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UK Welcomes Cayman Fiscal Plan

by Amanda Banks,, London

25 March 2010

The Cayman Islands government’s firm position on retaining a low tax regime, whilst maintaining low borrowing, was appreciated in meetings with the UK’s Foreign and Commonwealth Office (FCO). The FCO is undertaking a review of the island’s fiscal sustainability in light of the Caymans’ request for additional funds in case they are needed to finance the deficit going forward.

“By the government taking a firm position of minimal borrowing, controlling expenditure and maintaining the borrowing ratio, the FCO saw the Cayman Islands Government as genuinely seeking to put the country's finances on the road to recovery,” Caymans’ Prime Minister, McKeeva Bush, said in a statement following a news conference.

“Members of the Cayman delegation to the recent FCO talks believe the conservative fiscal policy made the UK more receptive to the needs of the Cayman Islands,” he said.

The Premier told a televised news conference that his government would not manage the country's finances by throwing the fiscal rules out the door in a panic, and disclosed that the Cayman’s medium term strategies had been well received by the FCO.

According to Bush, during talks with the FCO in London, the Cayman delegation emphasized the territory’s policy of keeping borrowing to absolutely minimal levels to protect the country's reputation and maintain its high credit rating. The UK agreed that this was the prudent approach to maintaining manageable debt levels, Bush told reporters.

While agreeing with the Cayman government’s plans, Bush said the UK government made it clear that they were not averse to additional borrowings once the islands had produced a three-year plan to bring the country’s finances back to sustainable levels. In order to receive permission for this, the Caymans' government must submit this plan, in its final stages, by the end of March.

Emphasizing that the government's stance on the use of additional borrowing, Bush told reporters that the Caymans' attempts to secure financing is precautionary, and said that the use of extra borrowing would be used only in the case of emergencies and the most essential of matters:

“My government remains fully committed to responsible financial management [as defined in Cayman's Public Finance Management Law]”, which limits the country's debt servicing ratio to 10% of government revenue.

"Our position on this is that we will only accept adjustments to these principles in extraordinary and exceptional circumstances and we wish to see that there are significant controls in place to prevent abuse of these principles by successive governments.”

“We must adhere to the highest standards of fiscal prudence if we are to maintain this country's good reputation", he said, noting that the FCO had concurred that: "Throwing the fiscal rules out the door in a panic is not the way that the way to manage the Caymans’ fiscal affairs."

TAGS: tax | economics | fiscal policy | budget | Cayman Islands | United Kingdom | offshore

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