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$10 Billion: Pandemic And Dorian Send Deficit Soaring

Members of the government head to the House of Assembly for the Budget presentation on Wednesday. Photo: Shawn Hanna/Tribune staff

Members of the government head to the House of Assembly for the Budget presentation on Wednesday. Photo: Shawn Hanna/Tribune staff

• Tax revenues to fall $900m

• VAT holiday for back-to-school

• State-owned firms to lose $100m

• Personalised plates for $200

• Abaco and GB special aid extended

• No new taxes or rise in existing levies

• Public sector jobs secured

• Elderly to see $50 lift in pensions

• Millions more put aside to help COVID jobless

• No govt discretionary spending

By RASHAD ROLLE

Tribune Senior Reporter

rrolle@tribunemedia.net

GOVERNMENT debt is projected to top 10 billion dollars by the end of the 2021/2022 fiscal year as the Minnis administration commits to deficit spending in response to the COVID-19 crisis.

The deficit is projected to explode to an unprecedented $1.3 billion for the upcoming fiscal year and is forecast to be as high as $813.4 million in the fiscal period that follows. By the end of the 2021/2022 period, government debt is forecast to be 85.6 percent of GDP, according to the annual budget forecast released in the House of Assembly yesterday. Debt is projected to be $10.6 billion by the end of the 2022/2023 fiscal year.

Deputy Prime Minister and Minister of Finance Peter Turnquest declared that “unprecedented times call for an unprecedented budget” as he outlined a plan for the next fiscal year that will involve some tax reductions, increased spending for certain services like social services, health and education and no increases in taxes or public sector job losses.

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Deputy Prime Minister and Minister of Finance Peter Turnquest delivers the Budget on Wednesday. Photo: Shawn Hanna/Tribune staff

The administration, which has often prioritised deficit reductions, will not decrease spending substantially though it plans cuts to discretionary spending and state owned enterprise (SOE) subsidies.

Mr Turnquest said: “The government will not be increasing taxes or introducing new taxes in this budget. Despite the projected weak performance in revenue, we are cognizant of the fact that this is not the right climate for increased taxation. It is our considered view that any such move would significantly slow down the timelines of an economy rebound…During this time, the government could have chosen to continue its fiscal restraint measures by cutting back spending and starving a deprived economy. However, we did not choose this as we appreciate that during a downturn government spending is crucial to reviving a downtrodden economy.”

Although Mr Turnquest said the Central Bank has forecast a 12 percent decline in real GDP, he said people should “remember the nature of economic downturns related to pandemics: a sharp and sudden downturn followed by strong recovery.”

“Despite the stark decline we are seeing today in our various fiscal and economic indicators, we will move onward from this crisis,” he said. He added that there are a number of independent economic indicators to give the Bahamian people hope and reassurance, pointing to the oversubscription of Carnival’s cruise port’s $130 million bond offering.

Mr Turnquest noted that although Hurricane Dorian initially prompted a tourism slowdown last year, the country still attracted more than seven million guests in 2019 — a new record. However, he said total visitor arrivals declined by 14.7 percent in the first quarter of 2020 because of COVID.

Mr Turnquest announced a number of increases in allocations. He said the administration will increase public health allocations for COVID-19 response by $20 million and that the budget for the Department of Social Services will increase from $29 million to over $60 million. He said $120 million has been allocated for the government’s tax credit/tax deferral programme which is intended to help businesses keep employees employed.

Mr Turnquest said $48 million has been allocated for unemployment assistance and $17 million for expanded food assistance through the government’s food voucher initiative. Allocations for scholarships to the University of the Bahamas have been increased by $1.5 million and scholarship allocations for the Bahamas Technical & Vocational Institute have been increased by $500,000.

A temporary incremental monthly increase of $50 in old age pension has been allocated and will be administered by the National Insurance Board to help elderly people who may be “depending on other family members that are now jobless because of the pandemic,” Mr Turnquest said. Thirty million dollars has been allocated to expand business support and a continuity loan programme for Bahamian entrepreneurs and small businesses. The National Health Insurance initiative will also receive an additional $18 million.

Regarding revenue enhancement, Mr Turnquest said vanity licence plates at the Road Traffic Department will be introduced at a fee of $200.

As for the impact of COVID-19 on government expenditure, Mr Turnquest said that as of mid-May, the National Insurance Board paid out some $6.2 million through the government unemployment assistance programme. He said $28.9 million in unemployment benefits were paid out to over 26,000 people since the end of March while 284 small businesses were approved for loan financing at a cost of $19.4 million.

He said the Department of Inland Revenue approved 44 companies for a business tax credit and deferral initiative, with those companies benefiting from $5.7 million in tax credits and deferrals to protect vulnerable jobs. To improve capacity to handle the COVID-19 pandemic, $3.1 million has been spent, he said.

Comments

hj 6 months ago

And yet despite the massive debt,none of the parliamentarians of both pollitical sides had the decency to get a paycut to their salaries and perks. However,they made a point of mentioning that they will not have breakfast and lunch at the HOA at the taxpayer's expense.With such drastic cost measures,the economic outlook of the country looks bright indeed.

