Government tighten its belt further and revenues projections fall by millions!

Minister of Finance Peter Turnquest.

Nassau, The Bahamas – Deputy Prime Minister and Minister of Finance the Hon. K. Peter Turnquest said the Government’s estimates for the 2019/20 Budget are framed within the projected outcomes of the 2018/19 fiscal year and the current and projected economic climate. 

During his Budget Communication 2019/20 in the House of Assembly, Wednesday, May 29, 2019, DPM Turnquest highlighted key fiscal prospects for the upcoming budget year, and future prospects for the medium term horizon. 

“Although the economy is expanding, the reality is that recovery is not occurring at the pace previously projected, against the backdrop of a number of global factors. 

“We are fully sensitive to the fact that a further improvement in our fiscal outcomes, and the attainment of the legally binding fiscal objectives, is contingent on both ongoing expenditure discipline and the further enhancement of revenues.” 

He noted that on the revenue front, the revenue yield of the government’s taxation system amounted to some 18.8 per cent of Gross Domestic Product (GDP) in 2018/19.  A number of factors are expected to contribute to a further enhancement of that yield in 2019/20 and beyond. 

“As such, we have budgeted for total revenue of $2.628 billion in 2019/20, which represents a $215 million increase over the projected outturn in 2018/19. 

“Recurrent expenditure is budgeted at $2.530 billion, equating to some 19.0 per cent of GDP. That represents an increase of $95 million over this year’s projected expenditure. With regard to the payment of arrears, we currently project that we will pay an additional $100.4 million toward the $360 million buildup we met when we came to Office two years ago.”

He said while the government continues to make good progress in settling the outstanding arrears, the level remains a significant percentage of outlays in the upcoming fiscal year. 

The DPM explained that one important obligation yet to be factored into future arrears payments is the requirement for the government to meet obligations relative to the BTC legacy Defined Benefit Pension Plan, based on the terms of the Shareholders’ Agreement between the Government and Cable & Wireless Communications.

He said it has been determined that the government never provided the $39 million to the Feeder Trust that was created to assist in meeting its obligations to the Plan, when the corporation was sold to Cable and Wireless for $210 million in April 2011. 

“To commence meeting these obligations, the government has provisioned $3.0 million in the FY2019/20 budget and over the course of the year will seek to devise a multi-year comprehensive strategy for settling the balance, once the full obligation has been determined. The Government will seek to provide an update on this matter in the upcoming Fiscal Strategy Report.”

DPM Turnquest explained that as for Capital Expenditure, the Budget provides for a modest increase in 2019/20 over the current projected outturn. This category of spending represented some 1.6 per cent of GDP in 2018/19 and we project an increase to 1.8 per cent in the coming fiscal year. 

He said that amounts to a $28 million increase, from $207 million projected for this year to $235 million next year. Going forward, we remain firmly committed to making infrastructure investment a key priority as financial resources permit. 

“That being said, several major infrastructure projects are already underway, and will continue. These projects are specifically geared towards building a new foundation for growth based on 21st century infrastructure. 

“Bahamians are already feeling the positive impact from some of these projects, like the road improvement, where everyone can benefit from getting to and from work easier, and going about their business.” 

The DPM also noted that the GFS deficit in 2019/20 is estimated at $137 million, which translates to a deficit to GDP ratio of 1.0 percent. Such an outcome is fully compliant with the requirements of the Fiscal Responsibility Act.

He said, “This will be the lowest annual fiscal deficit recorded in The Bahamas in 10 years. Also, our 1.0 per cent deficit to GDP ratio target will mean the lowest fiscal deficit ratio in this country in over 17 years. That is right, this will mark the lowest deficit ratio this land has seen in nearly two decades!”