The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An ex-Cabinet minister yesterday urged the Government to build on “the positive trend and headroom” left by the Minnis administration after revenues exceeded their first quarter target by $90m.

Kwasi Thompson, former minister of state for finance, responded to Tribune Business’ report by arguing that the revenue performance provides evidence that the former administration’s economic and fiscal policies were on track to haul The Bahamas out of its post-COVID slump.

“It is positive news that the Government’s revenue is $90m above projections for the first quarter of July, August and September 2021,” he said in a statement to this newspaper. “This is additional confirmation that the policies of the Minnis administration resulted in a recovering economy.”

Asserting that the revenue performance was in line with statements made recently by both the Central Bank and Moody’s, the east Grand Bahama MP continued: “The Minnis administration provided sound policies to meet the needs of the most vulnerable and sustain small businesses in the aftermath of Dorian and during the pandemic.

“There were deliberate, prudent and sound decisions articulated in the Resilient Bahamas Plan and the Accelerate Bahamas plan that focused on providing relief, raising revenue and growing the economy. We are seeing signs that all of these things are being achieved.”

Looking ahead to the imminent release of the Government’s fiscal “snapshot” for the 2021-2022 fiscal year’s first quarter, which will give more details on the public finances’ performance and The Bahamas’ fiscal health, Mr Thompson added: “The positive trend and headroom left in place must be built upon, and any adjustment should be evidence-based after proper studies and assessment.”

It is not surprising that the Free National Movement (FNM) will seek to take credit for the $90m revenue overshoot as this largely occurred during the final months of its term in office prior to the September 16 general election. However, revenues are only a small part of a much larger picture.

While the Government’s income may have exceeded forecasts, it is unclear what - if any - impact this has had on a fiscal deficit that is projected to be $951.8m for the year to end-June 2022. Given the extent to which spending is expected to exceed revenues, the extra $90m revenue is unlikely to make significant inroads into this ‘red ink’.

As Mr Thompson indicated, the overall fiscal position to be laid-out by the upcoming “snapshot” will be more telling given that the national debt already stands at $10.356bn - a number that is bigger than the economy’s total output at present.

It is also uncertain yet whether the increase in revenue witnessed during the 2021-2022 first quarter will be a sustainable trend, and The Bahamas remains a significant way off from rebuilding the fiscal “headroom” it needs to withstand external shocks such as hurricanes and other climate change-related disasters.

Simon Wilson, the Ministry of Finance’s financial secretary, told Tribune Business on Monday that the Government had beaten its 2021-2022 first quarter revenue targets by $90m, while also disclosing that the Government’s revised Budget will not increase the deficit.

He added that the Government’s lenders, creditors and the capital markets generally have all been informed that the supplemental Budget due to be presented to Parliament - possibly as early as this Wednesday - will not grow the deficit beyond the originally projected $951.8m.

And he also disclosed that the Government’s “underwriters” have advised it to delay placing the $700m foreign currency bond that the former Minnis administration had designed as the centrepiece of its gross $1.852bn borrowing plan for the current fiscal year.

No revised timeline for when it will be placed was given, but Mr Wilson said the advice to delay stemmed from international capital market uncertainties over US debt ceiling negotiations rather than any concerns peculiar to The Bahamas or its economic performance.

And, while the delay will cause the Government to reshuffle its borrowing plans, he added that there is no danger it will run short of funds as it will simply bring Bahamian dollar-denominated financing planned for year-end forward.

The $700m bond was supposed to have been placed by late September/early October 2021, and was to account for 37.8 percent of the Government’s total $1.852bn gross borrowing forecast for the the 2021-2022 fiscal year. It had been planned as the single biggest one-time capital raise during the period.

While the yields on external Bahamian government debt soared to 9 percent and over when COVID-19 hit, a chart produced by Moody’s showed that by August 2021 these had dropped to between 5-8 percent with the longer the maturity, the greater the return sought by international investors