Tibbetts Defends Cayman Government Spending

by Carla Johnson, Investors Offshore.com, London

18 February 2008

Cayman's Leader of Government Business, Kurt Tibbetts, spoke out late last week at a live Cabinet Press Briefing to defend the government's spending patterns.

He announced that:

"Earlier this week the two local newspapers carried an article on Government's expenditure and borrowing plans. That article contained details which are grossly exaggerated and inaccurate. The article states that Government plans to incur capital expenditures of $600 million over the next few years."

"This figure is incorrect."

"Government's expenditure and borrowing plans are set out in various documents: its Annual Budget, Supplementary Budgets and Strategic Policy Statements."

"Government's most recent plans are detailed in the Strategic Policy Statement (SPS) for the financial year that will start on 1 July 2008 and end on 30 June 2009. This 2008/9 SPS was presented in and accepted by, the Legislative Assembly in early December 2007 as the foundation on which Government's 2008/9 budget will be prepared."

He continued: "When we examine the 2008/9 SPS document we find the following details:

• Estimated borrowing for the year to 30 June 2008 = $89 million
• Estimated borrowing for the year to 30 June 2009 = $154 million
• Estimated borrowing for the year to 30 June 2010 = $76 million
• Estimated borrowing for the year to 30 June 2011 = $52 million."

"These amounts total $371 million. Hence the borrowing figure of $600 million mentioned in the article is exaggerated and inaccurate."

"The Government is very careful about the amount it borrows. As an illustration of this, let us consider the position in respect of the 2007/8 financial year that will end on 30 June 2008."

"The Legislative Assembly has empowered the Government to borrow CI$129.8 million for the year. Almost 8 months of this financial year has passed and Government has only borrowed $39 million. There are important mechanisms that scrutinise borrowings by Government to ensure that those levels are affordable."

"Firstly, the Public Management and Finance Law imposes a legal restriction on the amount that Government can borrow. That law states interest payments plus repayment of principal in respect of Government's borrowing cannot exceed 10% of Government's revenue. How many of us as individuals can truthfully say that our borrowing costs and repayments are no more than 10% of our income?"

"Secondly, there is deep scrutinising of Government's borrowing plans by the Legislative Assembly and Finance Committee."

"Thirdly, each year the United Kingdom's Foreign and Commonwealth Office sends economists to all its Overseas Territories-to examine their state of finances. The Cayman Islands are scrutinised in this process with other Overseas Territories. The Cayman Islands has not received any adverse reports or comments from the UK in respect of its borrowings."

"I can assure the people of this country that we will not borrow if it is not necessary and any borrowing that we undertake will be affordable!"

Tibbetts concluded: "This Government feels so strongly about limiting the extent of borrowing that we are not just content to have the 10% limit specified in the Public Management and Finance Law, we wish to enshrine limits to the amount Governments can borrow in our Constitution- that should indicate our seriousness on limiting Government borrowing to levels that are affordable!"

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