The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE GOVERNMENT yesterday revealed that its $285.7m fiscal deficit at the 2022-2023 half-way point was more than 50 percent of that projected for the full-year despite revenue collections increasing by $111.5m year-over-year.

The Prime Minister, unveiling the mid-year Budget in the House of Assembly, credited the economy’s strong post-COVID rebound driven by surging tourist arrivals for having driven the increase in the Public Treasury’s income during the six months to end-December 2022.

“During the first six months of fiscal year 2022- 2023, despite fluctuations in global markets, the local economy sustained steady activity. Inflation in the US had little-to-no impact on demand for travel within the region, with stopover arrivals for the first six months of the fiscal year outpacing those of the same period of the prior year by 135.8 percent,” Mr Davis said, with the prior year comparisons impacted still by COVID-related restrictions.

“In total, there were 2.3m additional visitors during the period, largely supported by a 2.1m increase in cruise ship arrivals, which totalled 3.3m. Strong activity within the tourism sector had an important impact throughout the domestic economy, and led to record-breaking revenue in both the hotel sector, as well as the short- term home rental market.

“Falling just short of pre-pandemic levels, arrivals in 2022 totalled approximately seven million, an undeniable indicator of economic rebound over the year. Likewise, hotel revenue during the first six months of fiscal year 2022-2023 exceeded pre-pandemic levels owing to steady occupancy and higher nightly rates.”

As for the Bahamian economy’s monetary side, Mr Davis admitted that “poor access to credit by businesses remains a significant constraint on economic growth” despite the significant reduction in loan arrears since the COVID pandemic. “The uptick in domestic market conditions helped to support a $138.3m (17.8 percent) contraction in private sector loan arrears, compared to the position in September 2021,” he added.

“Banks weighted average loan rate firmed to 11.02 percent and, at the end of September 2022, the weighted average deposit rate was 0.52 percent.” Noting that the difference between the two rates was “quite a disparity”, Mr Davis said: “The seasonal increase in demand for foreign currency contributed to a $36.2m decline in external reserves to $3.2bn at the end of December 2022.

“All told, madam speaker, while uncertainty can never be completely eliminated, all signs point to the economy and country finally moving in the right direction. Businesses continue to grow, underdeveloped sectors are nourished, tourists are flocking to our shores, and the economy continues to rebound.” Tourist arrivals, the Prime Minister added, are expected to exceed 2022’s seven million by some 20 percent, with economic growth for the remainder of the fiscal year over 3 percent.

As to what this means for fiscal performance, Mr Davis said: “For the first six months of the year, total revenue collections are estimated at $1.2bn, which represents a $111.5m increase over the same period of the prior year.... Tax revenue collections improved by $123.8m and stood at $1.1bn for the first six months of the fiscal year. This represents 44 percent of the budget target.

“VAT, which accounts for 54.8 percent of tax revenues, totalled $600.2m and grew by $23.7m relative to the same period in the previous year. This equates to 42.5 percent of the annual budget target. With the sustained improvement in the tourism sector, departure tax collections totalled $715m and improved by $45m relative to the previous year. At the half-year mark, departure tax accounts for 73.7 percent of the Budget target.

“Likewise, Excise duties during the period improved to $120m, a $38.3m increase compared to the previous year. At the half-year mark, excise duties are at 74.3 percent of the Budget target. Stamp tax collection increased to $57.8m, an improvement of $41.4m when compared to the previous year. This makes up 72.6 percent of the total budget target at the half-year mark.”

When it came to unpaid bills, Mr Davis said they totalled $90.7m or 2.7 percent of budgeted spending. “These bills include $44.3m in unpaid bills and other obligations for state-owned enterprises, of which $30.7m in unpaid bills were to the Water and Sewerage Corporation for water purchased; $13.8m in unpaid bills to the Ministry of Tourism, Investments and Aviation, mainly for consultancy services, quality assurance and global communications.”

A further $9.9m related to unpaid bills for catastrophic healthcare services and the upkeep of community clinics via the Ministry of Health and Wellness, with some $8m due at Department of Transformation and Digitisation for unfunded contractual obligations.

Of the balance, some $5.9m was due to the Ministry of National Security for various security enhancement projects, and $5.5m to the Bahamas Agricultural and Industrial Corporation (BAIC) for insurance services and utility services.