The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s prior year performance gives confidence that it remains on track to eliminate the fiscal deficit even if 2023-2024 “slides” from its original targets, a governance reformer said last night.

Hubert Edwards, the Organisation for Responsible Governance’s (ORG) economic development committee head, told Tribune Business that while reaching a fiscal surplus “may take a bit longer” than the Government’s 2024-2025 goal this would not be “fatal” for its plans or The Bahamas generally.

And, with the International Monetary Fund (IMF) projecting that the Government will run a near-$379m deficit for the 2023-2024 fiscal year, he argued the Davis administration’s first goal “almost instantly becomes” beating that benchmark.

Mr Edwards told this newspaper that while the Government’s $131.1m deficit target for the year is “aggressive”, given that this number is just one-third of the IMF’s forecast, there is likely “some wiggle room” provided the ultimate 2023-2024 outcome moves in the right direction.

He added that 2022-2023’s $533m deficit, which measures how much new money the Government had to borrow to cover the difference between its spending and income, was “within the ball park” set by the Davis administration and should give both Bahamian and international capital markets, investors and creditors it is meeting projections.

“There’s enough for us to be confident, even if 2023-2024 slides a bit further than expected, we will still be on target to eliminate the deficit and move into a surplus,” Mr Edwards told Tribune Business. “That may take a little bit longer, but I don’t think it’s a fatal circumstance.”

The Government is projecting that it will achieve a $109m surplus, where its revenues exceed spending, in the 2024-2025 fiscal year. However, the IMF is still forecasting that The Bahamas will incur a deficit equal to 2 percent of gross domestic product (GDP) or nearly $290m that year, so it remains to be seen who is right.

Mr Edwards, though, argued that missing the 2023-2024 deficit will not be a body blow for the Government provided it beats the IMF forecast by a large enough margin. “You and I readily appreciate that 0.9 percent of GDP is aggressive,” he said. “We’ve already discussed that number shouldn’t really have been set, but that’s the number they came up with.

“There’s always the view that there’s some wiggle room. The fact the IMF came out with this projection of near-$379m, the target for the Government - however they chose to portray that - automatically becomes reaching a target that’s less than that number.

“Almost instantaneously that becomes the first objective and, to the extent that becomes significantly less than the IMF pronouncement, all that represents greater success.” Mr Edwards, meanwhile, added that the 2023-2023 full-year fiscal numbers provided some “reassurance” to capital markets observers watching The Bahamas, and “reasonable balance” to the IMF’s forecasts, as it shows the nation has “stabilised”.

However, Kwasi Thompson, the Opposition’s finance spokesman, voiced concern over the $68m year-over-year increase in the public sector’s wage bill and compensations as he suggested the Government is seeking “to bloat” its payroll with ever-increasing hires.

“The Opposition is very concerned by the increase in compensation to employees by $68m,” Mr Thompson said in a statement. “Has the government properly factored in the impact of this elevated spending and made adjustments elsewhere in its discretionary spending to compensate? The Government also needs to explain how much of this amounts to new employees.

“The Government seems content to bloat the public service without restraint. If the employees increased, why did the payments in insurance premiums decrease by $55m, and have these insurance premium payments just been pushed into what is the current fiscal year? How much arrears from the last fiscal year got pushed into this fiscal year?”

However, the 9.2 percent increase in civil service compensation still came in below Budget forecasts at $805.2m, compared to a projected $827.6m. Simon Wilson, the Ministry of Finance’s financial secretary, added that the $68m increase was “not an annual norm” and will “taper off over a period of time”.

He added that the multiple industrial agreements signed with various public sector unions typically “front load” improved compensation such as lump-sum payments. And, with “close to 90 percent” of public sector industrial deals now completed, he added that the wage, benefits and compensation agreed had been “kept within the fiscal framework” set by the Government.

Mr Edwards, too, said the increased public sector compensation was “straightforward” and “to be expected” given the industrial agreement signings and minimum wage increase. “In the big picture sense, it’s a reasonable change,” he added. “When we look at overall revenues, they’re almost spot on in terms of budget, and the deficit was within the range of what was targeted.

“It turned out to be $533m; within the ball park. All things considered, based on these numbers, the Government essentially hit its targets for 2023-2023. I wouldn’t put any major focus on shifts in subsidiary areas where some programme changes were driven.”

However, Mr Thompson, arguing that there are still unanswered questions, said: “Why did the Government exceed its budget for rental accommodation? This amounted to an increase of $20m....

“At the same time, they have decreased spending on social benefit payments by $58.4m (20.4 percent) and expenditure on social protection declined by $28.8m (11.2 percent). We continue to demand that the Government increase social assistance to assist Bahamians in dealing with the high cost of living.

It is also unbelievable that they have also decreased payments for small and medium-sized businesses ($2.5m) and national disaster recovery ($7.7m). This continues to be a major need for Bahamians.”