The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The private sector yesterday pledged to keep the “Government’s feet to the fire” over its stewardship of the public finances, as the fiscal deficit for the 2015-2016 year’s first quarter fell by 34.2 per cent.

Edison Sumner, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive, told Tribune Business that part of its role was to hold the Government accountable for its fiscal management - especially given the extra $300-$350 million per year that it is now sucking out of the economy via Value-Added Tax (VAT).

“Part of our role is holding the Government accountable, and part of that is keeping the Government’s feet to the fire when it comes to fiscal management and the prudent use of public resources, public funds,” Mr Sumner told Tribune Business.

“The Chamber of Commerce will continue to hold the Government to account until the country is on the right path to pull ourselves out of the doldrums.”

Mr Sumner said he had not seen the Central Bank of the Bahamas’ monthly economic report for October, which disclosed that the Government’s fiscal deficit for the first quarter of its 2015-2016 Budget year had fallen by more than one-third year-over-year, driven by net VAT inflows of $165.5 million.

For the three months to end-September 2015, the Government’s deficit was said to have “narrowed sharply” from $91.6 million to $60.3 million.

This was attributed to a $120.6 million or 38.1 per cent year-over-year rise in revenues, driven by VAT and other taxes, to $437.1 million. This, in turn, outpaced a $29.1 million or 6.2 per cent increase in total spending to $497.4 million.

The Christie administration will likely take great comfort from the latest decline in the fiscal deficit, and interpret it as further evidence that its fiscal consolidation plan - and the associated VAT ‘pain’ - is working and bearing fruit.

Its critics, though, would probably counter that $60.3 million is still a deficit that will translate into a further increase in the $6.4 billion national debt. And spending continues to increase seemingly unchecked.

The first quarter of the 2015-2016 Budget year also fails to include the impact of Hurricane Joaquin, which struck in early October and, according to the Prime Minister, could have caused $56 million worth of damage to government assets.

This will result in unplanned expenditure, and could lead to further Government borrowing to effect repairs.

Mr Sumner, meanwhile, told Tribune Business that despite the extra VAT revenue, the Government was continuing to borrow to finance certain obligations.

Apart from the Government’s spending, he expressed concern about the Bahamas’ continued slippage in the World Bank’s ‘Ease of Doing Business’ and competitiveness rankings - issues which needed to concern both the private and public sectors.

“It’s not only about keeping score, but finding out what’s fundamentally wrong in the system and correct it, as it impacts on us all,” Mr Sumner told Tribune Business.

Analysing the Government’s fiscal performance for the 2015-2016 first quarter, the Central Bank said: “Buoyed by a net intake of $165.5 million in VAT, tax receipts surged by $113.7 million (40.8 per cent) to $392.2 million.

“In a modest offset, taxes on international trade contracted by $15.8 million (11 per cent) to $127.4 million, reflecting respective declines in import and excise taxes, of $10.1 million (13.3 per cent) and $8 million (12 per cent), which overshadowed a slight $2.3 million increase in export tax receipts.”

Services taxes, meanwhile, dropped from $12 million in 2014-2015 to just $0.1 million due to the elimination of the 10 per cent hotel occupancy tax to make way for VAT.

“Non-trade stamp taxes declined by $10.5 million (30.3 per cent), attributed mainly to a sharp $17.8 million (68.3 per cent) fall-off in tax receipts from real estate transactions, as property sales slumped, while timing-related factors led to a $10.1 million (63.4 per cent) contraction in business and professional fees to $5.8 million,” the Central Bank said.

“In contrast, non-tax revenue rose by $10.3 million (29.5 per cent) to $45.2 million, as the payment of dividends by a major telecommunications provider contributed to a more than four-fold increase in income to $13.9 million.”

The ‘telecommunications provider’ referred to will be the Bahamas Telecommunications Company (BTC), in which the Government holds a minority 49 per cent.

On the spending front, the Government’s recurrent ‘fixed cost’ spending was said to have increased year-over-year by $56.2 million or 14.5 per cent due largely to a rise in tourism industry subsidies.

“In terms of expenditure, current outlays expanded by $56.2 million (14.5 per cent) to $444.2 million, owing mainly to a $43.6 million (24.7 per cent) rise in transfer payments to $220.4 million,” the Central Bank said, “as an increase in subsidies to the tourism sector contributed to a $41.4 million (36 per cent) rise in this category to $93 million.

“In addition, interest payments increased slightly, by $2.3 million (3.7 per cent), to $64 million. Consumption expenditure firmed by $12.6 million (6 per cent) to $223.8 million, reflecting gains in both wages and salaries and purchases of goods and services, of $6.7 million (4.1 per cent) and $5.9 million (11.8 per cent), respectively,” the Central Bank added.

“In contrast, capital outlays fell by $20.6 million (34.2 per cent) to $39.7 million, mainly explained by an $11.3 million (27 per cent) reduction in infrastructure spending and a $9.3 million (50.3 per cent) decline in asset acquisitions.”