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Fiscal deficit balloons 79.3 percent to $251.5 million

The Nassau Guardian May 1, 2020

The fiscal deficit ballooned 79.3 percent to an estimated $251.5 million by the end of the third quarter of the 2019/2020 fiscal year, the Ministry of Finance (MOF) announced yesterday.

Nonetheless, total revenue grew by $67.9 million to settle at $1.76 billion for the first nine months of the fiscal year, which is up 4 percent compared to the same period last year.

This growth in revenue represents roughly 73.3 percent of the revised budget estimate for revenue this fiscal year.

The Ministry of Finance pointed out that this increase was bolstered by the high volume of cruise arrivals up to February 2020, that strengthened departure taxes by 5.4 percent or $5.6 million.

These latest figures were outlined in the MOF’s Combined 9-Months Budget Performance Snapshot and Fiscal Report, released yesterday.

Growth in tax revenue, which comprises just above 90 percent of total revenue, widened by $30.3 million to $1.55 billion and is led by value-added tax (VAT) receipts, which were boosted by $149.8 million to settle at $738.7 million up to the end of March.

This bolstering is attributed to the shift in taxes on real estate transactions to VAT from stamp taxes.

Addressing the fiscal snapshot yesterday, Deputy Prime Minister and Minister of Finance Peter Turnquest said, “We really started to see the fiscal impact of Hurricane Dorian materialize in the third-quarter numbers.”

He added, “Obviously, the COVID-19 pandemic is going to further weigh on our fiscal performance, likely leading to a missed budget deficit target. To carry us through the remainder of the fiscal year, we will continue to reprioritize expenditure and adjust within our existing contingencies and borrowing authority.”

The Ministry of Finance noted, however, that the full impact of the public health crisis and economic shutdown is not expected to be seen fully until the fourth quarter report.

Alongside growth in revenue, there was also an expansion in total expenditure, which grew by $179.4 million.

Total spending stood just above $2 billion or 65.4 percent of the budget at the end of the review period, reflecting increased spending related to hurricane recovery and restoration activities and other priority spending imperatives. 

“We anticipated a spike in recurrent expenditure, because of the allocations we made to increase capital expenditure and to provide various allowances and support to essential workers of the public service and staff displaced by the hurricane, among other things,” Turnquest said.

“Further, we addressed several other spending priorities, like union payments to civil servants and additional cash injections into the public health system, that were foreshadowed earlier this year. Of the total increase in expenditure, over $80 million can be directly attributed to new expenditures.”

This was led by capital expenditure, which grew 51.4 percent or $70.2 million to settle at $198.3 million; recurrent expenditure, which expanded by 6.4 percent or $109 million to settle at $1.8 billion; and capital expenditure.

To fund its budgetary operations, the government borrowed approximately $936.5 million during the review period, the Ministry of Finance noted.

“The $431.5 million in proceeds from new domestic bond issuances were used primarily to refinance maturing bonds. Borrowings by way of loan facilities totaled $372 million, with $94 million facilitated through existing facilities with international development institutions, $55 million of which represented the second and third tranches of drawdowns on the $100 million contingent credit line with the Inter-American Development Bank (IDB), bringing total drawings on this facility to $80 million at the end of March 2020,” the fiscal snapshot report states.

“Of the remaining $278 million sourced in bank loans, $228 million was in Bahamian dollars and $50 million in foreign currency facilities. Short-term financing comprised $60 million in advances from the Central Bank and $73 million in treasury bills.”

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