UK offers financial lifeline to the Cayman Islands

News - Banking

Thursday, 01 October 2009 11:22

The United Kingdom has given its approval for the Cayman Islands to immediately borrow $50 million and it conditionally approved an additional $229 million loan.

Leader of Government Business McKeeva Bush said the UK minister responsible for the overseas territories, Chris Bryant, had sent him a letter with the news on 28 September.

The $50 million will allow the Cayman Islands to pay a $15 million overdraft and to use $35 million for future requirements.

With regard to the additional $229 million, if the Cayman Islands comply with the UK’s conditions, $154 million would be used to repay a temporary loan due on 31 December 2009. The remaining $75 million would be used to fund existing capital projects.

The loan is not without conditions, however. In Bryant’s letter to Bush the British government made clear it expected the Caymans to make real cuts in expenditure during the remaining portion of the 2009/10 financial year, and to commit to further extensive expenditure cuts in the future.
A further condition for receiving the loans was a review of the public sector on the Caymans.

Although the Cayman Islands did not have to agree to direct taxation at this point, it did have to agree to an independent assessment of various methods of direct taxation to create a significant diversification of the government’s revenue base.

Commenting on the news, Anthony Travers, Chairman of The Cayman Islands Financial Services Association, said: “The financial community is pleased that after consideration the FCO approval has removed the sensationalism from this short term funding issue and placed it in its proper context.

“The Cayman Islands budget will show that its financial foundations are perfectly sound as they have been throughout.”