Previous deficit forecasts of $157-million funding gap failed to factor in tourism stipend payments to workers displaced by pandemic

The Government of the Cayman Islands is projecting a larger budget deficit of $192 million this year.

This is due to the fact that the previous forecasts of a $157-million funding gap failed to factor in tourism stipend payments to workers displaced by the pandemic for all of 2021. Currently, the monthly tourism stipend payments of $1,500 to more than 3,000 workers cost government approximately $5 million each month.

According to Finance Minister Chris Saunders, during the first five months of 2021, core government had an operating surplus of $175 million, which is 18 per cent, or $11 million, higher than budgeted. Government’s total operating revenue of $525.5 million was nine per cent higher than budgeted but operating expenses of $351 million were also eight per cent over budget.

Cayman maintained close to $571 million in cash reserves. Given that Cayman is facing another active hurricane season, the finance minister pointed to the imperative of government to make sure that it has the necessary resources to meet any challenges the country may face.

SAGCs are expected to operate at a deficit

Statutory authorities and government companies (SAGCs), including the Cayman Islands Airports Authority, Cayman Airways and the Cayman Turtle Centre, are expected to operate at a deficit because they are heavily dependent on a vibrant tourism sector, the finance minister explained. SAGC figures were not included in the financial update because of a delay in their reporting.

In April and May of this year, the operating deficit averaged $11.7 million each month, which is lower than the $27 million monthly average shortfall government saw between June and December last year. The finance minister made the point that the government maintained close to $571 million in cash reserves, which he described as “healthy”.

“We are definitely watching our cash very, very closely. And that’s one of the reasons why we don’t want to do anything crazy at this point. Because for most of those SAGCs, we would probably be the lender of last resort, in terms of making sure that they can pay salaries and everything else,” Saunders told a press conference regarding the budget expenses earlier this week.