• Tax revenues to fall $900m
• VAT holiday for back-to-school
• State-owned firms to lose $100m
• Personalised plates for $200
• Abaco and GB special aid extended
• No new taxes or rise in existing levies
• Public sector jobs secured
• Elderly to see $50 lift in pensions
• Millions more put aside to help COVID jobless
• No govt discretionary spending
By RASHAD ROLLE
Tribune Senior Reporter
GOVERNMENT debt is projected to top 10 billion dollars by the end of the 2021/2022 fiscal year as the Minnis administration commits to deficit spending in response to the COVID-19 crisis.
The deficit is projected to explode to an unprecedented $1.3 billion for the upcoming fiscal year and is forecast to be as high as $813.4 million in the fiscal period that follows. By the end of the 2021/2022 period, government debt is forecast to be 85.6 percent of GDP, according to the annual budget forecast released in the House of Assembly yesterday. Debt is projected to be $10.6 billion by the end of the 2022/2023 fiscal year.
Deputy Prime Minister and Minister of Finance Peter Turnquest declared that “unprecedented times call for an unprecedented budget” as he outlined a plan for the next fiscal year that will involve some tax reductions, increased spending for certain services like social services, health and education and no increases in taxes or public sector job losses.
The administration, which has often prioritised deficit reductions, will not decrease spending substantially though it plans cuts to discretionary spending and state owned enterprise (SOE) subsidies.
Mr Turnquest said: “The government will not be increasing taxes or introducing new taxes in this budget. Despite the projected weak performance in revenue, we are cognizant of the fact that this is not the right climate for increased taxation. It is our considered view that any such move would significantly slow down the timelines of an economy rebound…During this time, the government could have chosen to continue its fiscal restraint measures by cutting back spending and starving a deprived economy. However, we did not choose this as we appreciate that during a downturn government spending is crucial to reviving a downtrodden economy.”
Although Mr Turnquest said the Central Bank has forecast a 12 percent decline in real GDP, he said people should “remember the nature of economic downturns related to pandemics: a sharp and sudden downturn followed by strong recovery.”
“Despite the stark decline we are seeing today in our various fiscal and economic indicators, we will move onward from this crisis,” he said. He added that there are a number of independent economic indicators to give the Bahamian people hope and reassurance, pointing to the oversubscription of Carnival’s cruise port’s $130 million bond offering.
Mr Turnquest noted that although Hurricane Dorian initially prompted a tourism slowdown last year, the country still attracted more than seven million guests in 2019 — a new record. However, he said total visitor arrivals declined by 14.7 percent in the first quarter of 2020 because of COVID.
Mr Turnquest announced a number of increases in allocations. He said the administration will increase public health allocations for COVID-19 response by $20 million and that the budget for the Department of Social Services will increase from $29 million to over $60 million. He said $120 million has been allocated for the government’s tax credit/tax deferral programme which is intended to help businesses keep employees employed.
Mr Turnquest said $48 million has been allocated for unemployment assistance and $17 million for expanded food assistance through the government’s food voucher initiative. Allocations for scholarships to the University of the Bahamas have been increased by $1.5 million and scholarship allocations for the Bahamas Technical & Vocational Institute have been increased by $500,000.
A temporary incremental monthly increase of $50 in old age pension has been allocated and will be administered by the National Insurance Board to help elderly people who may be “depending on other family members that are now jobless because of the pandemic,” Mr Turnquest said. Thirty million dollars has been allocated to expand business support and a continuity loan programme for Bahamian entrepreneurs and small businesses. The National Health Insurance initiative will also receive an additional $18 million.
Regarding revenue enhancement, Mr Turnquest said vanity licence plates at the Road Traffic Department will be introduced at a fee of $200.
As for the impact of COVID-19 on government expenditure, Mr Turnquest said that as of mid-May, the National Insurance Board paid out some $6.2 million through the government unemployment assistance programme. He said $28.9 million in unemployment benefits were paid out to over 26,000 people since the end of March while 284 small businesses were approved for loan financing at a cost of $19.4 million.
He said the Department of Inland Revenue approved 44 companies for a business tax credit and deferral initiative, with those companies benefiting from $5.7 million in tax credits and deferrals to protect vulnerable jobs. To improve capacity to handle the COVID-19 pandemic, $3.1 million has been spent, he said.