By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Deputy Prime Minister yesterday said the Government is "not resting on our laurels" over a "stubbornly" high fiscal deficit, despite forecasts it is on track to hit its 2017-2018 fiscal targets.
K P Turnquest, pictured, told Tribune Business that despite Central Bank data showing key revenue and spending indicators were largely on plan with two-thirds of the fiscal year gone, the Government faced a continual "balancing act" between competing demands.
With the $224.7m deficit for the eight months to end-February 2018 equivalent to 70 per cent of the full-year goal, Mr Turnquest said the fiscal performance to-date was "too close" for himself and the Ministry of Finance to rest easily.
"It's too close for me to accept any resting on our laurels at this point," the Deputy Prime Minister told Tribune Business. "We are watchful. Obviously, this last quarter a lot of things happen, so we are cautiously optimistic. There's all kinds of factors that come into play."
Mr Turnquest confirmed that he was referring to the traditional Government revenue boost, as the Public Treasury usually collects the bulk of its income during the fiscal year's second half. This period, which is not captured in the latest Central Bank numbers, is when the bulk of Business Licence fees (due on March 31) and real property tax payments are collected.
The March/April period also includes peak winter tourism activity, which tends to boost Value-Added Tax (VAT) revenues and other consumption-based taxes, plus commercial vehicle 'licensing month' at the Road Traffic Department.
While the 2017-2018 deficit's progress almost exactly matches where the Government is in its fiscal year, Mr Turnquest said the national debt and continuing $300 million-plus deficits give the Ministry of Finance little room for manoeuvre - especially given the Bahamas' vulnerability to external economic shocks and natural disasters.
"We are doing our best to be as prudent as we can, to go after the revenue as best we can, and to try and control expenditure as best we can," he told Tribune Business.
"This is very much a long-term effort. We're facing an almost $8 billion debt, and a deficit that is stubborn. This is a very complex technical issue where we're trying to actually grow the economy while reining in expenditure, and trying to satisfy the demands of the public without blowing the deficit. It's not easy."
The Central Bank's economic developments report for March revealed that the Government's deficit at end-February, with two-thirds (66 per cent) of the fiscal year gone, was equivalent to 70 per cent of the full-year target - placing it on track to come in close to the $323 million of 'red ink' projected, with the traditional March/April revenue boost yet to come.
"At the eight-month point of the fiscal year, the Government's deficit was approximately 70 per cent of its target for fiscal year 2017-2018," the Central Bank said.
"Estimated capital outlays were less than half of the allocated total, while current spending comprised 60.7 per cent of budgeted approvals. Similarly, both non-tax and tax revenues were approximately 67.2 per cent and 56.5 per cent of the respective forecasted amounts."
Although the numbers suggest the Minnis administration's fiscal plans are on track, Mr Turnquest said: "Quite frankly, I'm reluctant to mark my own homework. I'm conservative by nature. We'll see at the end of the year when the accounts are produced where we end up."
The Deputy Prime Minister will unveil the 2018-2019 Budget before month's end, and he yesterday confirmed the Government's "intention" to release its draft Fiscal Responsibility legislation and associated 'fiscal rules' at that time.
Mr Turnquest added that the Budget should contain no major shocks or surprises, and said: "You're going to see us produce a Budget that demonstrates a commitment to our promises as well as efforts to stimulate and incentivise the local business community."
The Central Bank's data backs Mr Turnquest's concerns over the "stubborn" deficit, given that its year-over-year decline stemmed largely from a $100 million decline in capital spending. Hurricane Matthew recovery elevated that expenditure in the prior year, and the $29.3 million rise in recurrent spending highlighted the ongoing difficulties the Government faces in trying to cut its fixed costs - chiefly the $900 million-plus civil service wage bill and benefits, plus its rental expenses.
"During the first eight months of fiscal year 2017-2018, the deficit contracted by $84.1 million (27.2 per cent) to $224.7 million when compared to the same period of the prior year," the Central Bank said. "Underlying this development, total expenditure fell by $70.8 million (4.6 per cent) to $1.453 billion, while aggregate revenue firmed by $13.3 million (1.1 per cent) to $1.229 billion.
"The decline in total expenditure reflected mainly a halving in capital outlays to $98.3 million from $198.2 million, as the unwinding in hurricane-related spending led to a $74 million (46.8 per cent) reduction in capital formation. Similarly, asset acquisitions decreased by $25.9 million (64.4 per cent).
"In a partial offset, current expenditure rose by $29.3 million (2.2 per cent) to $1.355 billion, due mainly to a $45.1 million (6.6 per cent) increase in consumption outlays. In terms of the various categories, both personal emoluments and purchases of goods and services moved higher, by $21.5 million (4.7 per cent) and $23.6 million (10.8 per cent), respectively," the Central Bank continued.
"In contrast, transfer payments contracted by $15.8 million (2.4 per cent) as the $25.3 million (5.4 per cent) decrease in subsidies and other transfers - owing mainly to reduced subsidies to the Ministry of Tourism - outpaced the rise in interest payments by $9.6 million (5.3 per cent)."
On the revenue side, the Government's Value-Added Tax (VAT) revenues increased by $13.2 million to $430.7 million year-over-year. "In contrast, declines were noted for property taxes, by $8.5 million (11.9 per cent); taxes on international trade, by $8.1 million (2.3 per cent), owing to reduced import duties; receipts from business and professional fees by $7.3 million (13.3 per cent) and selective taxes on services by $1.5 million (8 per cent)," the Central Bank added.
Its 2017 annual report, meanwhile, showed that the national debt grew by almost $832 million or 11.8 per cent during the 2017 calendar year, hitting $7.882 billion - a figure equivalent to 67.8 per cent of GDP - as a result of Hurricane Matthew and the Christie administration's pre-election spending splurge.
This rate of increase was more than double the prior year's $390.3 million, or 5.9 per cent, rise, which resulted in the national debt expanding by 5.2 percentage points during the year.
Comments
TheMadHatter 5 years, 10 months ago
Keep up the good work.
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