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tetelestai 6 months ago

Average parliamentarian makes an average of $50,000 per year; those with portfolios make an average of $80,000 (notice, I said average - I am aware that an MP who holds a substantive minister post makes slightly over $100,000). SOURCE - 2017 Bahamas Handbook. The point, even if they cut salaries that will make no dent at all in our financial situation - none. It is like using a teaspoon to drain the ocean.
We did not get to this point because our MPs make $100,000, but rather due to poor education, lack of a strategy for the country and failing to take advantage of a changing global environment.
Save the "take a pay cut" rhetoric for the politicians.

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hj 6 months ago

Salaries of the politicians do not create billion dollar deficits. It is the mismanagement of the country's finances that got us there. My point is they don't even make a symbolic gesture that show that they are too into this difficult times. Not only this but they mention that will not have free breakfast and lunch in the HOA,like this is some kind of big deal. Many leaders around the world took a pay cut around this time, not that it will save their economies,but at least shows something.

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tetelestai 6 months ago

You do realize that Jacinda Arden - who took a paycut - makes almost $500,000 a year, right? So for her, taking a "symbolic" paycut means she still takes home over $400,000 per year. Our politicians on average dont make one fifth of her salary.
And, no, many leaders did not take a pay cut during this time, so your statement is not accurate.

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realitycheck242 6 months ago

Let us all hope that the new covid-19 protocols are successful after international air travel resumes and tourism turns around to the extent that the gov will not have to borrow $1.3 billion for the upcoming fiscal year.

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joeblow 6 months ago

Although I am against gambling, this is an opportunity to create a national lottery with the appropriate controls and remove the flow of cash into the hands of a few who have pillaged the over the hill community all these years!

Increase stamp tax on sale of properties over $2 million and start taking legal action against cruise ships that pollute in our waters.

Go rogue against the OECD and find creative ways to attract offshore business again.

Update fines for various criminal offences as well. There are many other ways to increase revenue without hurting the law abiding small man!

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TalRussell 6 months ago

From sound Imperialists' redcoats comrade House MP Jeffrey's supreme prayer, no need PopoulacesOrdinary worry be "clothed nor fed...
After all, since 2017 says Dioniso James's new tourism slogan, It's not only better in the Colony of 700 Out Islands and Cays but we do it as Mother Nature's natural nudists. It's pure and simple just has pack your toothbrush and Coppertone. Just can't make this naked as sin crap up. Just, can't. Nod once for yeah, Twice for no?

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K4C 6 months ago

population of Bahamas is 392,887 as of Thursday, May 28, 2020

debt is projected to top 10 billion dollars

$ per Bahamian $25.4526

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Chucky 6 months ago

Good observation, although I’d be more interested in know the number that will fall on the “contributing” members of society. Since we have a large segment of society with a very low income, their minimal if any contribution (ie taxes paid), create a shortfall, and this must be offset/ paid by the contributing members.

While only a fool would think any modern government will ever pay their debt in full; there are borrowing costs paid on an ongoing basis.

These borrowing costs are paid be the net contributing members of society. I’d estimate this to be around 20-40 % of the populous. While the remaining 60% pay some into the system, many drain resources at a rate far greater than their contribution.

I suggest that 80% of the debt costs fall on 20% of the people to service.

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tetelestai 6 months ago

Which is why we need to revamp our tax policy. I am agreeing with your statement, btw.

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K4C 6 months ago

that is for sure, but here is your problem, the Bahamas has both a consumption tax as well and duties etc, both are killing the earning power of Bahamians and the earning power for Bahamians is low compared to the real world, BTW taxing non Bahamians is a non starter, they will simply not return or reside in the Bahamas, time to look at the real issues, implement a income tax, that's fair to all, the more earned the more taxed

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Bobsyeruncle 6 months ago

You got your decimal point in the wrong place. It should be $2545.26 per person

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Chucky 6 months ago

Nope He was right. 10 billion / 392000= 25 k per

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TalRussell 6 months ago

I couldn't help but notice how the prayerful Mr. Minnis, heself alone is closely surrounded by two members his Imperialists' Palace Guards, as he leisurely strolls over to be cheered on by his loyal comrade redcoats House elected MP's stacked House of Assembly at the ready rubber-stamp whatever authoritarian bill cause PopoulacesOrdinary lives be placed in fear being arrested, brought before growing impatient judges be subject to hefty monetary fine's and, or imprisonment** of which heself alone should decision to present on the floor the House. Nod once for yeah, Twice for no?

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BahamaPundit 6 months ago

National lottery. Cannabis sale and cultivation. So many options have been ignored by this lot. Just borrow, borrow , borrow.

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Proguing 6 months ago

Why not increase the import tax from all these EU countries who blacklist us?

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TalRussell 6 months ago

And ma comrade Proguing, who but the broke OrdinaryPopoulaces, will has pays the colony's import and VAT taxes? The actual debt obligation per each PopoulacesOrdinary is more like $101,810.40+++

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VDSheep 5 months, 2 weeks ago

What we are building is the architecture of oppression - in a fantasy economy of debt addiction ' putting us further on the road to wealth destruction ' if we ever had any wealth - life is telling us what we ought to do ' all we need to do is figure it out ' our operational plans need a new revival

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