The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s deputy leader yesterday said the projected $62.5 million spending increase beyond original 2015-2016 Budget estimates was “exactly the reason why” the Bahamas needed Fiscal Responsibility-type legislation.

K P Turnquest, speaking before his own mid-year Budget contribution in the House of Assembly, said the forecast spending rise contradicted the Government’s assertions that it was on “fiscal consolidation path”.

Michael Halkitis, minister of state for finance, told Parliament yesterday that the Government would “reprioritise” from existing Budgetary allocations rather than add to its spending.

However, the Government’s mid-year Budget data clearly shows a total $62.5 million spending increase for the 2015-2016 fiscal year above May’s estimates. Recurrent (fixed cost) spending is set to rise by $48.197 million, with its capital expenditure counterpart also up by $14.438 million.

“He mentioned it, but didn’t expand on it,” Mr Turnquest said of his Government ministerial counterpart, prior to querying whether the $62.5 million was at least partly being used to finance public sector hiring prior to a general election.

“Certainly, he owes us an explanation. That doesn’t point to a Government that is on a fiscal consolidation path.”

Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, told Tribune Business on Monday that the projected spending increase could drive the 2015-2016 fiscal deficit above $200 million.

Mr Halkitis, though, moved to dismiss such concerns yesterday, reiterating that the Government earns the bulk of its revenues during the second half of its fiscal year.

Pointing out that there was precedent for the Government to ‘catch up’ on its full-year deficit and other fiscal targets during that period, the Minister also suggested that the media were being too negative.

Mr Halkitis implied that the Christie administration was not getting enough credit for its fiscal achievements, namely slashing the deficit by 75 per cent from the $539 million during its first year in office and setting the public finances back towards sustainability.

However, the mid-year Budget data raises serious questions as to whether the Government is in danger of squandering some of its Value-Added Tax (VAT) revenues through increased spending.

Asked whether the projected $62.5 million spending rise provided more support for the Bahamas to enact Fiscal Responsibility-type legislation, Mr Turnquest responded: “Absolutely.

“We talked about this early on in the last couple of Budgets, and this is exactly the reason why.

“So far, the Minister seems to be glossing over this planned increase in spending without any explanation, and he ought to be made to come to Parliament and explain why this extra spending is necessary.”

Mr Turnquest pointed out that the $6.5 billion national debt was still increasing, albeit at a slower rate, and any extra spending would lead to further rises.

Many in the private sector view Fiscal Responsibility-type legislation as a tool that could force Governments to be more transparent and accountable for their fiscal stewardship, as it would force them to return to Parliament to explain, and get approval for, any spending increases beyond approved Budget amounts.

Mr Turnquest, meanwhile, praised Tribune Business for “a good catch” in revealing the discrepancies on what the $62.5 million in additional spending will actually be used for.

The mid-year Budget data shows that two-thirds of the projected recurrent spending increase, some $32.239 million or 69 per cent, has come from increased allocations to the Ministry of Tourism.

The Ministry of Works is the next largest recipient, gaining an extra $10 million above May budget estimates, and accounting for more than 20 per cent of the revised spending increase.

The ‘line item’ breakdowns for both Ministries describe this cumulative $42.239 million increase as a rise in ‘grants, fixed charges and special transactions’.

These classifications, though, appear to be at odds with the ‘block’ breakdown of the Government’s spending. This shows just a $17.815 million increase in ‘grants, fixed charges and special transactions’, a sum equivalent to just 42 per cent of the funds given to the Ministries of Tourism and Works.

The ‘block’ breakdown instead shows the biggest revision to be an extra $23.504 million allocated for ‘personal emoluments’ - meaning salaries, pensions and gratuities paid to government employees.

With ‘allowances’ showing a $5.333 million increase, and ‘travel and subsistence’ generating another $573,532, more than $30 million - or over 60 per cent - of the revised recurrent spending increase relates to extra payments to public servants according to this analysis.

“That’s a good catch,” Mr Turnquest told Tribune Business. “Where the hell is that money going? What are they doing? Major problem.”

Mr Turnquest received no response from the Government benches when he raised the issue, and questioned whether the public sector was now hiring, during his mid-year Budget presentation.