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(CNS): The Cayman Islands government (including all its public agencies) had a surplus of C$216 million at the end of June, according to unaudited accounts for the middle of the year. This was mainly due to much higher than expected revenues from the financial sector. The surplus is expected to decline towards the end of the year, but with the surplus exceeding budget forecasts by $55.3 million (34%), the UPM government appears well placed to fund its ambitious spending projects unless something catastrophic happens.
A healthy public sector surplus provides an important buffer for the government in an unpredictable world and this will be seen as a positive for the government.
However, finance officials have been unable to predict how much they can expect to collect from a tax of this size each year, which has some worrying implications. The auditor general has raised a question: Poor budget forecasts On many occasions, this latest report highlights Budget reform This is what the independent office has recommended.
The latest report also shows that public spending was lower than budget expectations. Spending in the first half of the year was $511.6 million, $13.7 million below budget. However, total government core spending increased by $21.4 million compared to the first half of last year.
With many positions still unfilled across central government, the CIG saved $22 million in staffing costs, but Treasury officials warned that those vacancies would eventually be filled and inflation was still high, so even if staffing was below budget expectations, the savings could easily evaporate over time.
“Costs will continue to accrue as additional vacancies are filled and projects come online during the remaining two quarters of 2024,” officials said in the report. “These costs must be carefully monitored to ensure that unnecessary expenditures are not incurred. If planned activities (both operating and capital) are realized during the remaining months of 2024, the current surplus (as of June 30, 2024) will be significantly reduced.”
The unaudited report also showed that the performance of statutory bodies and government companies was different from expectations. Even taking into account the money that CIG had already invested in the Health Services Authority, the inflow of public funds from SAGC was $8.4 million more than the expected year-to-date budget of $89.5 million.
The HSA exceeded budget expectations by nearly $30 million to provide direct health care to the needy, tertiary care to the underinsured or uninsured, and Increase funding for CINICO.
The surplus came mainly from the financial services sector, which accounted for more than half of the extra revenue the government has collected so far this year. In the first six months of 2024, the government collected a record $673.1 million in compulsory revenue, nearly $52 million more than last year. Fee revenue from tax-exempt companies, partnerships and private funds was more than $23 million higher than expected.
The bumper revenue from the offshore sector could have been more than $6 million, but a new mandatory revenue stream from international tax cooperation fees, which was due to start this year, has been delayed until 2025.
The continued rise in property values has also helped ease the current surplus situation. After another six months of high-priced property transactions, stamp duty on land transfers was significantly higher than budgeted. Stamp duty collected so far this year is $45.7 million, $9.2 million more than in the first half of last year and nearly $12 million more than expected.
Officials said the second quarter’s performance gave the government reason to be optimistic, but as mentioned earlier, there were warning signs that financial sector revenues would fall and costs could rise in the second half of the year.
Officials said: “Costs must be strictly monitored to ensure that unnecessary expenditure is not incurred” to avoid depleting the current surplus.
There are other issues to consider. With about $584 million in the bank, the balance sheet looks good, but the government’s debt is close to $430 million.
In addition, the company still has not taken into account its future $2.2 billion in healthcare liabilities. CIG Not included Because this would wipe out all its assets and could result in control of its finances falling into British hands.
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