Government announced in its Fourth Quarter Report on Budgetary Performance for Fiscal Year 2018/19 that it achieved the lowest fiscal deficit in ten years in that budget cycle, with a low 0.1 percent increase in the debt-to-GDP (gross domestic product) ratio.
The government will officially release the numbers in the report today, but it is heralding its last budget cycle as successful in achieving its deficit target, recording a deficit reduction of 46 percent year-on-year, ending at $222.4 million, or 1.7 percent of GDP, “marking the lowest deficit and fiscal ratio achieved by any administration in The Bahamas in nearly ten years”.
Deputy Prime Minister and Minister of Finance Peter Turnquest said in a press release on the report that the Free National Movement (FNM) government has proved that it is serious about correcting the country’s fiscal trajectory.
He added that debt growth has seen the most sluggish movement in a decade. At the same time, the government recorded year-on-year revenue growth of 18 percent, most of which came in from value-added tax (VAT) and trade taxes.
“This is significant in our fiscal history and is evidence that we are serious and determined to put our fiscal house in order and committed to achieving a more sustainable fiscal position,” Turnquest said.
“As we have consistently maintained, our ultimate goal is to achieve sustainable economic growth that allows opportunity to flourish for all Bahamians and economic and social benefits to be maintained over the medium and long term.
“The success we achieved this year with improving our fiscal balance is only one step in a multi-step process. We are still at the early point of recovery and we must stay the course. Our country is still vulnerable to natural disasters and external economic shocks. Our priorities will continue to be expenditure restraint, enhanced revenue compliance and collection and implementing policies to stimulate economic growth.
“This is the slowest the debt has increased in over a decade. This virtual stabilization in the debt ratio is an important milestone and it aligns with our overall fiscal objective, which is to eventually bring the debt-to-GDP ratio down to the more sustainable target of 50 percent.”
The release explained that the debt-to-GDP ratio sat at 58.8 percent at the end of the 2018/19 budget cycle.
It added that recurrent expenditure ended within budgeted targets, with the arrears payments continuing to mostly account for expenditure growth year-over-year.
The release also explained that revenue collection challenges persisted, though the government maintains that those challenges are being addressed by the structural reforms being put in place, like the Customs Department’s electronic single window initiative.
“Governments of The Bahamas have only met their revenue targets on four occasions in nearly two decades,” Turnquest said.
“This means that we have to get better both at forecasting and at collecting revenues on the books. We are well underway in the implementation of the right policy and administrative measures to ensure that we are collecting all revenues due to the government. This is a compelling priority of the government, as we implement our fiscal plan utilizing a combination of strategies including the establishment of the Revenue Enhancement Unit, which is now fully staffed,” he pointed out.
“Nevertheless, what is important is that for the first time in a long time the government has met its deficit target and done so in a way that is responsible and prudent. More so, the outturn represents the lowest such deficit as a percentage of GDP in almost a decade.”