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Deficit Overshoots Dpm’S Final Prediction By $105m

photo

Marlon Johnson

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s 2017-2018 fiscal deficit overshot the deputy prime minister’s year-end forecast by $105m due to a late spending “ramp up”, a top official admitted yesterday.

Marlon Johnson, the Ministry of Finance’s financial secretary, told Tribune Business there was “a much higher than anticipated spike” in spending towards the fiscal year-end because multiple government agencies were seeking to pay bills in the period when they were incurred.

He added that efforts to prevent the “carry over” of unpaid spending obligations into the next fiscal year had effectively blown KP Turnquest’s prediction, made on May 30 when he presented the 2018-2019 budget, that the 2017-2018 deficit would come in at $310m.

The Government’s first-ever fiscal strategy report, tabled in Parliament yesterday to ensure compliance with the newly-passed Fiscal Responsibility Act, confirmed that the actual 2017-2018 deficit was $414.9m - almost $105m higher than Mr Turnquest’s forecast made just five-and-a-half months ago.

The outcome was also $94.6m higher that the $320.2m deficit projected in the initial 2017-2018 Budget, coming in 29.6 percent above target, and meaning the Government incurred considerably more “red ink” than initially thought. As a result, it will have to work much harder to meet this year’s $237m deficit goal and comply with the Fiscal Responsibility Act’s mandate.

Mr Johnson, though, described the frequent eight and nine-figure differences between the Government’s fiscal year-end deficit estimates and the actual outturn as “a chronic issue” that had plagued multiple administrations.

To correct this, he revealed the Ministry of Finance is now meeting with key government agencies on either a monthly or bi-monthly basis to better track their spending and head-off negative trends “we believe to be unwise”.

The Financial Secretary added that it was also working closely with the Ministry of Works, and other agencies that received capital funding, to “reforecast” spending projections as the fiscal year progressed while also “monitoring the commitment ledger much more closely”.

Mr Johnson said the “tightened up oversight” will ensure the Government’s year-end fiscal forecasts are more accurate, while pointing out that the $415m deficit for 2017-2018 still represented a “substantial cut” of more than one-third to the “red ink” incurred by the Christie administration during its final year in office.

The explanation for the latest deficit overshoot may not satisfy everyone, though, given that the revenue and spending figures detailed in the Fiscal Strategy Report largely match those outlined by Mr Turnquest when he made his Budget presentation.

“Provisional data on the fiscal outturn for fiscal year 2017-2018 reveal that the performance was somewhat weaker than projections presented at the time of the 2017-2018 Budget,” the Government’s Fiscal Strategy Report said.

“The deficit widened to an estimated $415m relative to the budget of $320m, and equated to an estimated 3.3 per cent of GDP compared to the forecasted 2.6 per cent. However, this still represented a sharp improvement from the $661m budgetary shortfall in 2016-2017, which stood at an elevated 5.5 per cent of GDP. Overall, the revenue outcome was some 5.1 per cent below budget expectations, while total expenditures were lower by 0.7 per cent.”

The deficit outcome, which measures by how much government spending exceeds its revenue income, was also much higher than the Deputy Prime Minister’s May 30 prediction. “The GFS deficit outturn in 2017-2018 is projected at $310m, a net improvement of $13m over the Budget forecast of $323m,” Mr Turnquest said then.

Mr Johnson told Tribune Business yesterday that the expanded deficit resulted from government ministries and agencies ensuring that all spending commitments made during the 2017-2018 fiscal year were met before the period ended.

“The reality is that towards the end of the year we saw a ramp up in expenditure in May and June, with agencies trying to meet the Ministry’s mandate to come current with commitments made in that year,” he explained.

“We wanted to avoid the carry over effect which led to that $300m unpaid arrears situation [from the 2016-2017 fiscal year]. As agencies made sure they utilised the funding available, and paid off as much of their obligations as possible, we saw a much higher than anticipated spike in the last few months which threw the estimates off.”

Mr Johnson said the gulf between the Government’s year-end deficit estimate and actual performance was nothing new, with the Ministry of Finance now taking action to better align Budget forecasts with outturn.

