Bahamas News

There is a clearer picture of the performance of the economy in the first six months of the 2007/2008 fiscal year ahead of Prime Minister Hubert Ingraham’s Budget Communication planned for next week Wednesday in the House of Assembly.

The government had vowed to undertake a path of fiscal discipline as the worldwide economy continued to slow, triggered by international pressures.

According to figures contained in the Central Bank of The Bahamas’ Annual Report and Statement of Accounts for 2007, in the last calendar year the national debt stood at more than $3 billion, the fiscal deficit almost doubled in size between July and December 2007 and there was a contraction in government revenue.

With the Bahamian economy moderating as it did, there was a slowing of total revenue by 2.6 percent to $609.7 million which was 41.1 percent of the budget estimates, as tax and non-tax yields declined by 1.1 percent and 16.4 percent respectively, the report said.

Analysts reported that there was a 4.8 percent hike in expenditures to $708.9 million which represented 44.1 percent of the approved budget. Also, the broad based growth in current spending overshadowed the contraction in capital outlays.

A few months ago, the Free National Movement Government provided a 2007/2008 Mid Year Budget Statement. When he delivered the report, Prime Minister Ingraham said revenue forecast for the first six month of the 2007/2008 fiscal year was $681 million which represented 45.7 percent of the revenue forecast for the full year.

He also reported that actual revenue for the six-month period was $628.1 million or $52.9 million below forecast, which was considerably less than the recurrent under spending of $75.3 million in the first half.

On the matter of recurrent expenditure, the prime minister also said that it was $75 million below forecast between July and December 2007.

In its report on fiscal performance, the Central Bank explained that tax receipts of $558.2 million that accounted for 92 percent of total revenue, included a 6.4 percent hike in taxes on international trade and transactions.

There were significant contributions from property taxes, which grew by 39.4 percent to $40.4 million and taxes on selected tourism services grew by 62.1 percent to $17.4 million because of a more than two fold hike in hotel occupancy taxes that reached $12.2 million.

Revenue collected from business and professional license taxes also grew by 43 percent to $18.6 million comprising higher inflows from international business companies and company fees and registrations. There were smaller contributions from taxes on motor vehicles and departures.

In a new assessment released this week, the International Monetary Fund [IMF] said it still sees continued serious risks to global financial stability despite some signs of normalization in global credit markets. It also urged policymakers to avoid complacency and take steps to restore confidence, while at the same time preparing for further pressures.

While the IMF has projected that world growth will slow to 3.7 percent in 2008 from 4.9 percent last year, there is a concern that global growth could weaken more than generally anticipated.

On the home front, the projections for the economy are unchanged.

“We are anticipating mild growth particularly for the first half of this year with some increased momentum towards the end of the year as some of the foreign investment projects that are already in the pipeline get started,” Central Bank Governor Wendy Craigg told the Bahama Journal.

Hefty levels of foreign direct investment that have been channeled into the tourism sector through mega resorts have provided a substantial economic boost.

In its report, the Central Bank also documented figures regarding recurrent spending that constituted 87.8 percent of total expenditures. There was a $39 million gain in this area to $623 million.

In another crucial area, capital expenditures were said to be moderately lower by $1.2 million to reach $64.0 million.

“Net lending to public entities for budgetary support was reduced by 19.1 percent to $22.4 million,” the report said.

Bank analysts also reported that the government’s contingent liabilities slowed by 13.9 percent or $69.4 million to $431.5 million at the end of 2007.

It partially reflected the refinancing and reclassification of debt by the Airport Authority (39.8 million as direct obligations of the Nassau Airport Development [NAD] Company.) NAD has the primary responsibility of operating Lynden Pindling International Airport which is to undergo a massive transformation spearheaded by the Vancouver based group YRVAS.

There was also a reflection of the reduction in outstanding liabilities by the Bahamas Electricity Corporation ($14.6 million).

“At the end of 2007, the National Debt, which incorporates these contingent liabilities stood at $177.6 million (6.2 percent) higher at $3,062 million – extending the comparative $147.7 million increase posted in 2006,” the report noted.

Source: Bahama Journal