Cook Islands Government Quarterly Financial Report – June 2018

The Cook Islands Government (CIG) preliminary financial outcome for the June 2018 quarter is now available on the MFEM website. (www.mfem.gov.ck)

Operating Balance
The net operating balance of the General Government sector for the 12 months ending June 2018 resulted in a net operating surplus of $37.23 million, $36.74 million higher than what was forecasted during the publication of the 2017/18 Budget estimates.

The favourable result was driven mainly by higher revenue collection (by $28.08 million) followed by saving in overall operating expenditure (by $8.66 million).

Taxation collection accounted for $22.18 million of the variance in revenue and largely attributed to the additional tax collected as part of the tax amnesty programme implemented during the year in addition to the increased economic activities evidenced by increased visitor numbers.

The tax amnesty programme implemented resulted in higher taxation collection with Company tax collected at $8.86 million higher (69% up) followed by Income tax at $5.63 million (24% up) and Value Added Tax at $4.76 million (8% up).

The tax amnesty has positively impacted on numerous taxpayer’s financial position by elevating them from a net loss carried forward position (i.e. not paying income tax) to having a net profit tax position and paying income tax. This came about through the filing of outstanding income tax returns over a number of years by a given taxpayer. The result was more taxpayers actually having income tax liabilities who previously were carrying forward net losses.

Saving in Administered payments of $6.23 million followed by overall underspending of $6.01 million in Crown agencies spending were the main contributing factor to the favourable variance in operating expenditure. This was primarily related to delay in implementing planned work programs and saving in personnel related costs due to unfilled vacant positions.

Fiscal Balance
The fiscal balance adjusted the net operating balance to take into account spending on capital items net of depreciation.
The overall fiscal balance for the reporting period was $23.89 million, which demonstrates a $74.97 million saving, mainly as a result of delays in capital and infrastructure implementation.

Spending on planned Capital projects were below Budget estimates by $38.41 million driven largely by delays in implementation of Manatua Cable ($10.87 million), Te Mato Vai Rarotonga water upgrade ($8.15 million), Renewable Energy projects ($6.44 million) and Water and Sanitation project ($1,91 million).

It is worth noting that these savings are temporary in nature and funding will be spend when they are ready to be implemented. this creates fiscal space however for other important unforeseen projects that can be considered in the short term.

Financial Position
The CIG cash position is reported at $116.92 million, which represents only cash managed through the Ministry of Finance on behalf of general Government and does not include an estimated $5.14 million cash held directly by Ministries and other Crown agencies.

The CIG reported a gross debt of $101.29 million, this represents actual loans disbursed and adjusted for debt service repayments. Net Debt adjusts the Gross Debt for the effect of Loan Repayment Fund (LRF) held against those loans and the loans held on behalf of SOE’s. Net debt was reported at $58.46 million at the end of the reporting period.

The net financial position of the CIG demonstrate a healthy position at the end of the reporting period.
These results are preliminary numbers and are not yet audited.

[END]
August 2018

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