The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

The Ministry of Finance's top official says the strength of the 2023-2024 Budget is that its projected $131m full-year deficit target largely aligns with the forecasts unveiled just months earlier in the annual Fiscal Strategy Report.

Simon Wilson, the financial secretary, told The Financial Voice meeting that the predicted deficit, which is equivalent to 0.9 percent of Bahamian gross domestic product (GDP), was close to the 0.7 percent target that was unveiled when the Fiscal Strategy Report was released at end-January 2023.

Having previously disclosed that the slight increase was due to greater debt servicing costs, as rising global interest rates increase the payments associated with The Bahamas' outstanding foreign currency debt, Mr Wilson said the Government's fiscal credibility would be boosted by sticking so close to plan projections.

“In this Budget we are able to set a credible target of 0.9 percent, which shows our commitment to fiscal consolidation and strong economic management. That’s the overall strength of the Budget in my opinion," he argued.

Hubert Edwards, head of the Organisation for Responsible Governance's (ORG) economic development committee, agreed, saying: “If we go back to the Fiscal Strategy Report, it pretty much - with slight variation - mirrors exactly what has been projected all the way up to 2026-2027. The Budget we got this year, in terms of the quantum of revenue output, the trajectory of the deficit, is the Budget that the country needed...

“The Budget addressed, in the first instance, the issues which are being imposed by the debt, and also speaks largely to the international audience to say The Bahamas is getting its house in order from a creditworthiness perspective."

Mr Wilson said the Budget is a set of compromises where the Government had to delicately balance the “right-sizing” of its fiscal consolidation efforts. “So, obviously, public servants, by and large, have also increases in salaries. We've got to keep the commitment towards that," he added.

"The minimum wage increase has taken hold. That was done last December. The Government has signed 18 industrial agreements, so most public servants have been covered by industrial agreements and that's the first time in a long time.”

Mr Wilson continued: “There's been increased allocations for private schools. All the private schools in this country suffered enrollment drops because of the pandemic, and they need to be nursed back to health. The Government was able to respond to that efficiently.

“The Government’s continuous programmes for reducing Customs duties on building materials and so forth. In terms of incentivising home ownership and home building, we've rolled out a programme that incentivises home ownership, again, by expanding the financial exemption to cover duplexes and triplexes.”

Developers also can apply for duty-free exemptions if they are building five or more homes each valued at less than $300,000, while small business owners expanding their ventures can also access tax breaks and other exemptions.

Mr Edwards, meanwhile, said the Government had given a “clear signal” of its fiscal intentions by setting a 25 percent revenue-to-GDP target by the 2025-2026 fiscal year.

"Then if you take a look at what some of the external agencies were doing, and also look at the performance of the Government's debt on the international market, it says that the Government sat down, had a very reasonable introspection and said to itself: ‘If we do not get over this creditworthiness hurdle, then all generations are going to feel it'," Mr Edwards added.

“When you drill into the Budget, there are three major line items there which come to $1.7bn in terms of expenditure in a $3bn Budget. One is wages, and it's closely rivalled by the costs of debt, which are $600m, and about $320m of that relates to external debt.”