Government spending needs to start falling, says Saunders

Finance Minister Chris Saunders at the Chamber of Commerce event

(CNS): The Cayman Islands government expects to collect more than C$1 billion in revenue by the end of 2022, but also to spend nearly C$1 billion for the first time in its history, said Deputy Prime Minister and Finance Minister Chris Saunders said on Wednesday, saying government spending needs to start falling. He said the country has not yet reached the point where the government spending growth line has exceeded the economic growth line, but if it does not slow down, these lines will cross.

However, speaking to the business community at a Chamber of Commerce luncheon, Saunders announced the likelihood that the fuel subsidy the government had put in place throughout the summer to keep the fuel factor going from CUC to 15 cents would likely be extended, adding more than $1.5 million to this year’s spending plan. The CUC grant has so far accumulated more than $5 million in public funds. But it allowed the government to maintain economic activity through a difficult summer, he said.

Saunders revealed that in the coming days Prime Minister Wayne Panton will announce additional aid this month as fuel costs for October are very high. CUC bought the diesel burned during this month around June before fuel prices started to fall. But he expressed fears that gas prices could rise again on the world market due to OPEC’s decision to cut production, which would continue to fuel inflation.

His audience of business owners and executives were probably thrilled to hear Saunders tell them that it was important for the Cayman Islands to remain a private sector-driven economy, where government is the enabler, the helper, not the lender. hindering. But he noted a number of challenges ahead for the country, such as mounting inflation pressures and a rapidly growing population. Nonetheless, he said Cayman “overall was doing pretty well.”

In a lengthy address, in which he addressed a number of issues, he said the government expected a surplus by the end of this year, but raised concerns about the level of spending and the need to gradually reduce this side of the balance sheet. and encourage the private sector to further stimulate the economy. He said the economy is expected to grow this year by 3.4% and more than 3% in 2023.

However, with the rapid increase in population, the housing stock is not keeping pace and this is now one of the biggest challenges facing the government in the coming months.

The Deputy Prime Minister noted the continued need to help families with social programs like the free school meals initiative, which are expensive but still important. This initiative alone saves local families an estimated $25 million a year that will be spent elsewhere in the economy, but also ensures healthier children and less stress on the healthcare system, he said. he said, but stressed that these programs must be fully funded.

It looks like the government will have no trouble funding these initiatives this year, as it is on track to bring in more than $1 billion in 2022. Saunders said that in the first nine months of this year, the government collected more than C$818 million, which was $135 million more than it collected at that time in 2019, but spent almost $200 million more than that year . However, next year, government spending is expected to decrease, as it will no longer pay the tourist allowance.