The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s $83.5m fiscal surplus for March 2024 was the largest since monthly reporting began almost three years ago - driven by a mix of revenue gains and reduced spending.

The Ministry of Finance’s report for the month, released just prior to the Labour Day holiday, revealed an almost-$56m year-over-year gain in revenues to $358.1m primarily due to a 69.6 percent increase in real property taxes and a $21.7m gain on “other taxes on goods and services”.

While crediting “enhanced enforcement measures” for the more than $21m improvement in property tax collections compared to March 2023, the Government’s fiscal surplus was also expanded by the 7.2 percent or $21.2m year-over-year decline in total spending to $274.6m.

While March 2024’s capital expenditure jumped to $37m, as opposed to just $29.6m one year ago, and civil service compensation rose to $72.4m from $66m as a result of new union contracts and public service hires, the data released late last week showed year-over-year declines in most recurrent (fixed cost spending) line items.

Combined with the revenue gains, the lowered spending resulted in the greatest Budget surplus for the Government since monthly reporting began in July 2021. The March 2024 surplus, which measured the extent to which the Government’s revenue income exceeded its spending for that month, was 81 percent or some $37.5m than the previous record set at $46.1m in April 2022.

The March monthly surplus also helped reduce the Government’s direct debt by $80.8m during the months, with some $104.6m in new borrowings overshadowed by $185.4m in repayments to produce the net repayment.

And, while one month does not necessarily signal the start of a trend, the March surplus reversed and eliminated some 28 percent of the $297.7m fiscal deficit incurred through the 2023-2024 Budget year’s first eight months, dropping it to the $214.2m that was referenced by the Prime Minister in the Budget.

That is still some 163.4 percent higher than the $131.1m full-year deficit target, which the Government has conceded it will “overshoot” but by an “acceptable” margin. It is now forecasting a deficit of between 1-1-1.5 percent of gross domestic product (GDP), which is a range between $146m-$216m. The Budget percentages unveiled by the Prime Minister place it at the high end of this scale at around $210m.

March is among the Government’s strongest, if not the best, fiscal-performing months because it not only coincides with the peak winter tourism season but is also when the bulk of annual Business Licence fees are paid. It also enjoys significant real property tax inflows, as taxpayers rush to pay before the end-March deadline to obtain their 10 percent discount, while this year was further bolstered by an early Easter.

“I would like to highlight that, historically, March has typically been the highest revenue-generating month in a given fiscal year,” Mr Davis said. “Consistent with that pattern, March 2024 was indeed a strong month.

“But it is the month following to which I draw your attention. The preliminary total revenue for April 2024 is estimated to be $385.8m, reflecting a significant increase of $108.6m or 39.2 percent compared to April in the previous year.

“The strong revenue performance in April shows that fourth quarter revenue performance will be very strong, which provides the basis of our favourable outlook for meeting our revenue targets to the end of the fiscal year.”

Mr Davis did not disclose the spending or deficit numbers for April, and it remains to be seen whether the former - in particular - increases as the Government may use the revenue influx to pay off outstanding bills. An April surplus matching March’s will likely be needed to withstand the typical heavy end-year deficits, averaging $180m in June alone, and bring the Government in close to target.

“Preliminary data for the month of March 2024 shows a significant improvement in the Government’s fiscal performance. The surplus on the overall balance strengthened significantly to $83.5m from $6.4, in the prior year,” the Ministry of Finance said.

“Underlying this outcome was an 18.5 percent ($56m) boost in revenue receipts to $358.1m alongside a 7.1 percent ($21.1m) decline in spending to $274.6m. Accounting for a dominant 90 percent of total revenue, tax receipts firmed year-on-year by 28.8 percent ($46.7m) to $322.1m.” 

Simon Wilson, the Ministry of Finance’s financial secretary, could not be reached for comment before press time last night. However, the Ministry of Finance largely attributed the improved revenue flows to “gains in property taxes of $21.1m to $51.4m, reflecting enhanced enforcement measures” plus a “boost in other taxes on goods and services by $21.7m to $99.5m”.

The Prime Minister, in his Budget debate lead-off, said real property tax billings have increased by 14 percent which could also help to explain the increased collections. It is unclear, too, whether the Department of Inland Revenue has begun to auction off and receive the proceeds from selling delinquent commercial and foreign-owned vacant land.

VAT, the Government’s main income source, saw a more modest $5.5m year-over-year rise to $111.6m for March 2024. And, after the first three quarters or nine months of the 2023-2024 fiscal year, just $993.9m or 62.5 percent - less than two-thirds - of the $1.591bn full-year VAT target had been collected, signalling that this revenue item was likely to undershoot again.

International trade and transactions taxes, meanwhile, declined by $2.3m to $57.9m year-over-year for March 2024. However, non-tax revenue collections, which rose year-on-year by $9.3m to $36m, were driven by a “$0.7m rise in fees derived from the sale of goods and services, mainly associated with Immigration and Custom administrative-related fees; and a more than two-fold hike in other receipts to $15.2m linked to fines, penalties and forfeits”.

As for spending, the Ministry of Finance said for March 2024: “Recurrent expenditures totaled $237.6m, a 10.7 percent ($28.5m) decline compared to the prior year... Capital expenditures increased by 25.1 percent ($7.4m) to $37m, with $32.7m mainly linked to investments in buildings and other structures and $4.4m by way of capital transfers.”

The Government’s outlay on goods and services dropped by $12.7m year-over-year, falling from $64.2m in March 2023 to $51.5m this time around. This was the major driver behind the expenditure reduction, although social assistance and pension payments dropped year-over-year from $26.1m to $19.8m, and public debt servicing expenses (interest costs) fell from $33m to $25.1m.

“During March 2024, central government’s debt decreased by $80.8m,” the Ministry of Finance said. “Proceeds of borrowings, which were all denominated in Bahamian dollars, totalled $104.6m and comprised issuances of government securities.

“Of the $185.4m in aggregate debt repayment, 56.3 percent was in Bahamian dollars and largely associated with operations in government securities. Transactions in foreign currency were allocated between reduction in liabilities due to investment banks (58.9 percent) and international financial institutions (41.1 percent).”