Govt to borrow $187 mil.
The government yesterday brought a resolution to the House of Assembly to borrow $187 million in the coming fiscal year.
Government debt is forecasted to increase from $7.1 billion to $7.3 billion. The government borrowed $1.4 billion in 2017/2018.
The GFS deficit for 2017/2018 is projected to be $310 million, a net improvement of $13 million over the original budget forecast of $323 million, Minister of Finance Peter Turnquest announced in his budget communication yesterday.
The GFS deficit for 2018/2019 is projected at $237 million.
The government projects revenue collection for the 2017/2018 fiscal year to come in at $2.02 billion. Recurrent revenue is projected at $2.6 billion in the upcoming fiscal year.
“At the time of the last budget communication, a GFS deficit of $323 million was projected for the 2017/2018 fiscal year,” Turnquest said.
“As I had mentioned at the time, since the budget was being presented a mere three weeks after the election, the fiscal projections in the budget largely reflected preparatory work that had gone on prior to our coming to office. In light of that fact, I explicitly stated that since our government was firmly committed to the achievement of our deficit and debt reduction objectives, we would implement in-year fiscal adjustments, as needed, to secure a lower deficit in 2018/2019 than was being projected in the communication.
“And, indeed, the government did announce [last] July an across-the-board 10 percent reduction in primary, or discretionary, recurrent expenditure relative to the sums that had been budgeted. Interest payments and debt redemption, of course, reflect fixed commitments of the government.
“On the basis of this in-year expenditure restraint measure, and our ongoing fiscal vigilance, we have succeeded, based on the projected fiscal results for the 2017/2018 fiscal year, in reducing expenditure on the wage bill and purchases of goods and services by some $120 million, or 10.3 percent, from the amounts budgeted for these items.
“As subventions to the state-owned enterprises (SOE) represent an important portion of primary recurrent expenditure, at roughly one-quarter of the total, it is clear that reductions in this area are also warranted and necessary to the achievement of our fiscal goals.”
In his budget communication last year, Turnquest noted that $429 million was budgeted for 25 state-owned enterprises.
“In light of the critical priority being attached to fiscal consolidation, such a drain on the public finances must clearly be rationalized,” Turnquest said yesterday.
“To that end, the government has directed each SOE to begin looking at a move toward a cost-recovery operating model, which might include a mix of revenue enhancement initiatives, as well as measures to reduce expenditures in-line with industry benchmarks.
“The SOEs are now formulating articulated strategies that we expect will take them to this optimized point within three to five years.”
Turnquest explained that capital expenditure during the 2017/2018 fiscal year was “subjected to restraint and is expected to come in at $153 million, down from the budgeted $230 million”.
The government expects to spend $299 million on capital expenditure in the upcoming fiscal year.
But the minister said recurrent revenue in the current fiscal year continued to perform less buoyantly than had been projected.
“…This despite the economy posting a real rate of growth of 1.4 percent in 2017, exactly as had been projected last May,” he said.
“At a projected $2.02 billion, recurrent revenue is expected to be some $130 million below forecast.
“Given the rebound in real growth, such lackluster performance of revenue is definitely a matter of pressing concern and speaks to the mandate given to the Ministry of Finance and its Revenue Enhancement Unit to address the areas of revenue under-performance so as to exceed the status quo run rate in the upcoming fiscal year.
“The bottom line is that the yield of our revenue system, at 16.1 percent of GDP in 2017/2018, is well below the revenue yields found elsewhere in the region, where yields average in the area of 25 percent of GDP, and certainly is inadequate to the needs of a modern government.”
Regarding its fiscal prospects for 2018/2019, Turnquest revealed that the government budgeted $48 million in financing for selected new initiatives, including $13.5 million for the digital government initiatives in the Ministry of Finance and Ministry of Education; $6 million for the construction of a new school in New Providence; $5 million for small and medium sized business support; $5 million for the Over-the-Hill initiative; $5 million for LED street lighting; $5 million for a solar demonstration project on one of the Family Islands; $4 million for the recruitment of new college graduates; $2.6 million for BTVI scholarships; $1 million for the prime minister’s cultural grant and $1 million for freedom of information support.
Education: College of The Bahamas, English