By NEIL HARTNELL
Tribune Business Editor
The Christie administration contained the fiscal deficit’s February 2017 increase to just $7.6 million, putting it on course to close 2016-2017 near its $350 million target.
The Central Bank’s monthly economic report for April, released late on Monday night, showed that the fiscal deficit grew from $295.3 million at end-January to $302.9 million by the close of the following month.
With a half-year deficit of $275 million, putting all the figures together showed that the deficit rise by some $27.9 million for the first two months of the calendar year - a period when the former government was in office.
Should the Treasury maintain that rate of deficit increase for the final four months of the 2016-2017 fiscal year to end-June, the full-year outcome would be just below $359 million - not too far away from the Christie administration’s target set out in the mid-year Budget. However, the deficit for the first eight months was almost as high as the $310 million full-year deficit in 2015-2016.
Despite seeming progress in efforts to contain the deficit, fiscal observers again expressed concern that the increased ‘red ink’ was driven by factors other than Hurricane Matthew.
The Central Bank’s report emphasised that recurrent spending, which is unrelated to Matthew recovery efforts, rose by $44.1 million or 3.4 per cent year-over-year for the first eight months of 2016-2017, driven in part by a $24.7 million increase in Public Hospitals Authority (PHA) subsidies to facilitate the National Health Insurance (NHI) scheme.
Robert Myers, a principal with the Organisation for Responsible Governance (ORG), told Tribune Business that the former government appeared to have been using its $756 million net VAT earnings to finance increased spending and social programmes, rather than the initially-stated objective - deficit elimination and debt reduction.
“Adding more fuel to the fiscal issues of this nation is not what we should be doing,” he said. “NHI is a scheme we can only afford to employ when we can afford it. That means getting our fiscal house in order before we spend on such programmes. I don’t think anyone objects to the concept of NHI; it’s when it should happen, and when we can afford it.”
The Central Bank’s report said: “Data on the Government’s budgetary operations for the eight months of fiscal year 2016/-2017 showed a $54.5 million (21.9 per cent) expansion in the fiscal deficit to $302.9 million, when compared to the same period last year, as the $85.1 million (5.9 per cent) increase in expenditure to $1.518 billion outstripped a $30.6 million (2.6 per cent) gain in aggregate revenue to $1.215 billion.
“The growth in total expenditure was driven mainly by a $44.1 million (3.4 per cent) advance in current outlays to $1.337 billion. Specifically, transfer payments firmed by $20.9 million (3.3 per cent), led by a $13 million (7.6 per cent) expansion in interest payments.
“Further, subsidies and other transfers grew by $7.9 million - 1.7 per cent — on account of the $24.7 million (16.6 per cent) growth in subsidies to the Public Hospital Authority for the rollout of National Health Insurance (NHI).”
The Central Bank’s revelations, which came on the eve of today’s Budget presentation, also confirmed that the size of government was continuing to dramatically increased. This, coupled with pre-election pressures and the spending commitments subsequently made by the Christie administration, raise significant doubts as to whether the $350 million deficit target for 2016-2017 will ultimately be met.
“Consumption expenditure rose by $23.2 million (3.5 per cent), reflecting an $18.5 million (4.2 per cent) rise in personal emoluments (wages and salaries) and a $4.6 million (2.2 per cent) gain in purchases of goods and services,” the Central Bank said.
“In addition, a $47.5 million (51.1 per cent) increase in capital formation—mainly for hurricane repairs— underpinned a $61.6 million (51.7 per cent) rise in total capital expenditure, while asset acquisitions grew by $14.1 million (53.9 per cent).”
“The growth in the size of government is not understandable,” Mr Myers told Tribune Business. “That’s fiscally irresponsible. To grow an inefficient government more is obscene. This is the time for austerity, not irresponsible behaviour.
“We have a challenge. We, the people and the Government, have a challenge. It’s got to be taken seriously, but it’s not doom and gloom. The whole point is to fix it before it becomes doom and gloom and it’s very possible at this juncture to do that. It’s not going to happen by spending irresponsibly.”
The Central Bank warned that the Minnis administration was still likely to feel some impact from Hurricane Matthew, which would continue to impact fiscal consolidation efforts.
“As regards fiscal consolidation prospects, the outturn will continue to hinge on the success of measures to strengthen revenue administration and contain expenditure growth. Near-term spending still reflects some pressures from the ongoing cost of recovery from Hurricane Matthew,” it added.
The Central Bank said Value-Added Tax (VAT) revenues were down by $6.2 million or 1.5 per cent to $417.5 million for the eight months to end-February 2017, but total tax receipts were ahead by $16.3 million at $1.082 billion.
“Gains in import and export taxes by $11.3 million (6.5 per cent) and $7.3 million (4.9 per cent) supported a $17.9 million (5.4 per cent) increase in taxes on international trade,” it added.
“Moreover, selective taxes on services firmed by $8 million (78 per cent) to $18.3 million, owing largely to a $7.2 million timing-related increase in gaming tax receipts, while revenues from business and professional fees rose by $8 million (17.2 per cent) to $54.7 million. In addition, receipts from stamp and departure taxes both moved higher by $6.8 million (10.3 per cent) and $5 million (6.4 per cent), respectively.”