As foreshadowed in its 2019 Fiscal Strategy Report (FSR), the government yesterday tabled its Supplementary Budget Statement and resolutions seeking approval for new and refinancing in the amount of $587.9 million; with over $415 million of that amount allocated to cover Hurricane Dorian-related expenditures and projected revenue losses.
Finance Minister Peter Turnquest has expressed cautious optimism that government will be able to meet its revised fiscal projections.
How the government intends to do this must be explained in detail when debate begins next week.
Failure to meet its revenue and expenditure projections would invariably result in additional borrowing above the sums Parliament is now being asked to approve, even as government debt is now estimated to soar to over $8.2 billion this fiscal year; some 64.4 percent of GDP.
Chiefly, the government must explain how it intends to collect over $77 million more this fiscal year in value-added-tax (VAT) than it did in the previous year, given the economy’s projected contraction, foregone VAT revenues due to hurricane relief incentives, and factors contributing to VAT’s underperformance last fiscal year.
The supplementary budget projects a $973.3 million intake in VAT, which is some $77.2 million more than the $896.1 million the FSR posted as being collected in the previous year.
The government must also indicate how it plans to collect $12.8 million more in excise taxes this fiscal year than it did in the previous year.
Pledging new initiatives aimed at enhanced customs revenue collection, the government launched its Click2Clear system, which has had some setbacks, but has been touted as a key mechanism in the government’s efforts to reduce revenue leakages at the country’s ports of entry.
Among the post-Dorian capital expenditure estimates, announced by Turnquest yesterday, is a $16.5 million allocation for “temporary housing and related facilities”.
This allocation requires explanation given that the only temporary housing project foreshadowed and under construction in the aftermath of Dorian this fiscal year is the dome housing project at Spring City on Abaco.
When the government first announced this project, the country was told it would be fully funded with monies donated to The Bahamas, with a current budget for the project set at $6.4 million according to the Disaster Reconstruction Authority.
An allocation of $12.9 million on the recurrent expenditure side has been set to facilitate food and accommodation assistance programs for displaced storm victims.
So, what is the temporary housing project that is to be funded via this $16.5 million capital allocation?
Additionally, Turnquest announced that the government would “regularize” several expenditures occurring within this fiscal year, including $16.1 million to Lucayan Renewal Holdings (LRH), the special purpose vehicle created for the sale of the Grand Lucayan properties in Freeport.
LRH chairman Michael Scott, in an interview last August with this newspaper’s weekly section Perspective, said the resort incurred $11.3 million in operational losses in LHR’s first year of management; recording earnings of $7.6 million and operating expenses of $18.9 million.
The average monthly operating cost at that time, according to Scott, was $1.9 million versus an average monthly revenue of $900,000.
As has been called for in various quarters, the government should bring to Parliament during next week’s debate, a comprehensive report of public expenditure for the Grand Lucayan, as well as an update on the sale status of the resort properties.
Turnquest, meantime, foreshadowed increases in recurrent expenditure for the public service, calling “the pressing transformation of the public service to achieve greater effectiveness in the delivery of public services through skills enhancement and other HR initiatives” a challenge the government can no longer ignore.
To this end, the government has set aside $30 million this fiscal year and $100 million over the next three fiscal periods; $23 million of which having been expended last December toward lump sum payments for civil servants.
While last year’s lump sum payment no doubt made civil servants happy, the government must demonstrate to the Bahamian taxpayer in clear and precise terms how this substantial increase in expenditure for the public service will be utilized to bring about what is needed but what was not explicitly stated by Turnquest — true public sector reform.
Rather than trite campaign rhetoric and finger-pointing, next week’s debate must provide substance, transparency and answers in the face of this country’s historic fiscal pressures.