The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Minister of Finance has pledged to hold spending “in line with the previous year as much as we can” in Wednesday’s Budget, with any overshooting caused by the Christie administration’s spending commitments.

K P Turnquest sought to send a message of fiscal transparency and prudence ahead of the 2017-2018 fiscal year, as the new government bids to narrow the $300 million-plus deficit and get the Bahamas’ national finances back on track.

He told Tribune Business that the Dr Hubert Minnis-led administration would seek to “hold” public expenditure for the upcoming Budget year in line with 2016-2017, while also signalling the Government’s intent to deliver on its campaign promises.

And Mr Turnquest also reaffirmed its commitment to drafting, and passing, a Fiscal Responsibility Act during its five-year term in office, expressing personal surprise that it had not been included in last week’s ‘Speech from the Throne’.

“We’re going to try and hold for the most part,” he replied, when asked about the Government’s spending plans for the 2017-2018 Budget. “Our commitment is to stay within the previous year’s spending as much as we can, until we have the opportunity to do our own Budget.

“There are some commitments that the previous government signed up to, but by and large we want to stay within the material variances of the previous year.”

Mr Turnquest’s comments are likely to be greeted with cautious optimism by many in the private sector who, together with the IMF and international credit rating agencies, believe the Government needs to immediately seize control of its spending if it is not to squander the benefit of VAT’s revenue windfall.

The newly-appointed Minister of Finance previously blamed pre-election spending commitments agreed by the former Christie administration for the Government’s likely inability to turn a ‘balanced Budget’ in 2017-2018, suggesting its hands would be ‘tied’ in delivering on its own election manifesto.

“You would have to appreciate that, for the large part, this Budget reflects the estimates of the previous government,” Mr Turnquest reiterated on Friday. “We have tried to adjust as best we can to signal to the Bahamian people we intend to follow through with the commitments we’ve made.

“There are various overhangs in terms of spending commitments, and we don’t want to cause any kind of abrupt disruption or take any arbitrary action with respect to projects and individuals.”

Mr Turnquest suggested Wednesday’s Budget presentation will be split into two parts, with the Prime Minister giving a broad economic and fiscal overview, and himself supplying the detail.

Asked whether the Government would “lay it all out” when it came to the Bahamas’ financial position, the Minister of Finance replied: “We’ll be as frank and candid as we can.... We’ll be as open and transparent with the Bahamian people as we possibly can.”

The former government initially budgeted $2.544 billion in total spending for the 2016-2017 fiscal year, divided into $2.302 billion of recurrent expenditure and $242 million in capital works spending. It subsequently increased recurrent spending without explanation by $232.708 million in the mid-year Budget, taking that to $2.553 billion.

The Christie administration’s pre-election pay rises and promotions for the security forces, together with temporary public service hires and other contracts, and the ongoing recovery from Hurricane Matthew mean that the new government will face a tough task to hold spending in line with 2016-2017.

Its predecessor projected a $28 million GFS deficit for the upcoming fiscal year, with a ‘break even’ achieved in 2018-2019 - targets that now seem too ambitious, given the $350 million in ‘red ink’ forecast for the year to end-June 2017 due largely to Matthew.

Mr Turnquest, meanwhile, warned against reading too much into the Speech from the Throne’s failure to refer specifically to a Fiscal Responsibility Act.

This is being viewed as an increasingly vital tool to rein in public spending, as it will force the Government to return to Parliament and explain why it needs more funding when approved Budgetary limits in certain areas are exceeded.

“I was surprised when it wasn’t mentioned specifically, but we are committed to our campaign promises,” Mr Turnquest told Tribune Business of a Fiscal Responsibility Act. “It’s definitely on the agenda; it’s not going anywhere.”

He added that the Speech from the Throne was effectively a ‘statement of intent’ by the Government, laying out the general direction of its legislative and policy direction but without going into all the details.

Some have suggested that the Bahamas needs to go further than a Fiscal Responsibility Act and impose so-called ‘fiscal rules’, which in theory would restrict the Government’s expenditure even more by setting debt-to-GDP and other limits that it cannot exceed.