Encouraging budget performance

The latest fiscal data from the Ministry of Finance detailing government revenue, expenditure and debt metric for the 2021/2022 budget year are encouraging.

The government’s revenue collections increased by over $700 million in the 2021/2022 fiscal year when compared to the previous fiscal year.

The improved revenue of $2.6 billion represents an increase of $364.1 million over the original revenue forecast for the fiscal year and $269.8 million over the revised budget target.

This improvement was recorded despite a reduction in value-added tax (VAT) from 12 percent to 10 percent on January 1, 2022.

Revenue targets are often elusive for governments. While they can make predictions with a variety of tools and indicators, it can often be difficult to pin down.

In the case of the previous fiscal year, revenue outpaced even the government’s increased projections.

The revenue figures paint a picture of an economy in continued recovery following the calamitous COVID-19 pandemic.

However, skyrocketing inflation and gas prices no doubt played a part.

Expenditure is exclusively within the control of government.

And while the government spent more, it managed to bring those numbers in under budget.

The Ministry of Finance reported that for the 2021/2022 fiscal year, total expenditure aggregated $3.2 billion, which is 95.6 percent of the budgeted amount, and represents a $54.5 million increase over the year prior.

This total includes $251.4 million in supplementary financing approved in May 2022 to settle arrears and claims on government owing from prior fiscal periods, including the refinancing of a Bahamas Power and Light bridge loan at just over $170 million.

The finance ministry reported a deficit of $689.5 million, a $646.2 million decrease from the deficit of $1.3 billion in the prior fiscal year.

Government debt at the end of June 2022 totaled $10.8 billion or 85.2 percent of GDP, as compared to 100.9 percent of GDP at the end of June 2021.

The national debt totaled $11.1 billion.

The debt has been a point of particular concern for many in the finance markets.

We are near a 100 percent debt-to-GDP ratio with a significant amount of foreign balloon debt payments coming due in the near term.

But overall, high levels of deficit spending and debt were to be expected in trying to manage the COVID-19 pandemic.

It was the first such global event in a century and world leaders followed the best advice health professionals had to offer.

Shelter in place orders and the limiting of gatherings and travel shut down economies throughout the globe.

The result was financial collapse as leaders sought to balance out the need not to overwhelm the health system and buy time for the development of effective vaccines while trying to provide people with the necessities to weather such an unknown storm.

Whether this was indeed the right course will be for economists, health professionals and others to determine.

There will perhaps be no part of society that is the same for quite some time.

It has changed the way we interact and the way the public understands modern medicine.

The pandemic has taken over 800 lives in The Bahamas and limited access to healthcare for those with chronic diseases as we struggled to save those with COVID-19 has likely cost many more.

We undertook record debt to keep the country going and will be attempting to balance the heavy burden while continuing to move the country forward for quite some time.

There was little choice in the matter.

For as much as Bahamians are averse to point of sale taxes, no government employee missed a paycheck and all of our national financial commitments were met.

Former Prime Minister Dr. Hubert Minnis made many bad decisions before and throughout the pandemic, but taking on more debt on the nation’s behalf – though the profile of that debt is debatable – was not one of them.

The effects of the pandemic have been far from limited to the economy.

But economic stability and viability are of primary importance now.

The Davis administration would do well not to crow too loudly about its performance.

Revised projections included in the supplementary budget that took effective October 1, 2021, were not markedly different from the substantive budget.

The administration has also telegraphed an attitude of plenty amid an environment that calls for some austerity.

It would do well to have a less celebratory attitude and follow the lead of Minister of Economic Affairs Michael Halkitis in patiently explaining to Bahamians that we are far from out of the woods, and there may be more shocks to come.

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