Moodys says it’s watching Cayman’s cash trouble

| 04/09/2009

(CNS): Credit ratings agency Moody’s says it is carefully monitoring developments in the Cayman Islands and the possible implications for the government’s triple A ratings and at present the outlook on the ratings remains stable. In a press release the global standard agency said that the recent revelations about the state of public finances had captured its attention along with the Cayman Islands Government request to the UK to extend borrowing levels beyond those laid out in the Public Management and Finance Law.

“For the first time in the territory’s history, the government made an explicit request to the UK Foreign and Commonwealth Office (FCO) in order to increase its debt levels,” said Alessandra Alecci, Vice President–Senior Analyst in Moody’s Sovereign Risk Group. “The request was necessary because some of the principles in the territory’s Public Management and Finance Law were violated last year, also an unprecedented development given traditional adherence to the fiscal responsibility law.”

Alecci added in the press release that the main reasons for the violations were falling revenues due to a drop in tourism and other services’ income and higher expenditures associated with a one-off ambitious capital expenditure programme. Among the principles violated Moody’s observed correctly was maintaining an operating surplus in the government budget. 

Noting the UK’s initial refusal to Cayman’s request to increase government debt until a medium-term strategy was established to create sustainable revenues in the longer term, Moodys still said it believed based on history, Cayman had a stable outlook with it said, “the expectation of a significant improvement in fiscal outturns once the capital program is completed.”

Moody’s said it believed Cayman’s fiscal trouble was down to one off projects and would soon recover as it was looking into a number of expenditure and revenuemeasures to address the FCO’s concerns. “In addition, the government is contemplating changes to the financing of its capital programme, which might include private finance initiatives that would both limit the need for additional public debt and boost liquidity. The government plans to present its revised plans to the FCO over the next couple of weeks before the budget is presented.”

The ratings agency said that the developments were not a complete surprise. “In a report published in June this year, Moody’s discussed the deterioration in public finances and the sharp increase in the Cayman Islands’ debt levels, which reached close to 20% of GDP during the 2009 fiscal year, double the size just a few years prior,” it said. “While this level of debt is still highly affordable, it is higher than the average such debt ratios in Cayman Islands’ Aa peers.’

The agency noted that the UK is concerned about Cayman’s “unusual tax structure” with no direct taxes but revenue coming from import duties and license fees on off-shore entities. 

However the agency was less concerned: “Given the islands’ long history of fiscal prudence, Moody’s views the significant widening of the central government deficit during 2004/2005 (when the costs associated with Hurricane Ivan were incurred) and subsequently as being more the result of extraordinary circumstances than a fundamental policy shift away from fiscal conservatism,” said Alecci. “However, we will be monitoring the situation to confirm that these are only temporary deviations.” 

Meanwhile, the Los Angeles Times reported yesterday that Moody’s parent company, Moody’s Corp, saw its shares plunge after a US district judge in New York ruled late Wednesday that Moody’s Investors Service and Standard & Poor’s can’t invoke the 1st Amendment to hide from subprime-related legal challenges, forcing the credit ratings firms to respond to fraud charges in a class-action by investors claiming the raters hid the risks of securities linked to subprime mortgages.

Defaults on the debt ignited a credit crisis that has led to more than $1.6 trillion in writedowns and losses since the start of 2007.

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  1. Anonymous says:

    Cayman like every country in the world today is having its challenges as a result of the global economic crisis. Do you all really think that this was caused by the PPM ? How stupid  can you really be. You’re either seriously stupid or totally unaware of whats happening in the world today.

    Now the game that McKeeva is playing by trying to blame this on the PPM is a very reckless and irresponsible game, played selfishly for his own political gain without regard for the wider ramifications for the country.

    Just look at the public relations crisis that McKeeva has caused for the country as a result for his exaggerated, stupid, careless and reckless statements about the financial position of the country at his useless and totally unstructured blabbering session at the Ritz recently.

    This man is so fixed on his own political career that he can’t see the forrest for the trees. This is a very dangerous situation and he needs to be removed as the Leader immediately.

    6 Opposition members, including Ezzard, and 3 from his side is all it will take to remove him. Which 3 UDP will step up to the plate and join the Opposition side in removing this dangerous man from the helm of Government ?

