The Cayman Islands financial position has not improved in the first six months of the current budget year.

According to figures presented by Premier McKeeva Bush in response to a parliamentary question posed Thursday morning in the Legislative Assembly, the total operating deficit in Cayman’s public sector had reached more than $73 million between 1 July, 2009 and 31 December, 2009 – the first half of the fiscal year.

Total government revenues were $179.7 million during those six months, while expenses totaled $233.7 million.

Financing expenses during the period totaled $11.8 million and extraordinary expenses were $3.7 million, according to Premier Bush.

In addition, the operating losses of statutory authorities and government companies reached $3.4 million in the first six months of the year.

“The country is in a precarious situation,” Mr. Bush told Legislative Assembly members Thursday.

Typically, Cayman’s big revenue earning months occur in January, February and March. However, government projections for the last half of the financial year can hardly be described as rosy.

According to projections completed on 23 February, Mr. Bush said a $72 million dollar drop off in government revenues was projected by 30 June, 2010 – the end of the fiscal year.

Initial revenue projections from central government dropped from $562 million to $490 million.

Government’s financial forecasters were predicting a total public sector operating deficit of $56.1 million by 30 June, Mr. Bush said.

On the expenditure side, projections were that some $9 million would be cut from government’s operating budget.

“But I’m not content with that,” Mr. Bush said, adding that additional reductions and cost-cutting strategies would be considered in the coming four months.

Of crucial importance, the premier said, was the need to divest certain government assets – including the under construction government office accommodation project – to ensure a $151 million bank balance by fiscal year end.

If those sales did not occur, Mr. Bush said the bank balance would drop some $111 million to a mere $39 million by the start of the next fiscal year.

“What it means is that the budget of this country would fail,” he told the House.

Opposition party member Alden McLaughlin questioned why the premier was so adamant about the asset sales, since government was already going to be out of compliance with legal financial requirements – including requirements to propose a balanced budget for the year.

Mr. McLaughlin said proceeds from the sale could not be used to help offset government’s operating deficit in any case.

“How will the sale prevent the need to lay off significant numbers of civil servants?” Mr. McLaughlin asked.

Mr. Bush said government would need cash to pay the salaries of some 3,800 civil servants.

“A country cannot wind up cash strapped….and uncertain how to make ends meet,” he said.

Mr. McLaughlin questioned whether Mr. Bush, when he meets with UK representatives next month in London, would ask if Britain might temporarily relax certain financial requirements for Cayman – including those that would restrict it from borrowing more money in the next financial year.

Mr. Bush has previously said that he doubted the UK would go for such a plan without Cayman first agreeing to implement direct taxation, and in any case, he said borrowing more would only add to the country’s financial problems.