Cayman Votes — General Elections in the Best-Run Country in the Caribbean
by Marla Dukharan
Determining the appropriate policy reforms to sustainably improve the socio-economic trajectory of the best-run country in the Caribbean, must feel like figuring out what gift to buy for someone who already has everything. But according to Moody’s, any developments (1) alleviating the constraints that the Cayman Islands’ small and relatively undiversified economy poses to the sovereign credit profile, (2) driving greater and more diversified economic growth that would push the per capita GDP higher than that of peers, and (3) promoting the buildup of significant fiscal buffers to address any sudden economic shocks and a policy framework that ensures the maintenance of very low debt levels, could lead to an improvement to Cayman’s rating and/or outlook. By extension, broader socio-economic progress will also be supported.
Not that more can’t be done, but Cayman’s fiscal strength has been proven to adequately mitigate the economic shocks of natural disasters and the sudden-stop, and diversification efforts are underway into medical tourism and the digital economy, for example. Furthermore, the authorities must be congratulated for successfully managing the pandemic’s socio-economic fallout. Indeed, Cayman’s pandemic response remains the gold-standard, globally. But like many other countries, Cayman faces two major threats to its stability and progress; climate change, and wealth/income inequality.
| Cayman’s pandemic response remains the gold-standard, globally.
Cayman is one of the most susceptible to sea level rise, as its highest point is only 60 feet above sea level. Moody’s reported that if temperatures were to rise by 3°C, 83% of the population in the Cayman Islands would be submerged. The rise in sea level that’s already ‘baked-in’ will displace thousands of Caymanians, and destroy valuable housing and infrastructure. Building greater climate resilience therefore, is a matter of survival, even in the near-term in Cayman.
Recent surveys revealed that the cost of living (directly and indirectly influenced by property prices) in Cayman is quite high and rising, compounding the already-regressive tax framework, driving greater income and wealth inequality. Land/property in Cayman is increasingly sought-after for rent-seeking and /or speculative purposes, by both locals and foreigners. The untaxed price appreciation in real estate assets amounts to an unintended transfer of wealth. It may be more appropriate therefore to model the tax and fiscal policy approach of a natural resource-based economy, where the finite and depleting natural resource (land) is taxed based on ‘extraction’ (sale), and a portion of that tax revenue saved in a sovereign wealth fund, with a view to investing to ensure inter-generational equity. The sovereign wealth fund could finance much needed climate resilience, and the national ‘Plan Cayman’ development plan. Otherwise, broad-based reform towards a more progressive tax framework, and a fiscal policy stance which protects the most vulnerable and grows the middle-class, would lessen inequality, and drive greater stability and better socio-economic outcomes for all.
As the electorate prepares to vote on April 14th in Cayman, sustainability and inequality are two issues that feature high on the list of policy priorities being ventilated. I trust the leaders of the Cayman Islands will continue to get their policy formula right, in the face of constantly changing conditions and demands, more so than any other in the region.
“If we merge mercy with might, and might with right, then love becomes our legacy, and change our children’s birthright. So let us leave behind a country better than the one we were left with.” — Amanda Gorman, President Biden’s Inauguration