Editorials

Analyzing the new budget 

The national budget for the 2022/2023 period has been prepared against the background of what is perhaps this country’s most challenging economic environment since independence in 1973.

With The Bahamas still recovering from the devastating effects of Hurricane Dorian, the COVID-19 pandemic arrived resulting in a complete lockdown of the economy and the ports of arrival to tourists who contribute to an enormous slice of economic activity in The Bahamas.

Added to that crippling blow, disruptions in the global supply chains and a war in Ukraine have recently ushered in a new wave of inflation.

Taken together, stagnant economic growth, high levels of unemployment and an ever-expanding social safety net have left the country with an elevated stock of debt in the region of 100 percent of GDP and an urgent need to stabilize the economy and contain impact of rising prices.

In short, the new budget must be innovative, ambitious and aggressive on both the expenditure and revenue side. Above all, it must be sensitive to the legitimate needs of a population under stress and sorely in need of a ray of hope.

Is the Davis administration’s first budget up to that challenge?

The budget communication has certainly touched the right notes on innovation when it addresses policies aimed at embracing the orange, green and blue economies together with plans to modernize the agricultural base for the purpose of national food security.

Its fiscal projections are indeed ambitious by projecting a deficit of $564 million or 4.3 percent of GDP arising from projected total revenue receipts of $2.85 billion versus total expenditures of about $3.36 billion.

The extent to which those total revenue and expenditure projections are realized will no doubt determine the success of the budget or its fundamental weaknesses.

To begin with, the revenue increases seem to be heavily reliant on improved collection procedures and more stringent enforcement measures as opposed to any new taxes or increases in the rates of existing taxes.

Moreover, the expenditure plans include a long list of salary increases and expansion of benefits, enlargement of subsidies to government-owned corporations and non-governmental agencies, equipment for law enforcement and several noteworthy initiatives, including catastrophic healthcare, and contributions to newly established special purpose funds for utilities and road construction.

Little or nothing is said regarding the need to control wastage or selected austerity measures in certain areas given the continued global uncertainty of supply disruptions which could adversely affect critical imports into the country.

One notable oversight would appear to be the absence of specific provisions to mitigate the fallout from natural disasters such as hurricanes, a phenomenon with which we are all too familiar.

One can hardly argue successfully that the 2022/2023 budget is not offering hope to an exhausted nation, nor is it sensitive to the needs of the most vulnerable among us.

We cannot ignore the enormity of the challenges before us and especially the ominous clouds that are forming in global economies around us, which leads us to wonder if we will have sufficient time to set the economy on a sustainable path to growth and prosperity.

What we do know is that we are all in this together and that there is a desperate need for a new direction for our economy combined with a collective effort by all of us to be supportive of any policies and programs that are aimed at raising living standards and improving the well-being of our respective communities.

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