One of the consequences of economic growth for the Cayman Islands has been increasingly healthy public finances.
The result of large surpluses, year after year, can be seen in the territory’s debt, which peaked at CI$613.4 million ($736.1 million) in 2010 and by 2018 had fallen to CI$418.7 million ($502.4 million), or 9.2 per cent of GDP.
Bermuda’s debt has ballooned to more than five times that number and now stands at more than $2.6 billion, according to the Ministry of Finance’s Pre-Budget Report, or around 36 per cent of GDP.
Roy McTaggart, Cayman’s finance minister said last November: “The Cayman Islands ranks seventh in the world with a budget surplus equal to 4.4 per cent of our GDP.”
The situation marks a spectacular turnaround from the aftermath of the global financial crisis, when skyrocketing borrowing by Cayman led to Britain effectively taking away direct control of the government budget from the territory’s legislators.
The 2011 agreement, which is still in place and implements strict financial controls, is known as the Framework for Fiscal Responsibility.
Cayman racked up revenue of CI$835.2 million in 2018. It’s major income source is financial services licences, which in 2018 yielded CI$263.8 million, drawn from many of the firms on its large company register.
There were 110,451 companies based in Cayman as of the third quarter of 2019, according to Cayman’s Registry General, as compared to 16,009 companies in Bermuda at the same point in time. Since 2010, Cayman has added a net total of 19,246 companies, despite the international pressures against offshore financial centres.
Cayman’s surpluses give it room to spend more on public services and infrastructure. Cayman’s latest two-year budget, presented in November projects capital investments of CI$182.6 million in 2020 and CI$121.4 million in 2021.
Major spending projects will include education, technical and vocational training, community policing, child protection, a residential mental health facility, traffic management, border protection and the Coastguard unit.
Civil servants have benefited with three successive “cost of living allowance” pay rises, each worth 5 per cent, to help them keep up with inflation.
Meanwhile, Cayman projects that it will reduce core government debt by CI$70 million over the next two years.
Cayman levies no payroll or income tax. Instead it charges hefty work permit fees, which netted the government CI$87.3 million in 2018.
Import duties yielded CI$199.1 million, while income from tourism accommodation taxes has more than tripled over the past decade to more than CI$32.7 million.