The Tribune

By TANEKA THOMPSON

Tribune News Editor

GOVERNMENT borrowing for the upcoming fiscal year will shrink to $343m compared to the $465m that was borrowed in the 2013/2014 fiscal year, State Minister for Finance Michael Halkitis said yesterday.

Mr Halkitis said the government borrowed $512m in the 2012/2013 fiscal year.

He said the fall-off in government borrowing is a sign that the Christie administration is on the right track.

“In terms of the state of public finances, we should all be encouraged by the revelation that the government fiscal consolidation plan remains on course, that is we are witnessing a decline in the deficit as a percentage of GDP from 6.3 per cent in the year 2012/2013 to an estimate of 5.4 per cent in the budget year 2013/2014 to now a forecast of 3.2 per cent going forward into this budget year,” Mr Halkitis said.

“Our ultimate objective at minimum is a budget that is in a balanced position and eventually a budget showing a surplus,” he added. “We are moving in the right direction.”

He spoke to reporters shortly after Prime Minister Perry Christie delivered a communication in the House of Assembly on the 2014/2015 budget. During that address Mr Christie said the Bahamas’ economy experienced muted growth in 2013, a continuing trend over the past four years following recessions in 2008 and 2009.

The prime minister outlined plans to raise recurrent revenue, which includes new taxes and strengthening collections on existing fees such as Customs duties and real property tax.

Revenue boosting measures include the planned taxation of web shops which will be retroactive to July 1. The government also plans to introduce value added tax on January 1 at a rate of 7.5 per cent.

“The mix of measures will allow us to move progressively to: eliminate the untenable structural imbalance between recurrent expenditure and revenue by the 2015/2016 fiscal year; sharply reduce the GFS deficit by 2016/2017 and arrest the growth in the government debt burden and move in onto a steady downward path to more sustainable levels,” Mr Christie said.

“I want to emphasise, at this point, that we are in no way engaged in unrealistic, pie-in-the-sky, wishful thinking on the score of fiscal redress. With a keen eye on the state of our economy and mindful of the need to maintain and support its upward, forward momentum, we are embarked on a mutually-reinforcing plan of national development and fiscal consolidation that is balanced and measured. As such, our aim is set on gradual, though assured, progress on the fiscal front.”

The economy’s growth in 2013 came in at 0.7 per cent, down from the 2.7 per cent that was projected by the IMF and which was factored into the previous budget communication, Mr Christie said.

Mr Christie said this “weaker than expected performance“ was due to softness in the tourism industry. He said it is estimated that tourist expenditure declined by some three per cent in 2013, as the number of stopover visitors fell by four per cent, from 1.42 million to 1.36 million.

Mr Christie said the country’s “tepid” growth in the 2013/2014 fiscal year impacted recurrent revenue.

The government expects recurrent revenue to come in at $1.465bn, which is 2.5 per cent less than was budgeted. Recurrent expenditure is expected to come in at $1.720 billion. The country’s GFS deficit is expected to be $462m, or 5.4 per cent of the GDP, in the 2013/2014 fiscal year.

“That compares to the budget estimate of $443m, or 5.1 per cent of GDP. This represents an improvement over the GFS deficit of 6.3 per cent of GDP recording in 2012/2013.

Mr Christie said government debt at the end of the current fiscal year is projected to come in at $5.152bn, or 60 per cent of GDP.

“That is up from the projected 59.4 per cent of GDP in last year’s budget,” he said.

The prime minister said his administration is committed to ridding the country of the “fiscal albatross” that hangs around its neck.

“By breaking the vicious cycle of deficits and debt buildup on a permanent and sustainable basis, we will reap a sizable fiscal dividend that will be available to adequately finance our aggressive economic and social policy going forward,” he said.

The budget debate will begin next week.