“The Ministry is doing quite a bit to avoid this chronic issue,” he added. “We see this phenomenon where the Government comes with a Budget presentation, makes a prediction, and the prediction does not pan out. We have to do a better job in forecasting what the actual spending and deficit will be.”

Research by Tribune Business uncovered that the former Christie administration encountered similar problems, most notably for 2014-2015, when then-prime minister Perry Christie projected that the deficit would be $198m. It ultimately came in at $381m, a negative variance of $183m.

This pattern was repeated for 2015-2016, when the $310m deficit was more than double Mr Christie’s year-end forecast of $150m. Mr Johnson said the Ministry of Finance “feels confident” that the “operational changes” it has made, with more controls and interaction with all other government agencies, will rein in unanticipated capital and fixed-cost spending.

And he suggested that the higher-than-expected deficit for 2017-2018 still represented some positives, given that it was still much lower than the prior year’s outcome and indicated that government ministries were taking seriously instructions to pay off bills in the years they were incurred.

“We feel pretty confident that the level of carry over has been minimised,” Mr Johnson told Tribune Business, noting that this had contributed to the $661m fiscal deficit in 2016-2017. “We’re still seeing some carry over, but want to make sure that’s managed.

“What we’ve found happening is that spending in the current year is used to address bills from the previous year, and we’re managing that much more closely. We’ve tightened up the oversight quite a bit to make sure we’re doing a better job forecasting spending patterns towards the end of the year.”

The Financial Secretary added that 2017-2018’s $415m deficit still represented a more than one-third, or 37.2 percent, year-over-year decline on the $661m deficit run-up by the last Christie administration.

“It really was a substantial step,” Mr Johnson said of the narrowed deficit. “The next step is [a deficit of] $237m. Even though we were off we were very encouraged that the deficit is substantially reduced and continues to trend downwards.”

The Fiscal Strategy Report blamed last year’s “fiscal underperformance” on “the less buoyant outturn for recurrent revenue” even though the economy grew by 1.4 percent in line with forecasts. Total revenues were $110m below forecast at $2.042bn, equivalent to 16.3 percent of GDP as opposed to the target 17.2 percent.

While VAT and motor vehicle taxes exceeded forecast, “licences to conduct special business activities (in large measure business licences) were some $53m, or 32 percent, lower than projected and excise taxes were $18m under forecast”.

“Below budget outcomes were also posted for taxes on international trade and transactions, of $41 million (8.6 per cent), and taxes on property of 14 percent or $20 million. Such lacklustre performance of revenue is a matter of pressing concern that is aggressively being addressed by the Ministry of Finance and its Revenue Enhancement Unit.”

These trends were noted in the May Budget presentation, along with recurrent spending coming in $55m below target as a result of the Government’s across-the-board 10 percent spending cut relative to 2017-2018 allocations.

“As a result, expenditure on the wage bill was reduced during the fiscal year by some $62m, or 8 percent, from budget,” the Fiscal Strategy Report said. “Interest payments, however, exceeded the budgeted allocation by $21m, primarily consequent on commitments arising from new debt obligations incurred during the period.

“Outlays on goods and services were $31m or 7 per cent above budget, and considerably exceeded the initial savings foreshadowed during the 2017-2018 mid-year Budget presentation. The hike in outlays during the closing month of the fiscal year reflected the Government’s insistence on agencies settling their payment obligations within the appropriate fiscal year, to the extent possible, as to minimise ‘carry over’ into the ensuing fiscal period.”

As a result, the Government’s direct debt increased by $372.4m to $7.245bn during the 2017-2018 fiscal year. As a percentage of Bahamian gross domestic product (GDP) it rose by 2.9 percentage points, from 54.8 percent to 57.8 percent - putting it further away from the 50 percent target set in the Fiscal Responsibility Act.

Comments

proudloudandfnm 1 year, 8 months ago

All these fees and taxes and the deficit went up???????

Time for some resignations....

