By NEIL HARTNELL
Tribune Business Editor
The Ministry of Finance’s top official yesterday said it was “encouraged that revenue collections are holding up” despite a $10.3m year-over-year decline in January.
Marlon Johnson, the acting financial secretary, told Tribune Business that the initial fiscal figures for 2020’s first month had given the government optimism “we will not do worse than we have budgeted for” over the remainder of the 2019-2020 fiscal year.
He admitted, though, that the Ministry of Finance was engaged in “an ongoing exercise” to provide fiscal options for the Minnis administration should the worldwide coronavirus outbreak result in a tourism slowdown or further depress already-tepid post-Dorian economic growth forecasts.
K Peter Turnquest, deputy prime minister, in delivering the mid-year budget statement in the House of Assembly had highlighted an “upward trend” in revenues that placed them some $79.3m higher than prior year comparatives for the seven months to end-January 2020.
However, research by Tribune Business showed the government’s income had actually been $89.674m ahead of the prior year period at the mid-point of the 2019-2020 fiscal year at end-December 2019. This means that revenues actually declined by $10.3m year-over-year in January 2020.
Mr Johnson told this newspaper that this was “a correct inference” to draw, attributing the decline to the post-Dorian tax breaks implemented in Abaco and Grand Bahama ever since Dorian struck in early December.
Reiterating that the government was giving up significant income, especially after the Economic Recovery Zones were formalised in both islands in December, the acting financial secretary said January’s performance was still being viewed positively.
“We are encouraged that revenues are holding the way they are,” he told Tribune Business. “We have budgeted for a tapering off in revenue flows through the tax incentives we have put in place, so we do anticipate a substantial moderation in revenue flows.
“But so far, based on the preliminary results from January, we will not do worse than budgeted for. The January numbers are encouraging.”
Mr Johnson acknowledged that the government is now in the critical period that will largely determine 2019-2020’s fiscal outcome, and whether it can hit its revised post-Dorian deficit, revenue and spending targets.
Besides the projected fiscal deterioration to a $677.5m annual deficit as restoration-related expenditure ramps up, the government is also in its peak revenue-earning time. The first four months of every calendar year include the peak winter tourism season, together with Business Licence fee payments, the bulk of real property tax earnings, and commercial vehicle licence month.
“I think this is our critical period,” Mr Johnson agreed. “The bulk of revenue comes in by the time we get through March and beyond. This is the crux of the budget year for us. This is the critical period with the ramp up of expenditure associated with the hurricane.”
Mr Turnquest, in his House of Assembly address, said of the increased $79.3m revenue over the period to January 2020: “Driving these gains, tax receipts widened by $98.8m over the first seven months of fiscal year 2019-2020, relative to fiscal year 2018-2019, with collections from VAT, gaming taxes, excise taxes and international trade taxes all posting gains over the corresponding period of the prior fiscal year.
“Expenditure trends for the seven months of the fiscal year up to January reveal a $104.2m expansion in outlays, primarily underpinned by the $56.6m rise in recurrent spending due to the $31.2m rise in personal emoluments, again largely reflective of the one-time boost in December due to the union negotiated lump sum payment. In addition, capital spending rose by $47.6m, owing to spending related to hurricane recovery.”
However, The Bahamas now has to contend with the uncertainty produced by the coronavirus outbreak. “We are looking at contingencies and different scenarios,” Mr Johnson admitted. “That’s an active exercise ongoing in the Ministry of Finance right now so we can inform the policymakers what will likely happen.
“If the coronavirus leads to a slowdown in travel, a slowdown in tourists coming here..... We are working through these scenarios to inform the policymakers of what the options would be fiscally. We are watching it very carefully.
“We are watching it very carefully. We remain hopeful it can be contained, and the impact to the economy and tourism is minimal, but we want to be prepared for any eventuality as far as this is concerned.”