Late Fiscal Strategy Report due to S&P credit rating review, says PM
Outlining his administration’s plan to achieve several important fiscal targets, Prime Minister Philip Davis tabled the 2022 Fiscal Strategy Report (FSR) yesterday in the House of Assembly, months after it was due.
Last week, Opposition Leader Michael Pintard accused the government of displaying contempt for the rule of law and the Bahamian people by not publishing that and other reports in November, as required by law.
Davis said the date was simply not feasible, because at the time The Bahamas was in the middle of its Standard and Poor’s (S&P) biannual credit rating review and tabling such a document would have interfered with the independent review process.
“I would like to point out to this honorable House that the results of the S&P review were not released until
November 22, 2022. This event was very significant for our country, as for the first time in almost a decade, positive signs were observed in The Bahamas’ credit rating. While the S&P rating did not provide an improved credit rating for The Bahamas, it did provide for an improvement in the credit outlook from negative to stable,” he said.
“I point this out to emphasize that this constitutes a reversal of the country’s deteriorating credit position. Our plans to restore the country’s fiscal health are working. Given the significance of this report and its implications for the government’s fiscal policies, projections and debt sustainability, the 2022 Fiscal Strategy Report and Debt Management Strategy were deferred to allow for inclusion of this significant outcome in our projections, policies and strategy.”
Accounting for the recent increase in the minimum wage, the report notes adjustments to recurrent expenditure for this fiscal year, but the maintenance of ratio of recurrent expenditures to gross domestic product (GDP) of approximately 20 percent of GDP over the medium term.
“While rebalancing recurrent expenditure to “normalized” levels with the removal of many COVID-19 economic and social programs, recurrent expenditure is forecast to trend to 22.6 percent of GDP over the period, based on revised macroeconomic estimates. Recurrent expenditure estimates include provisions for a minimum wage increase as recently articulated by government. The budget estimate also provides for increased allowances for promotions, increments and union negotiated payments,” the report states.
“Owing to the increased global inflationary pressures as the world rebounds from the COVID-19 pandemic, as well as the pass-through impact of global prices on the domestic economy as the conflict in Ukraine continues, recurrent expenditures include a permanent increase in the social safety net.”
The report notes that improved economic conditions led to higher revenue collections for the first four months of the fiscal year by $50.6 million.
Nonetheless, the government said fiscal forecasts remain as stated in the FY2022/2023 budget.
“Since coming to office on September 16, 2021, a key priority of the current administration has been the transformation of prior investments to preserve The Bahamas’ natural marine endowments into commercial revenue at the national level. Such efforts have led to the appointment of a “climate change tsar” in the Office of the Prime Minister and the creation of a unit focused on the commercialization of Bahamian blue carbon credits in the near future. As the very important work under this initiative remains ongoing, any potential revenue windfalls from this initiative have been excluded from this exercise to avoid interference with market dynamics,” it notes.
“Notwithstanding increased inflationary levels in major tourism source markets, such as the US and Canada, and the related fiscal and monetary policy measures to contain inflation (eg. increasing interest rates in these markets aimed at slowing growth), domestic revenue collections are expected to improve with broader economic expansion as the tourism sector rebounds and the Bahamian economy reflates.”