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Well_mudda_take_sic 1 year, 8 months ago

Minnis, Turnquest and Johnson are spitting in the eyes of the Bahamian people. These three can't believe how dumb, stupid and ignorant the Bahamian people can be. They have been, and will continue, taxing us to death while they merrily go about feathering the nests of themselves, their families, and their cronies. Yep, Minnis, Turnquest and Johnson are LOL as they grow their support base by throwing away our tax dollars rather than using them to pay down our mountain of national debt. LMAO

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TheMadHatter 1 year, 8 months ago

It's only money, don't worry about it. You can't eat it.

I met a lady in the grocery store the other day, she was buying Ramen Noodles and Vienna Sausages (by the half case) to feed her two young boys. I could see she was pregnant and i asked how far along. She proudly told me 5 months, said she was happy and hoping for a girl "this time".

People are generally happy. The Bahamas is a great place to raise children and just live carefree. Pay your tithes and Jesus will take care of you - stop all this fussing man.

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Well_mudda_take_sic 1 year, 8 months ago

"It's only money, don't worry about it. You can't eat it."

You're one of the few I know who would be content eating mud pies to ease your hunger pains when you have no money. You must be of Haitian heritage. LMAO

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John 1 year, 8 months ago

Shut the government down and let them go sell phone cards!

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sheeprunner12 1 year, 8 months ago

Scorched record ............... Wonder if the protesters knew that information??????

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BahamaPundit 1 year, 8 months ago

These guys are scarier than the PLP in some respects. They are taking in huge amounts of tax money and still failing. At the same time, they are silent on how the money is being spent. What is to say they aren't stealing huge amounts of our money? We know they are liars, and liars are often robbers.

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ThisIsOurs 1 year, 8 months ago

The litmus test for any administration, watch who they put to mind the money, treasury, finance, nib, bob. That will tell you everything you need to know. If they put a guy investigated at his last job for self dealing, you know exactly what they up to. Less questions if he already understand all the wink and hand signals

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John 1 year, 8 months ago

who else tired of seeing this pic of BoBo..in The Tribune and if all this (additional) tax money the government is taking is not paying down the debt and putting the country in a better financial position, then what next. May have been better to leave Perry and the PLP there and let them continue to splurge.

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proudloudandfnm 1 year, 8 months ago

Bout pay tithes. I don't do church bro. Never will. Biggest damn con on the planet....

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DDK 1 year, 8 months ago

Y'ALL GOTTA GO!!!!! BUCHA CROOKS! Next one of them jumps on a plane with a damn entourage should have his passport cancelled.

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DDK 1 year, 8 months ago

"He added that efforts to prevent the “carry over” of unpaid spending obligations into the next fiscal year had effectively blown KP Turnquest’s prediction, made on May 30 when he presented the 2018-2019 budget, that the 2017-2018 deficit would come in at $310m."

Is there an accountant in the whole slew of government employees or are all the presenters of the budget just liars. Turnquest's "prediction" should have included a debt repayment schedule.

"Mr Johnson, though, described the frequent eight and nine-figure differences between the Government’s fiscal year-end deficit estimates and the actual outturn as “a chronic issue” that had plagued multiple administrations." Including the FNM you jack---. What have you learned from this appalling fact? JACK - - - -!

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birdiestrachan 1 year, 8 months ago

They lied, They lied again that is all. keep telling lies, it really does not matter any more. because no one can believe anything that come out of these FNM fellows mouth,

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proudloudandfnm 1 year, 8 months ago

Birdie dear, we can't believe anything that comes out of the FNM or the PLP. Stay on track....

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proudloudandfnm 1 year, 8 months ago

Marlon is good people but he needs to get out of government. Useless.

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ThisIsOurs 1 year, 8 months ago

And how did they get to 661 milliondeficit for the PLP? by adding all the bills they knew were out there but hadn't been paid as yet. So how can they come and say now these bills run up on us unawares? Didn't they make a big deal about switching to accrual based accounting? Everybody knew KP's budget projections were ridiculous. Everyone knew he wouldn't collect 400 million VAT.

please note that the 65 million hotel we had to buy to save the employees who say they want severance is 60% of the "overrun"

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DDK 1 year, 8 months ago

"The Minnis administration is thought to be financing the Grand Lucayan purchase with a combination of debt and the $25m allocated in the 2018-2019 Budget to support the now-abandoned Wynn Group purchase.

