NASSAU, BAHAMAS — The government is projecting $2.8 billion in revenue for the fiscal year 2022/2023 as a result of its revenue-enhancing programmes, according to Prime Minister Philip Davis KC.
Davis spoke during the debate on the 2022 Fiscal strategy report and the medium-term debt management strategy for the fiscal year 2023/2024 and fiscal year 2025/2026.
He said: “As a result of our revenue-enhancing programmes, revenue for FY2022/23 is estimated at $2.8 billion, which represents 21.2 per cent of GDP. Revenue is forecast at 22.9 per cent of GDP in FY2023/24, and 24.4 per cent in FY2024/25. Thereafter we expect to achieve revenue targets of at least 25 per cent.”
With regards to public expenditure, Davis noted that the government’s fiscal projections support the prudent management of expenditure, while at the same time utilizing alternative financing methods to continue and improve service delivery.
“This approach means that we are on course to achieve our fiscal target to reduce recurrent expenditure to 20 per cent of GDP by FY2025/26, down from an estimated 22.6 per cent of GDP in FY2022/23. In order to achieve this reduction in expenditure, we will implement a number of measures. We will implement targeted public expenditure reforms, relying on the most recent IDB-supported public expenditure review. We will resume reforms of the State Owned Enterprise Reform and Rationalization programme. We will contain costs and drive innovation in the public sector by continuing to digitize government services. In line with the recommendations made by the accounting firm, KPMG, we will reform and modernize the Government pension scheme,” the Prime Minister said.
He further noted that in the fiscal year 2020/2021, capital expenditure outlay peaked at 3.8 per cent of GDP as a result of transfers to support small and medium-sized businesses during the COVID-19 economic downturn.
“Capital expenditure is now forecast to contract to 2.3 per cent of GDP by FY2024/2025. To support long-term economic growth, expenditure on capital projects is forecast to remain at 3.5 per cent of GDP over the medium term,” said Davis.
The prime minister noted that the preparation of the Fiscal Strategy Report and Fiscal Forecasts naturally contain risks.
“Where possible we have sought to mitigate these risks and included fiscal buffers in our framework,” he said.
“In respect of Natural Disasters, we will maintain our CCRIF insurance policy, continue to build a disaster relief fund, renew the IDB $100m contingent credit line, continue to implement improvements in building standards, introduce more comprehensive planning, and implement coastal improvement measures. Another key risk is in respect of our debt management, and so the Government will continue to maintain The Sinking Fund, in order to mitigate the risk of default of future debt repayment.
“The Dormant Account Fund provides another source of mitigation. The legislation that governs dormant accounts allows for accounts to be transferred to the treasury when dormant for a period of seven years or more. The balance on the country’s dormant account fund currently stands at $88 million,” said Davis.
In 2019, the government allocated $10 million from the dormant accounts fund to help restart businesses on Grand Bahama and Abaco.
Further risk mitigation will come via a targeted strategy to collect more than $1 billion in revenue tax arrears via the Revenue Enhancement Unit.
The prime Minister noted that at the end of June 2021, Government debt peaked at 100.9 per cent of GDP. By the end of September 2022, the debt had been reduced to 81.1 per cent of GDP, in the amount of $10.775 million.
Opposition Leader Michael Pintard cast serious doubt on the Davis administration’s ability to hit its fiscal targets, citing a lack of spending restraint. Pintard said that said the projections were overly optimistic and unlikely to be achieved.
“We do not see the pathway when we look into the Fiscal Strategy Report we don’t see the pathway to get there. This is an administration that is good at selling dreams with a hope that there will be some windfall to miraculously confirm what they had projected,” said Pintard.
