The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Opposition’s finance spokesman yesterday doubled down on assertions that “the Government’s fiscal projections are in jeopardy” and need to be adjusted in next month’s mid-year Budget.

Kwasi Thompson, former minister of state for finance in the Minnis administration, told Tribune Business it was vital that the Government maintain “credibility” with creditors, investors and the voting public as he voiced doubts it will hit its 2023-2024 full-year Budget targets based on the first four months’ performance.

Simon Wilson, the Ministry of Finance’s financial secretary, sought to calm any concerns on Thursday by asserting that he has “no reason to panic yet” over the early 2023- 2024 fiscal deficit given that VAT revenues for December exceeded the prior year by 16-17 percent.

However, Mr Thompson said he was far from reassured. “I don’t believe anybody is convinced,” he told this newspaper. “We have commented on the challenges the Government is having now. The October fiscal report puts the Government’s fiscal plans and projections in jeopardy.

“I’ve listened to the explanation by the financial secretary, but I think their projections are in jeopardy. He [Mr Wilson] has the figures, and his response was that in December VAT projections were at a certain amount. We only have data up to October, and based on the October report their projections are in jeopardy.”

Mr Wilson had told Tribune Business the near-$120m deficit for the four months to end-October 2023, equivalent to 91.3 percent of the $131.1m full-year forecast, did not necessarily signal that the Government will blow its fiscal projections given that “peak revenue season” has just started.

Asserting that VAT and import tariff revenues for the six months to December “bode well” for the Government’s tax and fee income between now and April, he added that the half-year performance “should translate into a strong revenue outturn” over the next two-three months.

Pointing out that the cyclical nature of the Government’s revenues makes it impossible to estimate the full-year Budget outcome on just a few months’ data, Mr Wilson told this newspaper that “we’ll know for sure where we stand after March” - a period that includes peak tourism and economic activity; Business Licence fee payments; the bulk of real property taxes; and commercial vehicle licensing month.

However, maintaining his scepticism, Mr Thompson added: “Again, it is a matter of credibility. We’ve said to the public, we’ve said to creditors, we’ve said to investors these are our fiscal numbers and we will meet our targets. It’s a question of credibility.

“We are watching what happens with respect to the economy, and we are saying to the Government they ought to adjust their targets because the projections they made in the Budget are in jeopardy so they must make the necessary adjustments.”

While October’s $61.5m deficit represented a decline on the prior year’s $74.9m by almost 18 per cent, the amount of ‘red ink’ incurred by the Government over the first four months of the 2023-2024 fiscal year increased by 24.4 percent or $23.5m from $96.2m to $119.7m.

Total government spending for October, while increasing at a slower rate than revenue, jumped by 2.5 percent or $7.6m to hit $309.7m. And, for the first four months of 2023-2024, spending overall has risen by 5.5

percent to $1.032bn - a rate that is slightly faster than the revenue increase. Recurrent spending, on fixed costs such as salaries and rents, grew by $43.6m or 4.8 percent to reach $952.4m.

Meanwhile, Mr Thompson also returned to the offensive over the Government’s recently-unveiled $500m loan that is partially guaranteed by the Inter-American Development Bank (IDB) by asserting the Opposition is “now even more concerned” despite Mr Wilson’s explanation.

“The interest and terms of the loan remain confidential although, according to the ministry’s own statement, the transaction is complete,” the east Grand Bahama MP said. “In no universe can a democratic government commit the Bahamian people to half a billion dollars worth of debt without telling us the interest rates, fees, penalties and other terms.

“If the transaction is not complete or terms are not yet known, then why claim that the transaction is finalised in their release?” Mr Wilson had confirmed that the $500m loan proceeds “cannot be used” to refinance or pay-off old debt such as the $300m foreign currency bond that is due to mature this month.

He added, though, that the 10-year facility will not breach the $131m in net new borrowing approved by Parliament for the 2023-2024 fiscal year. He explained that the proceeds will be used as stated in the release to fund areas such as infrastructure, education and social welfare, and help to smooth out the Government’s cash flows by covering cover valley months when it runs deficits.

The Davis administration will use the months when it runs a surplus to remain within Parliament’s borrowing limits. However, Mr Thompson asked: “Is the Ministry of Finance thus then stating that this $500m facility is in large part simply a short-term facility that will substantially be paid back within the fiscal year during the months where the revenue peaks?

“We do not see anything in the annual borrowing plan that suggests that the Government will be seeking foreign currency short-term credit facilities.

“Haven’t Bahamian dollar Treasury bills and Treasury notes been used to address short-term cash needs in the past? Why wouldn’t the Government make use of those?

“The Opposition continues to demand that the Government release the full term sheet and documented profile of this trans- action and confirm for the Bahamian public all the relevant details.”