The deal is structured so that the Government pays a $10m deposit, which it has done, and a further $20m upon closing. This is likely to be financed largely through the Budget, with the $35m balance split into semi-annual $5m payments spread over three-and-a-half years.

That portion will come from debt, with the funds likely to be extended by the Grand Lucayan's departing owner, Hutchison Whampoa, as a form of vendor financing. This was proposed a year earlier, when the Minnis administration first suggested it would take an equity stake in a purchase of the resort.

A mortgage, secured on the Grand Lucayan's real estate assets, will provide security for the loan or any form of debt financing. The Government guarantee is needed to provide assurance to the lender that its monies will be repaid."

The above from Tribune 12th September. Do we actually know how the purchase was financed?

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BONEFISH 1 year, 8 months ago

Did not expect their projections do be off by that amount.A highly educated person told me a few weeks ago,Mr.Johnson is out of his depth.The person said he does not know his job.

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ThisIsOurs 1 year, 8 months ago

Are you serious? I'm betting it's more but 100m is as much as they think they can admit to. I'm betting there are more unpaid contracts that they haven't included

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John 1 year, 8 months ago

So what constituency does Marlon Johnson plan to run in next election? Hope he is not running on his track record... #BTC. But he loves working with finances...other peoples!

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BahamaPundit 1 year, 8 months ago

This is a huge overun. Huge!!!! A real disgrace. Time to fold it in. Our VAT is hardly making a dent in the defecit. What is more, FNM accounting was off by over 100 million. Unacceptable! Complete and utter failure.

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bcitizen 1 year, 8 months ago

And the private sector needs to give over their bank records because of sloppy accounting practices? lol lol

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birdiestrachan 1 year, 8 months ago

I always believed they cooked the books. What does moody and IMF have to say about this. Turnquest made his grand announcement LIE. and left Marlon to clear up the big mess. They can not be trusted.

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John 1 year, 8 months ago

It’s like trying to force a 300 pound hog on the back of a pickup truck. He won’t fit so you try starving him. Then when it looks like the hog will fit you realize he’s also too heavy for the truck. So now only must you go out and find a bigger truck but you now have a half starved hog that doesn’t look attractive to take to market. So while it may be ok to cut some of the fat off the government’s budget, they must also grow the economy at the same time. Otherwise there will be no bacon. Just a cash starved hog that will eventually gobble up everything.

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CaptainCoon 1 year, 8 months ago

No matter who is in power we cannot control the deficits. Bahamians simply can't run a country is all. No matter who is in, the deficit only grows and the debt increases along with the tax burden (combined with a higher cost of living). I await for this 'country to turn into another Jamaica after we collapse and beg the IMF for a bailout.

Now's a good time to get out of the Bahamas and get as far away as possible. SAD!

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realitycheck242 1 year, 8 months ago

where ya goin ....The USA with 21 trillion depth, canada with 1.8 trillion depth or England 1.78 trillion...........or maybe ya like hot weather so how about Haiti with a 2.7 trillion depth .......we in paradise compared to many others.

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Chucky 1 year, 8 months ago

Haiti, there sent 2.7 billion, a third of ours, and their gdpis similar to ours. Get your facts right.

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ThisIsOurs 1 year, 8 months ago

Someone just reminded me, what happened to the 650 million that Turnquest and Johnson flew around the world to borrow

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Gotoutintime 1 year, 8 months ago

Goodness me---Do we need the UBP again??

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Well_mudda_take_sic 1 year, 8 months ago

Those UBP bastards are the very ones who paved the way for successive corrupt PLP and FNM governments alike. Unbelievable that Minnis approved the nomination of Brent Symonette as a candidate in an easy to win constituency and then proceeded to try re-write Bahamian history by having rum-runner Pop Symonette (Brent's father) declared a national hero. No, we don't need the Symonette-types involved in governing our country when all they have ever been truly concerned about is increasing their family wealth by hook or crook. LMAO

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