By NEIL HARTNELL
Tribune Business Editor
The Government yesterday unveiled a $74.511m spending increase beyond its initial Budget approvals that may have to increase further after Bahamasair used up all its extra subsidy in six months.
The mid-year Budget, tabled by the Prime Minister in the House of Assembly, disclosed that the cash-strapped national flag carrier had spent virtually the entire additional $15.885m allocated to it by end-December 2020 due to COVID-19’s devastating impact on its business.
That sum, together with the $19m allocated in the initial May budget, took taxpayer support to $34.885m for the full 2020-2021 fiscal year. Yet the mid-year Budget showed some $34.801m had been spent to keep Bahamasair from collapse during the first six months of the year.
With its latest subsidy almost fully spent, and almost triple the $11.752m outlay incurred during the 2019-2020 fiscal half-year, a further call on the Public Treasury is inevitable and has already been made. Tommy Turnquest, Bahamasair’s chairman, revealed recently that taxpayer subsidies were now $40m “and counting” as the public continues to bail-out the carrier from its COVID-induced crisis.
Other new spending allocations include $8.8m to the Ministry of Disaster Preparedness, Management and Reconstruction to restart the Hurricane Dorian home repairs initiative, which had stalled amid the wait for additional taxpayer monies.
The Department of Social Services is to receive an extra $12.522m for benefits to support those left destitute by COVID-19 and the subsequent economic collapse, taking the year’s allocation for this assistance to more than $55m.
Another $5.8m has been provided as subventions to troubled private schools, while the Public Treasury and Ministry of Finance are to get an extra $20.7m and $3.5m, respectively, beyond their original 2020-2021 Budget allocations.
Marlon Johnson, the Ministry of Finance’s acting financial secretary, told Tribune Business that the extra funding for the latter two agencies was required to cover financing charges associated with the Government’s recent bond offering and other transactions.
Acknowledging the increasing drain imposed by Bahamasair and other loss-making state-owned enterprises, he said: “The Government has a stated policy that they want to retain employment at the state-owned enterprises (SOEs).
“The Water & Sewerage Corporation’s revenues have been impacted because of the downturn, with residential and business collections taking a hit because of the economy. Bahamasair’s revenues have dropped precipitously. The Government intends to help them meet their operating expenses, and particularly payroll, because it’s part of an employment retention policy.”
Although the Government’s half-year fiscal deficit, standing at just over $736.1m in ‘red ink’, was equivalent to 55 percent of the full-year total, Mr Johnson said it was “pretty much in line with expectations”.
The Prime Minister, in unveiling the mid-year Budget, sought to find some crumbs of positive news by saying: “Since the reopening of the tourism economy in November, government revenues for the months of November, December and January have modestly exceeded our revenue forecasts for those months.”
This message was reinforced by Mr Johnson, who said “the revenue numbers have picked up” through the second and third quarters of the Government’s fiscal year-to-date due to the trickle of tourist arrivals and the domestic economy’s continued re-opening.
The first three months of the 2020-2021 fiscal year were hit by lockdowns and further COVID-19 restrictions, but Mr Johnson added: “We’re in a fairly stable position right now so fingers crossed it stays that way.”
While providing no figures, he said: “These past three months we’ve either met or been slightly above Budget for revenues in each of those months. What it indicates from where we sit is that the domestic economy has been able to open up a bit more, and we’ve got the Budget back on track.
“Even though the tourism numbers are nowhere where they were, the hotel openings and rise in employment is helping us meet budget targets. From the ministry’s perspective we’re hopeful we stay where we are and the tourism numbers pick up. We recognise there’s a great deal of uncertainty, and we’re being very cautious in how we plan and very restrained in how we spend.”
Dr Minnis, meanwhile, sought to reassure Bahamians that the fixed exchange rate regime and one:one peg with the US dollar is under no threat of devaluation with the external reserves, at $2.4bn at year-end 2020, providing 43.6 weeks of import coverage compared to 27.7 weeks at end-2019.
With the reserves having increased by $622.4m during 2020, thanks to the boost from the Government’s foreign currency borrowing, the Prime Minister said: “A guiding principle of my government is the assurance that we never put the Bahamian dollar under any threat of devaluation.
“Despite the twin economic catastrophes of Hurricane Dorian and the COVID-19 pandemic, the Bahamian dollar remains as strong as it has ever been. I repeat: The Bahamas maintains a record level of foreign reserves and our Bahamian dollar is as secure as it has ever been.”