The Tribune

By DANA SMITH

Tribune Staff Reporter

dsmith@tribunemedia.net

ALTHOUGH the country is “moving in the direction where we are borrowing less,” the government is planning on borrowing $465 million this fiscal year, according to Minister of State for Finance Michael Halkitis. 

Speaking to the press in the Majority Room at the House of Assembly after Prime Minister Perry Christie had delivered the 2013/2014 budget, Mr Halkitis also said the government is “confident” it can lower debt to 50 per cent of GDP by 2016/2017.

Mr Halkitis noted the planned $465 million borrow is down from the hefty borrow the government had taken last fiscal year.

“In this, we introduced the resolution to borrow $465 million, which we are happy to say is down from the $500 million plus that we had to do last year,” he said.

“As you know we have introduced in the budget presentation last year, the mid-term budget, and this budget, the medium-term strategy where we are gradually consolidating and putting our finances on a better footing. It’s a gradual process – we have to do it gradually so that we do not put too much shocks into the economy.

“And so while we are borrowing additional funds, we are happy that we are moving in the direction where we are borrowing less and we look forward to when we have successfully implemented this budget and we go into the next budget, the number that we do next year will be even lower.”

When asked about the prime minister’s announcement of a debt reduction to “a level in the area of” 50 per cent of GDP by 2016/2017, Mr Halkitis said the government “thinks it’s realistic”.

In the last budget, the government forecast a deficit of 6.5 per cent and “even in the face of reduced revenues”, Mr Halkitis said, “we were able to actually beat that forecast and get it down to about 6.2 per cent, this year”.

The government forecasts that will drop to 5.1 per cent by next year, he continued, also noting the government was “very successful” with its call for all government agencies and departments to “identify savings” in their budgets.

“We believe that if we continue on our disciplined and focused strategy, we’ll be able to get it done,” Mr Halkitis said of the debt reduction. “So, we’re confident.”

Mr Christie had announced in the House yesterday, the government is “acting decisively” to “improve the health” of the country’s finances and to pull the country out of the “debilitating public debt spiral” the government inherited upon coming to office.

“We are also strengthening the foundations of the economy to secure steady growth and private sector employment creation,” he said.

“In this way, we are positioning my government to have the resources with which to implement, over the full course of our mandate, initiatives that will strengthen law and order, promote stronger growth and job creation and solidify our firm commitment to maintaining and reforming our social safety net for the effective delivery of relief to the disadvantaged and needy in our midst.”

Noting there should not be a “misconception” about the government’s commitment to “healthier public finances,” the prime minister noted: “We find ourselves at present severely constrained in our ability to fully implement our changed agenda.”

That severe constraint is owed to “fiscal mismanagement” that left the “resources stretched too thin,” he said.

“The legacy of high public deficits and spiralling debt burden that we inherited is brutally onerous: almost one out of every four dollars in revenue collected by the government must be allocated to pay the interest charges on the public debt and cover the debt repayment,” Mr Christie said.

The near-term implementation of the “vital portions” of the government agenda – including job creation, attacking crime and strengthening the social safety net – will come about through a “re-prioritisation” of how public sector resources are spent and maintaining a “strong focus” on medium-term fiscal consolidation, he added.

Mr Christie also said yesterday: ”Through our fiscal consolidation strategy, we expect to eliminate the GFS deficit and return the government’s finances to surpluses. We will also reverse the government’s primary balance position from deficits to surpluses, and in so doing cause the burden of public debt to decline over time.”

The GFS deficit next year will reach $443 million or 5.1 per cent of GDP, as compared to the estimated outcome of 6.1 per cent of GDP this year, he said.

And, the government will continue to “exert discipline” on recurrent and capital expenditure so that the levels of both continue to decline as a proportion of GDP.

February’s tax reform package as well as the “ongoing structural enhancements” to revenue administration will also contribute to a “significant improvement” in the revenue yield of the country’s tax system, the prime minister continued.

“As a consequence and barring unforeseen developments, we expect to be able to adhere to the fiscal objectives of our medium-term plan, namely: both the deficit on recurrent account and the GFS deficit will be eradicated by 2015/2016; the primary deficit will be eliminated by 2014/2013 and that is critical to reversing the upward trend in the debt to GDP ratio; (and) government debt will return to a level in the area of 50 per cent of GDP by 2016/2017, as opposed to a level approaching 70 per cent in the absence of our decisive action plan to redress the public finances.”