    Rolston, Mike & Julianna…..where are you when the country needs you ???????????????

  2. Anonymous says:

    You can not really blame Kurt for the things the PPM did over the last 4 years.

    Kurt tried to do all these things during his previous stint as LOGB and had to be removed by Mac.

    You all responded by electing the PPM unanimoulsy and put Kurt in a position where he could not be removed again, now you complain that he made a mess. Kurt did exactly what you wanted of him so dont blame him now.

    Maybe if Kurt was running the Government things could have been different, unfortunately he seemed only to be LOGB in name and not in nature, as it appeared that the real LOGB was Alden and Chuckie. and that Kurt only functioned between hangovers.


    • Anonymous says:

      LOL! "Kurt had to be removed by McKeeva". Why, so McKeeva could really foul up things like the $56m Boatswain Beach that is costing us $10m each year? Don’t you think that is a significant part of our budget deficit and has increased our national debt by more than the entire facility is valued in the past few years? Please stop pretending that McKeeva doesn’t share the blame in all of this.    

  3. Anonymous says:

    No one should read the comments from Moody’s as an "all clear". Historically they almost always issue a "watch" notice before reversing a previous position. That is just prudent for them to do, particularly given that the ink on their most recent report on Cayman is hardly dry.

    The profound lack of understanding of international matters demonstrated by Mac in his public speech last week at the Ritz ought to get someone on his "team" fired unless it was all his doing, which I doubt. His predecessors made their share of mistakes but that meeting was idiotic.

    • Anonymous says:

      You are right on the mark on both counts. Unfortunately, Mac has got carried away with blaming all our economic woes on the PPM and he figured this was the coup de grâce for the PPM.  It never occurred to him that this would hurt us internationally.  

  4. Anon says:

    Good report from Moodys which backs up what everyone really knows. The Cayman Islands long term viability is good.

    Shame on the Guardian for publishing their half-baked sensationalist story without commenting on articles like this Moodys report or indeed the plans Slim Mac is about to put to Capt. Underpants.

    I feel a great deal of confidence in Mr. Mac’s plans. He may not be perfect, but we are lucky to have him.

  5. Clearviewer says:

    Johnny Cake, those two crabs should have their big claws put in a good pot of boiling water, wah ya say.

    • Johnny Cake wid a cup of coffey(e) says:

      now you talking…but they going need some good purging first before they reach that hot water.  I would then get that frying pan with little butter, onion and some scotch bonnet and fry that up…and the rest is history. 

      ahh…you know for this one just some plain good ole maxwell house will do.  I can smell it now.

  6. Johnny Cake wid a cup of coffey(e) says:

    it good to see that the people of Moody’s are in the know and obviously on target and responsibile with their assessment.  They sum total of the Cayman Islands was viewed and they are still able to smile with confidence at our position.  Those two crabs from the guardian should read from Moody’sbook on responsible assessing and reporting.


    Thanks Moodys.

    • Diet Tribe says:

      Apparently, so should our esteemed leader. Preferably prior to spouting off his back trap next time

      • Anonymous says:

        You say Mr. Bush shouldshut his trap but it’s kind of hard to hide what the PPM did to us.  Kurt and that bunch shouldresign in shame and save us the big paychecks they make.

        • Anonymous says:

          Mac needs to have his leash pulled and think before he talks!

          This is a dangerous game he is playing – to focus on embarrassing Alden & Kurt, you cant lose sight of the big picture – financial stability through a world economic crisis!

          But he dont have any control over the UK approval of borrowing; and he dont have control over Moodys.  So he is taking a HUGE risk with all of our lives – just to shame Kurt’s one-term government??

          Talk about selfish, childish and stupid.

          • Anonymous says:

            Yes, yes,yes, Mac stop ranting about Kurt and Alden, we all knew what they were up to, so now that the cat is out of the bag, just forget about those two loosers and work  for the country,  it doesnt matter now that they have screwed up the affairs of the country , what matters is getting it back on track. So use your common sense  and try get us out of this mess, we dont need reminding of what they did, we need undoing  of the bad decisions, keep the few good things in place and lets move on.This bickering will get us no where.