Government SPS Heralds Growth in Economy

16 July 2021, 08:04 AM

Politics & Government

Deputy Premier and Minister for Finance and Economic Development Hon. Chris Saunders unveiled the PACT Government’s first Strategic Policy Statement (SPS) in Parliament on Wednesday, 14 July 2021 at the first sitting of the second meeting of the House.

The SPS traditionally sets the tone for Government’s fiscal performance and outlines the 10 broad policy outcomes to be pursued over the next three financial years.

Speaking on the SPS in the House, the Deputy Premier revealed that Government expects to maintain positive economic growth and surpluses from 2022 to 2024; necessary capital development projects will be pursued using debt financing from the established line of credit; and required cash balances are forecasted to be maintained during the SPS period.

He said, “This SPS is the first one produced by this Administration and it accords with both the Principles of Responsible Financial Management and the terms of the Framework of Fiscal Responsibility as set out in the Public Management and Finance Act.”

Overall economic growth in the Cayman Islands is expected to recover over the near term, Mr. Saunders emphasised.

Economic growth is forecasted at 1.2% in 2021 and accelerates further to 4.7% in 2022; 4.3% in 2023 and 2.3% in 2024.

The Government is also forecasted to maintain positive Operating Surpluses of $25.5 million in 2022, $34.3 million in 2023 and rising to $65.2 million in 2024, Mr. Saunders said.

Only 2021 is forecasted to face a deficit of $15.8 million.

The Deputy Premier underscored that Government is committed to being fiscally prudent and complying fully with the requirements of the Public Management and Finance Act (PMFA), despite COVID-19’s economic impact on the Cayman Islands.

He emphasised that this commitment is matched by his and his Cabinet colleagues’ dedication to ensuring people’s health and safety while also stimulating the local economy.

Mr. Saunders noted, “This SPS does not contain any new fees or taxes levied on the public.”

Nevertheless, operating revenues are expected to total $2.7 billion over the SPS period, and to increase over the forecast period, surpassing pre-COVID 19 levels.

Minister Saunders explained, “As the Tourism Sector begins to recover, other major sectors of the local economy are showing tremendous resilience and growth, led by the expansion of the construction sector. Such growth is expected to result in increased demand for goods and services thereby driving revenue from import duties and other consumption-based revenue items.”

Fees from the financial services sector are expected to contribute revenue of $1.1 billion over the three-year period ending 31 December 2024.

Operating Expenditure totalling $2.6 billion over the SPS period is forecast to fund the key priorities of the 12 Government Ministries as well as the Office of the Police Commissioner.

Additionally, Government will comply with maintaining cash balances required by the PMFA for 90 days of executive expenses with $441.7 million or 167.1 days of executive expenses in 2022; $352.5 million or 125.2 days in 2023; and $291.6 million or 94.3 days in 2024.

With the need for some capital projects keenly felt, Mr. Saunders said Government will borrow funds to finance them. Government will use the established $330.5 million Line of Credit specifically to fund capital expenditure.

As a result, Core Government’s debt balance is forecast to be $499.1 million at 31 December 2022; $446.4 million at 31 December 2023 and $398.8 million at 31 December 2024.

“The Government will continue its prudent approach to the Public Sector capital development over the medium term with specific emphasis on affordability and need,” the SPS document states.

Planned capital investments are expected to total $331 million over the 2022-24 period in order to primarily fund continued expansion of educational facilities including:

completion of all phases of the John Gray High School in George Town as well as other critical education infrastructure;
investment in a new submarine communications cable system;
security improvements to the prison facilities;
procurement of patrol vessels for the Coast Guard;
specialised equipment for the Royal Cayman Islands Police Service;
modernisation of local infrastructure including the road network; and
the purchase of lands for national environmental conservation.

Additionally, planned capital investments into Statutory Authorities and Government Companies (SAGCs) is forecast to total $103.3 million providing funding for:

Cayman Islands Airports Authority in the sum of $30 million;
National Housing and Development Trust - $20 million;
Cayman Turtle Centre - $9 million;
University College of the Cayman Islands – 10.2 million and
Cayman Airways - $9 million.

The Strategic Policy Statement also includes the Government’s strategic

broad policy outcomes, which will drive public policy and funding during the forecast period.

The PACT Government has developed 10 strategic broad outcomes and specific actions aimed at achieving these outcomes through the delivery of Government programmes, Cabinet policy actions and legislative changes.

These outcomes are outlined below:

Improving education to promote lifelong learning and greater economic mobility
Ensuring an equitable, sustainable and successful healthcare system
Providing solutions to improve the well-being of our people so they can achieve their full potential
Strengthening good governance for more effective government
Supporting climate change resilience and sustainable development
Increasing social justice in the workforce
Using sports to enhance the lives of our people
Building a modern infrastructure to ensure a successful future for our Islands
Improve our Financial Services as an industry, product and economic driver for our Islands
Improve our tourism, as an industry, product and added economic driver