The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government yesterday said it would still hit its ‘6.5 per cent of GDP’ fiscal deficit target for the current Budget year, despite having to borrow a further $100 million to meet “carry over expenditures” it inherited from the former Ingraham administration.

Projections unveiled by Prime Minister Perry Christie show the Government even forecasting a slight reduction in its 2012-2013 GFS fiscal deficit from $550 million to $532 million, although the drop is far from material.

That measurement strips out payments associated with debt principal redemption, but even adding this $121 million sum in, the Government is projecting its total deficit will decline slightly from a projected $671 million to $653 million.

In his address to the House of Assembly, Mr Christie said the $100 million worth of ‘carry overs’ from the 2011-2012 fiscal year included unpaid cheques and wire transfers totalling $63.14 million.

This accounted for almost two-thirds of the total, the remainder being $23 million for the then-administration’s 52-week job programme and $10.86 million owed to the teachers and Bahamas Public Service Union (BPSU) in the form of lump sum payments.

Michael Halkitis, minister of state for finance, said in a statement that despite its precarious financial situation, the Government had avoided imposing new or increased taxes to-date - something that further retard economic growth and job creation.

“Notwithstanding the fact that the Government inherited some $100 million in unpaid bills left behind by the previous administration, today the Government reiterates its commitment to no increases in taxes on the backs of the Bahamian people,” Mr Halkitis said.

No explanation as to why the Christie administration missed these bills when it took office was forthcoming, although the Prime Minister said the Government had reduced the $200 million Royal Bank of Canada overdraft facility it had inherited.

This, Mr Christie said, was part of a strategy to reduce the Government’s ‘maxed out’ short-term financing - its overdraft, commercial bank and Central Bank borrowings, and Treasury Bill issues - and restructure them through longer-term borrowings.

He added that this would “substantially reduce our overall cost of financing”.

Pledging that the Government was making “internal adjustments” to ensure it hit its ‘6.5 per cent of GDP’ deficit target, Mr Christie said these involved the Ministry of Finance containing recurrent spending by other ministries/departments and “moderating the pace” of planned capital works projects.

Disclosing that the Government planned to release draft Value-Added Tax (VAT) legislation by the second quarter of the 2013-2014 fiscal year (the October-December 2013 period), the Prime Minister said public sector pension and procurement reforms were also on the agenda.

New Public Sector Procurement regulations are set to be implemented by September 1, 2013, in a bid to “impose greater controls and efficiencies” in this area for all government entities.

And the Government is also reviewing the administrative and actuarial costs of existing public sector pension schemes, to see if these can be reduced or managed “in a more comprehensive fashion” with no impact on their beneficiaries.

The Prime Minister also pledged that the Ministry of Finance would “exert more direct and greater oversight” over the budgeting and finances of public corporations, and look to reduce the Government’s electricity usage, communications costs, and way in which assets and motor vehicles were used.

Conceding that government revenue performance for the 2012-2013 first half had been weaker than projected, the $633 million in income matching the economy’s less than robust performance, Mr Christie said the administration’s “fiscal straits” impacted all Bahamians.

With the Government’s debt servicing costs (interest payments) already more than $200 million, the Prime Minister said $1 out of every $7 collected in revenue went to covering this Budget line item - taking funds away from other public programmes and services.

Noting that the Bahamas “faces the prospect of higher interest rates on any future borrowings”, Mr Christie expressed concern that the Government’s domestic borrowings might ‘crowd out’ the private sector and consumers from much-needed financing.

Agreeing that the Bahamas stood at “a critical juncture” in its fiscal affairs, the Prime Minister said the Government’s medium-term fiscal consolidation plan would restore confidence in the economy and place the public finances back on “a more desirable and sustainable path”.