Government leaders in the Cayman Islands have identified a capital projects to-do list that will cost more than $1 billion in the medium term.
But with import duties and fees for government services already high and the territory’s ability to borrow limited by the United Kingdom, paying for the projects will take some creativity, a consultant said.
As part of the government’s Project Future, a public service reform initiative that has relied heavily on a 245-page report from the consulting firm Ernst and Young, officials are considering selling some government agencies and assets.
The consultants’ report made 52 recommendations, which include selling the government-run turtle farm, privatising garbage collection, and merging the Cayman Islands Monetary Authority with the islands’ stock exchange so that exchange profits can fund the regulator.
Financial crisis
In the wake of the 2008 financial crisis, the government’s revenues fell far short of expected.
The island received a $62 million emergency loan from the UK on the condition that officials would widen government’s revenue base and not take out any new loans for the immediate future.
This has complicated financing future capital projects including a bigger airport and ports facilities, a new high school, and an enlarged landfill. The consultants’ report said that government’s latest budget “outlines a sound current position for Cayman and up trending economic prospects.”
But it added that despite the improvement in finances – the government now has $162 million in cash reserves — the potential for future borrowing and tax increases is limited.
“Critically, [government] is not in a position to significantly invest in infrastructure upgrades and developments vital to the country’s development and future,” the report stated.
According to the Cay Compass newspaper, E&Y consultant Kieran Hutchinson said that Cayman already raises substantial funds in indirect taxes and fees.
“Revenues that come into Cayman are close to the same as what you see in high-tax jurisdictions like the US and Canada,” Mr. Hutchison said. “Cayman doesn’t have a revenue problem.”
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