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Cayman Islands Government maintains higher fiscal surplus in third quarter

Updated: Apr 9

The Cayman Islands government maintained a fiscal net surplus of $81.8 million through the third quarter of 2022. This is 49.8%, or $27.2 million, higher than budgeted for the period.

Higher-than-expected revenues by $53.9 million for the first nine months of the year were the main factor for this overall performance.

Speaking at the CIIPA Momentum conference on Wednesday, Finance Minister Chris Saunders said by the end of October government’s surplus remained at about $80 million with $880 million in revenues.

“That’s actually pretty good because we forecasted around $20 million this year in terms of a surplus. So 10 months in we are at around $80 million surplus, so we are still doing better than we expected.”

The best news, he said, is that revenues are more than $100 million higher than during the same time pre-COVID.

Higher revenue and savings

Coercive revenue recorded for the period was $44.4 million ahead of the budget and $23.9 million higher than during the same period in 2021.

A 14.9% increase in the population to 81,700 between the 2021 census and the third quarter of this year brought the government a $7.6 million higher windfall in motor vehicle charges for the year to date as more cars were imported.

As in previous quarters, mutual fund administrator fees and private fund fees performed better than anticipated by more than $4.3 million each due an increase in the volume of funds registered. Current year results for these fees are $2.3 million and $9.5 million higher, respectively, when compared to last year.

Higher-than-expected volumes of property transactions coupled with high property values mean that government’s revenue from stamp duty on land transfers is higher than expected, even though the duty income is about $15 million lower than last year.

Work-permit fees ($12.2 million) increased by $10.6 million over the prior period, reflecting the increased demand for workers as Cayman reopened its borders, as well as a stronger economic performance.

In addition, government saved $19.3 million in budgeted personnel costs and $13.7 million from lower supplies and consumables expenditures.

However, it is also unlikely that savings in areas such as personnel and supplies will be maintained throughout the final quarter of 2022. Vacant posts, cost-of-living adjustments paid from September, and delayed projects will impact current costs reflected in these areas, the government fiscal report said.

Higher expenditures

Expenditures on outputs from statutory authorities and government companies (SAGCs), were higher than budgeted by $15.2 million, while payments for outputs from non-governmental suppliers were $23.2 million higher, and transfer payments exceeded the budgeted amount by $27.3 million.

These additional costs reflect higher-than-budgeted health insurance costs for civil service pensioners; COVID-19 spending and indigent care by the Health Services Authority; tertiary care at local and overseas medical facilities; and stipends for displaced tourism workers and businesses.

Core government’s total expenses have risen by $52.6 million compared to last year.

Cash balance

Government’s cash position at $393.7 million at the end of September was $117.7 million less than anticipated in the 2022 Plan & Estimates, as a result of the purchase of $280.5 million worth of US Government Treasury Notes, which is not included in cash and cash equivalents.

Overall, government has accumulated more cash and short-term securities due to higher revenues and the delay of capital projects.

The Ministry of Finance said the third quarter fiscal results indicated a positive performance for the year but cautioned that if planned increases in operating and capital activity materialise during the remaining months of 2022, the current surplus will be significantly reduced.

“Over the remaining quarter of 2022, costs will have to be diligently monitored to ensure spending is not incurred unnecessarily,” the unaudited quarterly financial report said.

IMS is one of the longest established company management firms in the Cayman Islands. IMS is licensed by the Cayman Islands Monetary Authority to provide independent directors, company management and incorporation, mutual fund administration, captive insurance and trust services. For more information about our services, please contact us.

Disclaimer: this publication does not constitute legal or professional advice and should not be relied on as such.

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