Bahamas, May 31, 2017 – Nassau – Deputy Prime Minister and Minister of Finance the Hon. K. Peter Turnquest said that with this Government Administration’s recent coming to Office that it is not for him to attempt to justify the actions of its predecessors, nor the fiscal impacts of those actions.
“However, for the sake of transparency and understanding on the part of the Bahamian public, I do want to describe the facts of the fiscal situation objectively and as they present themselves,” DPM Turnquest said as he presented the Budget Communication 2017/2018 in the House of Assembly, Wednesday, May 31, 2017.
He said: “The stark facts are as follows. The Deficit outturn in the current fiscal year features a significant deterioration as compared to the fiscal projections contained in the previous Government’s final Budget.
“While they had forecast a Government Finance Statistics Deficit (GFS) of $100 million, the actual outturn is now expected to be on the order of $500 million. That is an astonishing five times the Budget forecast of only 12 months ago. The sharp deterioration in the state of the public finances in 2016/17 did admittedly flow, to some extent, from the multi-faceted impacts of Hurricane Matthew in early October 2016.”
He explained that the hurricane severely dampened economic activity in October, with the impact extended through to the fourth quarter of the year.
As a result, it is estimated that real Gross Domestic Product (GDP) in 2016 posted a zero rate of growth for the year as a whole, as compared to the Budget forecast of 0.5 per cent growth.
DPM Turnquest explained that this directly weakened revenue collections. “Recurrent Revenues were also reduced through the effects of the exigency order implemented by our predecessors, as a means of providing relief to those impacted by the hurricane. In combination, these factors resulted in a shortfall in Recurrent Revenue collections to the tune of $216 million, to a level of $1,960 million vs. the $2,176 million budgeted.”
He said weaker revenues therefore account for a significant portion of the $400 million slippage in the GFS Deficit in the current fiscal year.
The DPM said Hurricane Matthew also affected the expenditure side of the Budget, through the actions implemented by the Government to assist in the rebuilding efforts and the repair of public infrastructure. For example, the capital expenditures of the Ministry of Public Works were bolstered by over $55 million above and beyond its Budget allocation. Total Capital Expenditures thus amounted to $310 million versus the $242 million budgeted.
He said that in addition, Recurrent Expenditures during the year amounted to some $137 million more than had been forecast, i.e., $2,458 million versus $2,321 million.
DPM Turnquest said key contributors to this increase were a higher level of Debt Redemption, at $21 million, as well as higher interest payments on Government debt, at $27 million.
He added that the total Government Direct Debt at the end of the 2016/17 fiscal year is estimated to amount to $6.5 billion, or 71.5 per cent of GDP. “However, that is not the end of the story in the current fiscal year. It is also important to note that the combination of revenue shortfalls and accelerated spending has contributed to a greater than usual backlog of payments and commitments as we approach the end of the fiscal year.
“The latest information has this backlog in excess of $300 million and it is possible that this number could increase before the end of the year as we get a greater understanding of the many deals of the former Administration.”
He said this high level of outstanding payables is directly responsible for the Government seeking emergency funding to meet the obligations of the 2016/2017 budget, as vendors are clamouring for payments. “It is our intention to fully pay all of this backlog of payments and commitments this fiscal year and minimize, to the greatest extent possible, any carryovers into the 2017/18 fiscal year. “I would also stress that this funding does not indicate insolvency but rather gross imprudence in the management of the fiscal affairs by our predecessors, as demonstrated by the large amount of financial commitments made in the run-up to the General Election,” DPM Turnquest said.
Release by: Llonella Gilbert (BIS)