The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government is predicting that it will be able to end all COVID-19 assistance initiatives by end-March 2021 - a forecast that a top official yesterday admitted is "fraught with risk".

Marlon Johnson, the Ministry of Finance's acting financial secretary, told Tribune Business that while the Government is "cautiously optimistic" that the pandemic's threat is on "a downward trend" there are multiple uncertainties that could throw economic and fiscal forecasts badly off-course.

He conceded that current estimates and predictions were among the most difficult the Ministry of Finance has ever had to make, after Tribune Business spotted a little-noticed line in the recently-tabled Fiscal Strategy Report showing the Government hopes to stop financing mass COVID-related unemployment benefits, food assistance and various business support by the 2021 first quarter end.

"The key elements of the medium-term forecasts are government’s commitment to reductions in subventions to state-owned enterprises (SOEs) through a programme of activities aimed at making these entities more self-sufficient and efficient," the report says.

"The forecasts also reflect the cost savings emanating from the cessation of the special expenditures associated with Hurricane Dorian by end-June 2021, and COVID-19 by end-March 2021."

Many observers will likely argue that ending all forms of COVID-19 support by end-March 2021 will be extremely difficult, if not impossible, due to the pandemic's devastating economic impact, and Mr Johnson said: "That's our projection. It's just that.

"Our hope is that we're on the downward trend, but there's a great deal of uncertainty around that, as I have said and the minister [Kwasi Thompson] has said. COVID-19 determines ultimately what happens and it's part of the uncertainty built into our forecasts.

"There's a great deal of unknowns. If things are favourable we could be substantially past it by then [end of March], but it will in large part be dictated by what's happening with the pandemic going forward, as in other jurisdictions," the acting financial secretary continued.

"There are a number of dynamics to the situation that make forecasting fraught with risk. I don't think any of us know what will be happening in March 2021 with COVID-19. We're hopeful with the vaccine that it will wind down and be brought down. We remain cautiously optimistic."

The Government had spent a total $177.3m on various forms of COVID-19 assistance, including NIB and Treasury-funded unemployment benefits; the tax credit/deferral initiative for VAT registrants; and the Business Continuity Loan for small businesses, by end-October. A further $55m was allocated for food assistance and other initiatives through to end December 2020.

The Fiscal Strategy Report, though, admitted that the Government's Budget revenue forecasts could be off by more than 30 percent if The Bahamas and rest of the world are forced back to harsh COVID-19 lockdown measures. Even the imposition of less severe restrictions could cause revenue slippage of up to 22 percent.

Mr Johnson yesterday said the Government would provide another fiscal and economic update by the end of January/early February, around the time of the mid-year Budget, when the Ministry of Finance would have had time to analyse the 2020-2021 Budget's second quarter and determine if signs of improvement were continuing.

Elsewhere, the Government has pledged to rebuild the fledgling Disaster Relief Fund after its initial $40m injection was drawn down by more than 50 percent following Hurricane Dorian and COVID-19.

"The fund was initially constituted with $40m in proceeds from the extinguished dormant accounts, which was utilised to meet needs arising from Hurricane Dorian," the Fiscal Strategy Report said.

"The fund currently has a balance of $14.5m at end-June 2020. As originally contemplated, the Government remains committed to growing the fund to the optimal size - estimated by the IMF to be between 2 and 4 percent of GDP - once budgetary conditions permit."

Mr Johnson said of this target: "It's on our radar. It's been set back, but such is life. This is what happens when you have two disasters back to back in rapid succession."