenue measures were very carefully considered to ensure that they would not impact the average Caymanian or lower income resident. We fully understand the already difficult impact on local families of inflation and the high cost of living.”

After rebutting the Opposition’s main objections to the 2024-2025 Budget, Premier O’Connor-Connolly called for cooperation as the Members moved to the Finance Committee phase.

She said, “I ask that we all come together on this vote and we keep the people’s best interest in mind as we endeavour to complete their business for their good. It is what we were elected to do, and what we have pledged to uphold.”

Key features of the 2024-2025 budget are:

Core Government is forecast to earn Operating Revenues of $1.095 billion in 2024 and

$1.137 billion in 2025;

Core Government’s Operating Expenses (inclusive of Financing Expenses) are forecast to be $1.052 billion in 2024 and $1.083 billion in 2025. The Financing Expenses element of the preceding is forecast to be $18.4 million in 2024 and $24.7 million in 2025;
Core Government Operating Surpluses are forecast to be approximately $43.0 million in 2024 and $53.2 million in 2025;
Closing Cash Balances are expected to be $388.7 million at 31 December 2024 and $412.1 million at 31 December 2025; and
Core Government Capital Expenditure and Investments are forecast to total $160.5 million in 2024 and $117.9 million in 2025.
Capital Expenditure and Investments include Equity Investments into Statutory Authorities and Government Companies that total $35.2 million in 2024 and $24.3 million in 2025.

New Revenue Measures are projected to yield additional revenues of $52.0 million in 2024 and $80.0 million in 2025 and are primarily related to:

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;
Increases to work permit application fees;
An increase to the import duty rate on hybrid and electric vehicles with a value of more than $70,000.00;
An increase in the environmental tax payable with respect to hybrid and electric vehicles with a cost, insurance and freight value (CIF) of $80,000.00 or more;
An increase to Customs fines and procedural fines; and
An increase in the fees for immigration-related visas and extensions.

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 $150.00 million over the two-year Budget period.

The Government intends to make Capital Investments into Ministries, Portfolios and Offices of approximately $125.3 million in 2024 and a further $93.7 million in 2025.

The major investments in this category include:

$31.9 million in 2024 and $33.9 million in 2025 for the continued expansion of educational facilities, including the construction of a new High School on Cayman Brac, the development of a West Bay High School and the continued expansion of the new John Gray High School;
$15.1 million in 2024 and $13.5 million in 2025 for the expansion, maintenance and improvement of the road network;
$11.8 million in 2024 and $8.6 million in 2025 for various park and district upgrades, civic centres and jetties; and infrastructure and development;
$7.4 million in 2024 and $4.2 million in 2025 for the improvement to the prison facilities;
$3.8 million per year in 2024 and 2025 for land acquisition; and
$10 million for the acquisition of beaches and other lands for conservation, protection, and securing the Cayman Islands environment.