By NEIL HARTNELL
Tribune Business Editor
While the better-than-expected fiscal performance gives the Davis administration “something to hang their hat on” heading into the upcoming 2022-2023 Budget, it was yesterday warned: “It’s not time to celebrate yet.”
Hubert Edwards, head of the Organisation for Responsible Governance’s (ORG) economic development committee, told Tribune Business that while the headline numbers unveiled on Friday were “positive” the entire report for the third quarter and first nine months of the Government’s 2021-2022 fiscal year needs to be released so the figures can be placed “in context”.
However, he added that if the position outlined by Senator Michael Halkitis, minister of economic affairs, “holds true then The Bahamas is in a much better place” than it has been from a fiscal perspective since the COVID-19 pandemic struck in March 2020.
Mr Halkitis, addressing the Prime Minister’s Office weekly media briefing on Friday, gave an insight into the fiscal reports set to be released this week. He indicated that the Government’s revenues were ahead of target, standing at $1.8bn or 78 percent of the projected full-year amount with three-quarters of the fiscal year gone, while spending was 3 percent below forecast.
The statistics also indicated that the Government was set to beat its full-year deficit forecast of over $850m by a significant amount, as the amount by which spending exceeded revenues for the first nine months to end-March 2022 stands at $345m.
“The numbers are positive, but obviously we need the entire report to get the full context,” Mr Edwards told this newspaper. “We don’t yet fully appreciate what they are, and we have to bear in mind that the Government accounts on a cash basis, and that may have an impact on where the numbers are.
“If the numbers hold true, and are what we go into the end of the fiscal year with, we are in a much better place than during the last two years. The trajectory of the deficit is moving in a positive way compared to the last two years, and that will be something to hang their hat on going into the new Budget cycle and augurs well for the Government to perhaps even create more headroom for fiscal policy.
“I wouldn’t celebrate at this time, but I would feel positive about it. It’s one of those that you have to keep your fingers crossed and hope it holds true through the end of the fiscal year.”
Kwasi Thompson, who was effectively Mr Halkitis’ predecessor as last minister of state for finance in the Minnis administration, echoed Mr Edwards by saying of the released figures: “It is not cause to celebrate. We have not seen any help for the ordinary citizens to address the inflation crisis. Our numbers mean very little to the ordinary Bahamian unless they are used to provide the needed relief. Bahamians are suffering without relief.”
Calling on the Davis administration to reveal whether it will follow its predecessor in providing a VAT holiday to help reduce the cost of preparing for hurricane season, especially with the “escalating prices”seen now, Mr Thompson asserted that the Government was reaping the benefits of “an economy that was roaring back to life” under the Minnis administration.
Pointing out that revenues were already ahead of projections by $92m for the 2021-2022 fiscal year’s first quarter, which had just two weeks to run before the Minnis administration was voted out of office, the east Grand Bahama MP said it was little surprise that the Government’s income was running ahead of forecast.
And he accused the Davis administration of “fiscal indiscipline”, and having no appetite for fiscal prudence despite it being too early to assess the effects of the VAT rate cut to 10 percent. “From all indication the Government is on a reckless spending spree, with an untold number of hirings, unchecked international travel and dozens of contracts for works and services fully ignoring the legal requirements for competitive bidding and public publication of contracts,” Mr Thompson said.
The Ministry of Finance has already touted a 26 percent VAT revenue increase, compared to pre-COVID numbers, for the first two months of calendar 2022 as a signal that the rate cut has not impacted government revenues. Simon Wilson, the financial secretary, previously said the $212.6m in combined VAT revenues collected for January and February 2022 exceeded sums collected during the same two months in 2020 by some $47.1m.
Using those two months rather than 2021 comparatives, as the former represented pre-pandemic figures, he said VAT revenues had “increased dramatically” despite the Davis administration cutting the rate from 12 percent to 10 percent with effect from January 1, 2022.
“For the period January and February 2022, total VAT collected was $212.6m,” Mr Wilson said, comparing this to the $165.5m collected during the same two months in 2020. “Even though we had reduced the VAT rate from 12 percent to 10 percent, we experienced a $47.1m or 25.8 percent increase in VAT collections.
“The VAT decrease has not led to an overall decrease in VAT revenue. The VAT performance has actually increased dramatically. Some of that was because of the increase in economic activity because of the economy’s re-opening. Some of that is because of our revenue administration efforts, and some of that is because the lower VAT rate encouraged more consumption.”
However, given that VAT payments and filings are submitted to the Government some 21 days after the relevant month closes, informed sources have queried whether the January VAT figure actually represents December collections when the rate was still 12 percent.
And they pointed out that the Government typically incurs significant spending in the fiscal year’s final quarter, between April and June, as all agencies, departments and ministries rush to present invoices and bills that must be paid before the fiscal year closes to the Ministry of Finance.