The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Deputy Prime Minister yesterday said he “takes no comfort” in the $9.1 million Budget surplus achieved by the Government for the 2017-2018 fiscal year’s first month.

K P Turnquest told Tribune Business that the near-$25 million year-over-year reversal identified by the Central Bank did not account for future spending obligations already committed to by the Government, “some of which we don’t know about”.

While arguing that the Minnis administration’s “sacrifices” and austerity measures were moving the Government’s fiscal position “in the right direction”, he warned that unexpected events - such as hurricanes - had the potential to “cause tremendous setbacks” to the consolidation effort.

Mr Turnquest, who is also minister of finance, added that he was “uncomfortable” that the Bahamas’ $7.2 billion-plus national debt continues on an upward trajectory despite the new government’s seemingly-promising start in reining in the ‘red ink’.

The Deputy Prime Minister was responding after the Central Bank’s report on August’s economic and financial developments revealed that the Minnis administration had reversed July 2016’s $15.8 million deficit, turning it into a $9.1 million surplus.

With final figures for the 2016-2017 fiscal year yet to be published, the Central Bank said: “Preliminary data on the Government’s operations for the first month of fiscal year 2017-2018 showed a $9.1 million surplus, a turnaround from a $15.8 million deficit recorded during the corresponding period a year earlier.

“This outturn reflected a contraction in total expenditures by $18 million (10.2 per cent) to $159.5 million, which overshadowed the $6.8 million (4.2 per cent) gain in aggregate revenue to $168.6 million.”

Mr Turnquest, though, responded cautiously and downplayed the first-month fiscal surplus, saying: “I don’t keep score like that.”

He emphasised, in particular, that the Central Bank’s numbers were based on the Government’s traditional cash-based accounting system, rather than the modern accrual method which captures future spending commitments for which funds have yet to be released.

Implying that the inclusion of such obligations may have produced a deficit, Mr Turnquest told Tribune Business: “One of the things we must bear in mind is that is cash-based, and we have obligations that are out there, and some we don’t know are out there.

“I don’t take comfort in that number [$9.1million surplus] as it’s a cash basis. What I’d really be interested to know and determine is, from June onwards, whether we’re running a real surplus as opposed to a cash surplus.”

However, he conceded of the first-month figures: “It says we’re moving in the right direction, and the sacrifices and commitments we’re making are achieving that. We have to stay true to our course and statements, and follow through to the end of the year.

“Any unexpected turn of events can cause a tremendous setback, so we have to continue to be prudent, demonstrate our commitment to fiscal consolidation and reform, and just work the plan.”

The first-month Budget surplus was hailed by some in the private sector. Rick Lowe, a Nassau Institute executive and noted ‘fiscal hawk’, replied “fantastic, fantastic” when told of the Central Bank’s figures.

“Now they have to keep that pace up because we have a lot of catching up to do,” he told Tribune Business. “I hope it’s not a one-off. That’s the type of action required to bring the fiscal house in order.

“It’s an important first step. The spending cuts don’t seem to have made any government services worse. It has to be incremental and it has to be continuous. I just hope there are no major setbacks.”

Mr Turnquest, though, said the Bahamas’ national debt continued to climb, albeit at a slower rate than in the past.

“On an apples to apples basis our debt trend is still in an upward direction, so I’m still not comfortable about that,” he told Tribune Business.

The Central Bank said the July spending reduction stemmed from “negligible” capital expenditure, plus a $20.5 million or 36.6 per cent reduction in subsidies or transfers to public corporations.

It described a “timing-related decline” of $8.2 million, or 42.5 per cent, in subsidies to the Public Hospitals Authority (PHA) and National Health Insurance (NHI). Transfers to other public corporations dropped by $9.2million or 69.2 per cent.

“In a partial offset, consumption spending rose by $16.8 million (23.1 per cent) to $89.8 million, with purchases of goods and services and wages and salaries growing by $12.7 million (70.2 per cent), and $4.2 million (7.6 per cent), respectively,” the Central Bank added.

On the revenue front, tax collections increased by 5.1 per cent to $156.4 million year-over-year, led by an 11.5 per cent rise in Value-Added Tax (VAT) receipts.

“The revenue improvement was underpinned by a $7.6 million increase in tax collections,” the Central Bank said. “Gains were reported for the majority of the categories, led by VAT receipts, which advanced by $7.9 million (11.5 per cent) to $76.6 million, while business and professional fees firmed by more than two-fold ($4.4 million) to $8.1 million, due to a $4.3 million expansion in general business fee proceeds.

“Meanwhile, taxes on international trade grew by a more muted $1.5 million (3.4 per cent) to $45.7 million. In contrast, ‘other’ tax collections declined by $6.3 million (19.4 per cent) to $26.5 million, as ‘unclassified’ receipts were negligible during the review period, compared to the prior year’s $10.4 million.

“However, other stamp tax receipts firmed by $2.3 million (42.3 per cent). Total non-tax revenue softened by $0.8 million (6.1 per cent ) to $12.2 million, led by a $0.4 million (3.9 per cent) reduction in receipts from fines, forfeits and administrative fees.”