The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s fiscal deficit for the first five months of the 2012-2013 Budget year rose 46.7 per cent or $70.3 million to hit $220.9 million, imposing further strain on the nation’s finances by taking the administration’s direct debt burden to $4.23 billion.

The Central Bank of the Bahamas’ December 2012 report on economic activity noted that the Government borrowed a total $383 million to finance its deficits during the July-November 2012 period, with some $325 million in Bahamas Government Registered stock accounting for the lion’s share of this.

The remainder came from $30 million in local currency short-term advances, and $28 million in external drawings. The end result was that the Government’s direct debt hit $4.23 billion at end-November 2012 - an increase of 11.2 per cent year-over-year.

While the politicians may not like to face it, the Central Bank data showed that the Government has more of a spending problem than a revenue one.

Total spending increased by $90.7 million (14.2 per cent) to $729.8 million, which outpaced a $20.4 million (4.2 per cent) growth in total revenue to $509 million.

For the July-November 2012 period, the Central Bank said: “The fiscal situation deteriorated over the first five months of 2012-2013, as broad-based gains in aggregate spending outpaced the tax-led rise in total receipts.

“Tax collections rose by $17.7 million (4.1 per cent) to $447.4 million, led by a timing-related $9.6 million (26.5 per cent) increase in departure taxes and a $7 million (2.8 per cent) gain in taxes on international trade.

“Non-tax receipts also grew by $2.8 million (4.7 per cent) to $61.6 million, owing mainly to a rise in miscellaneous income sources.”

And, while infrastructure and capital works spending may have led the way when it came to expenditure increases, the figures continue to show the Government is having difficulty in controlling its fixed costs, such as wages and rents.

“Spending was led by broad-based gains in current outlays, of $20.1 million (3.3 per cent) to $623.4 million, while the $24.5 million (40.4 per cent) hike in capital disbursements to $85 million, was dominated by a $13.6 million (25.7 per cent) firming in infrastructure outlays,” the Central Bank said.

Elsewhere, the Nassau/Paradise Island hotel industry enjoyed 4 per cent total room revenue growth for 2012, due to the 4.3 percentage point increase in average occupancy rates to 68.3 per cent outweighing the 3 per cent drop to an average daily room rate (ADR)of $229.24.

For December, room revenues fell by 2.0 per cent year-on-year, due primarily to a 30 basis point decrease in the average occupancy rate to 58 per cent. This overshadowed the 1.4 per cent gain in that month’s ADR to $274.46, although pricing weakness remains.

“Price developments in December included a decrease in domestic fuel costs for the second consecutive month, as average gasoline and diesel prices moved lower by 6.9 per cent to $5.10 per gallon, and by 3.2 per cent to $5.16 per gallon, respectively,” the Central Bank said.

“In comparison to end-2011, both gasoline and diesel costs were only higher by 1 per cent and 0.4 per cent, respectively.

“With regards to energy costs, the Bahamas Electricity Corporation’s fuel charge fell by 3.7 per cent over the month, and by 3.6 per cent vis-�-vis last year, to 25.34� per kilowatt hour (kWh).”

Looking forward, the Central Bank of the Bahamas’ outlook was little changed from previously, although it noted that new foreign currency inflows would “figure importantly in constraining downward pressure on external reserves” despite the anaemic credit growth climate.

While the Bahamas was expected to maintain its economic recovery momentum, the Central Bank said volatile global oil/energy prices and a weak recovery in the developed world were likely to act as headwinds.

And, until the economic recovery became more broad-based, the unemployment figures were unlikely to show significant improvement.