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Saturday, Feb 27, 2021

Finance Minister Reviews 2020 Performance, Announces Increased Stipend

Finance Minister Reviews 2020 Performance, Announces Increased Stipend

I’m very happy to be joining you and the panel this afternoon to provide an update on the country’s finances. But to help us better appreciate today’s news, it is I think, important for us to consider some context.

When I was elected and joined the Government in 2013 the Country was still facing the impact of the 2008/2009 global recession with an economy struggling to grow at about 1% and with some 10.5% of Caymanians being unemployed. Tourism numbers were the lowest they had been in ten or more years and much of the large development projects had stopped - the construction sector was hurting and small businesses were struggling.

If we consider where this Country had moved to by the end of 2019, I think we can all be proud of what the past two Governments have achieved along with the businesses and families of Cayman. Before the impact of COVID-19 early last year, we had a Cayman economy that was the best in the region.

Growth averaged over 3% from 2014-2019 and Caymanian unemployment was below 5% - the lowest in many years. Tourism had grown by record numbers while financial services grew at almost 4% on average. The development sector was helping drive jobs and the economy and in 2019 alone nearly 750 projects were approved with a combined total value of over $890 million. It is several of those projects that have recommenced after a long 2020 lockdown that has helped and is helping to keep our local economy alive.

And happily, even with the backdrop of a global pandemic and challenging economic times, those investments are continuing to come to Cayman and bodes well for our future recovery.

It has been the political leadership and strong financial stewardship of this Government, and the previous one, that has provided the business sector with the confidence to invest and fuel the economic growth that created opportunities and thousands of new jobs for Caymanians.

Continued investment is critical to the rebuilding of our economy and investment will continue as long as the business sector remains confident in the political and fiscal leadership Government is providing.

We have over two terms now demonstrated fiscal leadership by creating substantial surpluses that were used to reduce debt by more than half, rebuild cash reserves and to fund large infrastructure projects from cash without increasing taxation or debt. Few other past administrations, if any, can lay claim to similar accomplishments. But this administration can. And we did it with sound planning, judgement and leadership. That sound planning ensured that when COVID-19 hit we were as well prepared financially to weather the storm even with borders closed.

That is the same planning, judgement, and leadership that prepared the country financially for an economic downturn that helped guide these Islands through the worst of 2020 and is helping bring some confidence to our prospects in 2021

As we continue to navigate through this global pandemic I’m happy to be able to report today that we are in a much better place than we anticipated at the start of the pandemic.

So let’s go through the preliminary results for the period ended 31st December.

I’m pleased to report that the overall 2020 Deficit will be substantially less than the $168 Million core government deficit that had previously been estimated in early 2020.

Preliminary results indicate that Central Government itself is expected to close out the 2020 Financial Year with an Operating Deficit of approximately $50.1 Million. Adding in non-core government entities could increase this to $75M – this will be clearer in the coming weeks.

Again, against the backdrop of an earlier estimated $168M deficit then a $50M-$75M deficit leaves us in a much better position.

What also leaves us in a good position is that at the end of 2020 we had some $449M in the bank. This is the result of the work done over the last two terms to secure the country’s finances, and it is this buffer that has given us the space to keep health and safety at the forefront of our decisions rather than money.

So to repeat, we have ended 2020 with $449M in the bank and with a much smaller deficit of $50M-$75M than anticipated. I would add that our debt at year end is a low $249M and we still have access to the US$403M line of credit if needed.

Revenue Categories that Performed Better than Budgeted

One of the reasons the Deficit isn’t likely to be as grave as was initially projected, was the great performance of a few of Government’s revenue categories when compared to the original revenue projections for the 2020 year.

1) Stamp Duty on Land Transfers: this category exceeded its initial 2020 projection by $20.6 Million;

2) Mutual Fund Administrators Licenses: this category exceeded its initial revenue projection by $5.9 Million;

3) Other revenues had a favourable variance of $4.2 million – which was made up of $1.7 million with respect to sales of supplies and other items to jurisdictions in the region to combat COVID-19 and to other local on-Island health care facilities, and $2.5 million of revenues from the “air bridge” flights; and

The improvement in the Deficit also came about because certain expenditure categories have incurred fewer costs at the end of 2020 than initially budgeted for Personnel costs and Supplies and Consumables – combined these accounted for a savings of about $43M.

Improvement in Deficit - Despite Significant COVID-19 Expenditures

It is very important to note that core Government’s preliminary $50.1 million Deficit figure takes account of a significant level of COVID-19 expenditures that were incurred in 2020.

The preliminary figure for COVID-19 expenses incurred to 31st December, 2020, is approximately $65.4 Million, which consists of some $33M for health-related costs, including testing, PPE and quarantine costs. The remaining $32.4M was used primarily to support families and business impacted by the pandemic.

Whilst our local economy continues to perform well we know there are many in our tourism sector who are still suffering due to our borders being closed. Some time ago Government had determined that if our finances allowed we would look again at the assistance that could be provided to displaced tourism workers.

So today I’m very pleased to announce that we will be increasing the tourism stipend from $1,000 a month to $1,500 per month. This will come into effect in February and will continue until June 2021.

This increase to the stipend is another step in helping our tourism workers to weather the economic and financial hardships caused by COVID-19.

As I close, I would like to take this opportunity to thank my Cabinet and Caucus colleagues, the Deputy Governor and all the civil servants who have worked so diligently to keep our country ticking and continuing to deliver for our citizens during this very difficult time.

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