The establishment of an independent fiscal council is a key factor to tackle the current high government debt and fiscal imbalances, according to the findings of an Inter-American Development Bank (IDB) report.
The report, entitled “Nurturing Institutions for a Resilient Caribbean”, notes that The Bahamas’ biggest challenge on the fiscal front is the need to effectively establish fiscal rules and supporting institutions, such as the fiscal council.
“These are key factors to tackle the current high government debt and fiscal imbalances, as well as to guarantee credibility and inter-generational equity in the long run,” the report said.
“The principal areas of public sector weaknesses in The Bahamas are the wage bill and the mounting transfers to indebted state-owned enterprises. The not-properly-financed National Health Insurance (NHI) program is an additional fiscal burden.
“The Bahamas would benefit considerably from greater credibility of its budget. Actual expenditures should be more aligned with the budget. Furthermore, comprehensiveness and transparency could be enhanced by providing better information on extra budgetary expenditures or funds.”
Minister of Finance Peter Turnquest told The Guardian yesterday that the fiscal council should be in place by June.
This comes after he revealed last week that the government is seeking to fully and properly legislate the management of its debt through the creation of the Public Debt Management Bill and provide a legal framework to manage public funds through a Public Financial Management (PFM) Bill.
During his mid-year budget communication in the House of Assembly, Turnquest also announced that the government’s revenue projection for the 2018/2019 fiscal period is forecasted to fall short by $185 million. This is due in part to the renegotiated tax scale for gaming houses, lower than expected value-added tax (VAT) collections and the delay in the formation of the Revenue Enhancement Unit, which was forecasted to collect some $80 million in incremental revenue.
He also noted that expenditure was expected to come in lower than budgeted.
“Expenditure outcomes for the first half of FY2018/2019 showed a $50.9 million or 4.5 percent increase in spending to $1,185.6 million, with recurrent outlays higher by $94.9 million or 9.5 percent to $1,098.6 million,” Turnquest said.
“Yet, total expenditure and recurrent expenditure were both below the budgeted halfway mark, at 41 percent and 42.4 percent, respectively.”
Meantime, the IDB said the economy of The Bahamas needs continued emphasis on diversification, mostly within the tourism segment, among other things.
“Oversight of fair-trade practices, protection of minority investors and improvements in the ease of registering property and getting credit are current issues that need to be addressed to promote entrepreneurship, investment and growth,” the report concluded.
Education: Benedict College, BA in Mass Communications