The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Prime Minister yesterday warned Bahamians “we are not yet out of the woods” as he hailed the lowest first quarter fiscal deficit “in more than ten years”.

Philip Davis KC, addressing the House of Assembly after the deficit for the three months to end-September 2022 shrank by some 85 percent year-over-year, urged that “we must not lower our guard” despite the improved outturn given that multiple global headwinds and economic risks confront The Bahamas.

The deficit, which measures by how much government spending exceeds its tax and fee income, contracted from $136.4m in the three months to end-September 2021 to just $20.6m for the 2022-2023 fiscal year’s first quarter. The marked improvement was driven largely by the economy’s continued post-COVID reflation and re-opening, and much more remains to be done to reduce a Bahamian national debt burden that is now more than $11.1bn.

“This deficit of $20.6m is the lowest first quarter deficit in more than ten years,” Mr Davis told MPs, allowing himself a victory lap. “I’ll say that again: This is the lowest first quarter deficit in more than ten years. A new day has dawned in our Bahamas. We have been able to achieve this by holding fast to our commitment to fiscal prudence, and implementing sound policies to stimulate the economy and generate revenue....

“While the historically low deficit we have achieved is a great cause for celebration, I say to the Bahamian people as I have already said to members of my Cabinet: We are not as yet out of the woods. We have to remain prudent and disciplined. While the economy is now heading in the right direction, we must not lower our guard. World events remain unstable, and we have to remain vigilant in case there are other unforeseen future shocks to the global economy.”

Mr Davis said that despite soaring inflation, which increased by 30 basis points in September to hit 6.5 percent on an annual basis in The Bahamas, and the cost of living crisis there are also continuing risks from global oil price volatility, the Russian invasion of Ukraine and the continued presence of COVID-19.

The Prime Minister spent much of his address dealing with the ongoing controversy surrounding the Government’s travel-related spending, which more than doubled during the 2022-2023 first quarter. “Outlays for travel and subsistence grew by $2.3m (122.7 percent) to $4.2m for 26.8 percent of budget,” the Ministry of Finance’s own report disclosed.

While some increase in travel was expected following the relaxation of COVID restrictions, and The Bahamas needs to make its presence felt on key issues on the world stage, there has been growing criticism - especially from Opposition circles - on the amount of time Mr Davis spends outside the country. Other concerns have focused on the size of government delegations and exactly who is permitted to travel at the taxpayer’s expense.

The Prime Minister yesterday insisted that when Cabinet ministers and officials travel “we do so for the good of The Bahamas and the betterment of the Bahamian people”. He added that “a significant portion of the travel spend” goes on inter-island travel in The Bahamas and visits abroad by public officials for increased training.

“The first quarter expenditure on travel is around 28 percent of the travel budget, marginally above the level of 25 percent for the year. This is not remarkable. Some quarters will be a little bit higher, others a little lower. But by year’s end it should be within budget,” Mr Davis said.

Acknowledging that it was critical to “show a return on that investment”, Mr Davis added that he would never have met the International Monetary Fund’s (IMF) managing director, Kristalina Georgieva, at the COP27 climate conference in Egypt, where an agreement in principle was struck for the Fund to work with The Bahamas in developing blue carbon credits, had he not been on a New York Times climate change panel discussion with her.

And, in a nod to concerns and criticisms over the recent Bermuda trip by himself, several Cabinet ministers and members of the Progressive Liberal Party (PLP), the Prime Minister promised to crack down on the use of taxpayer monies to finance politically-related travel.

“In relation to travel for public officials, we have recently learned of two instances where travel was conducted for political purposes rather than official business,” Mr Davis said, though not identifying the incidents or the persons involved. “Although there has been the long-standing practice across several administrations of reimbursing such expenditure, I have instructed a tightening of this practice so as to avoid even the appearance of impropriety.

“In the two cases I mentioned, the sums of money involved were very small, but it is the principle itself which I think is important.”  

“Central government’s operations for the first quarter of the 2022-2023 fiscal year indicate a narrowing of the fiscal deficit to $20.6m from $136.4m in the year prior for the same period. This outcome is largely due to growth in revenue receipts while expenditure was contained due to the significant easing of extreme COVID-19 fiscal measures,” the Ministry of Finance said in its first quarter report.

“Mirroring the continued accelerating pace of the economic rebound, revenue receipts during the first three months of fiscal year 2022-2023 improved by $57.8m (9.7 percent) as compared to the same period of the prior year. At an estimated $654.3 million, total revenue stands at 23.3 percent of the Budget target.

“Year-to-date revenue collections are consistent with pre-Dorian/pre-COVID-19 fiscal revenue trends as evidenced by first quarter 2018-2019 revenue collections of $471.8m, representing 21.5 percent of 2018-2019 total revenue. The positive revenue performance was supported by increases in tax revenue of $54.1m (10.4 percent) to $574.4m (23 percent of Budget) while non-tax revenue firmed by $3.7m (4.9 percent) to $79.9m (25.8 percent of the Budget).”

On the spending side, the end of COVID-19 restrictions and support resulted in subsidy cuts for state-owned enterprises (SOEs) and reduced social services support. “Government subsidies, which include transfers to government-owned and/or controlled enterprises that provide commercial goods and services to the public, narrowed by $16.7m (14.2 percent) to $100.5m, which equalled 24.6 percent of the Budget,” the Ministry of Finance said.

“Subsidies to public non-financial corporations declined by $20.5m (17.7 percent) to $95.7m. Owing to the ending of emergency orders and the reduced need for COVID-19 support, transfers tightened for Bahamasair ($2.7m); Water and Sewerage Corporation ($4.7m); and the Public Hospitals Authority ($13.4m).

“Subsidies to private enterprises and other sectors rose by $3.9m (412.4 percent) to equal $4.8m owing to payment of the $4m equity contribution to Baha Mar, suspended during the prior year.” The end to COVID’s pandemic phase also coincided with a near-$42m drop in social welfare benefits.