Sunday September 23, 2012
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A political blog about Bahamian politics in The Bahamas, Bahamian Politicans - and the entire Bahamas political lot. Bahamian Blogger Dennis Dames keeps you updated on the political news and views throughout the islands of The Bahamas without fear or favor. Bahamian Politicians and the Bahamian Political Arena: Updates one Post at a time on Bahamas Politics and Bahamas Politicans; and their local, regional and international policies and perspectives.
The Budget: Part II
Consider this
By Philip C. Galanis
Last week, we invited our readers to consider whether the national budget for fiscal 2012/13 as presented by the Rt. Hon. Prime Minister and Minister of Finance addresses the important promises that were made during the general election campaign. In answering that question, we reviewed the fiscal environment that the PLP Administration inherited on May 7, 2012 and the attendant limitations and constraints for the nation’s first budget for Mr. Christie’s second non-consecutive term in office.
This week, we would like to continue to Consider This… Do the PLP administration’s budgetary provisions remain true to its pledges to an impatient and hurting populace whose expectations for relief and renewal are extremely high, and to what extent does the 2012/13 national budget meet those high expectations?
The macro view
The government anticipates that it will incur a total deficit of $570 million for the fiscal year ending June 30, 2012 and a Government Finance Statistics (GFS) deficit of $504 million for that period. This represents an increased GFS deficit of $256 million or 103 percent more than was originally approved by Parliament for fiscal 2011/2012. The GFS deficit as a percent of GDP will be 6.3 percent — a new record for The Bahamas — more than a doubling of that figure of three percent in the preceding year. The increased GFS deficit will be financed by additional borrowings which will push the national debt from $4.3 billion at December 31, 2011 to $4.8 billion a year later, rapidly approaching 60 percent of GDP, also a new record — and not in a good way.
Similarly, the GFS deficit for 2012/13 will be $550 million which, as a percent of GDP, will be 6.5 percent — another new record for The Bahamas. By the end of fiscal 2013, the national debt will exceed $5.3 billion, more than 60 percent of GDP.
Recurrent revenue measures
The recurrent budgeted revenues of $1.55 billion for the next fiscal year are anticipated to increase by only $100 million or seven percent over the actual outturn of the preceding fiscal year. This compares to an increase of $435 million or five percent in the gross domestic product (GDP) for the same period.
At first glance, the projected recurrent revenue appears to be overly optimistic for several reasons. First, recurrent revenue is projected to exceed the increased GDP rate of growth by two percent. Secondly, last year’s budgeted revenue of $1.514 billion was not achieved. The actual, revised projected revenue came in at $1.45 billion or $64 million less than was originally budgeted.
The third and most compelling reason that we believe that the projected recurrent revenue is overly optimistic is that over the past five years, the average increase in recurrent revenue was three percent. To suggest that we will achieve more than a doubling of that amount to seven percent next year is questionable. The government anticipates that it will collect an additional $148 million more in excise taxes in the next fiscal period than it did last year, although at the same time it foreshadows a reduction in almost every other category of tax revenue over the preceding year, except for tourism taxes which are expected to increase by $8 million.
Capital revenue
The government expects to receive no capital revenue for the ensuing year as compared to $86 million last year.
Recurrent expenditures
The recurrent expenditures for 2012 will end at $1.7 billion, $27 million or two percent more than the $1.68 billion that was originally approved by Parliament for fiscal 2011/2012. For 2012/13, recurrent expenditures are forecast at $1.82 billion, an increase of $114 million or six percent over the preceding year.
Several recurrent expenditure allocations have been made to address specific campaign promises. There is an allocation of $4.4 million for the re-established Ministry of Financial Services and $3.2 million for the establishment of the Ministry for Grand Bahama, both campaign pledges. Thirdly, the government has provided $15 million “for the implementation of early initiatives in the Charter [for Governance], such as the introduction of Urban Renewal 2.0.”
Several other items are noteworthy relative to budgeted recurrent expenditures. These include significant subventions for the following ministries and departments:
Department of Public Service, $187 million – an increase of $13 million;
Royal Bahamas Police Force, $132.2 million – an increase of $5.6 million;
Royal Bahamas Defence Force, $54.7 million – an increase of $3 million;
Department of Education, $202 million – an increase of $5.4 million;
Ministry of Education, Science & Technology, $49 million – an increase of $3.7 million;
Department of Social Services, $40 million – an increase of $5.9 million;
Public Hospitals Authority, $199 million – an increase of $13.2 million.
These allocations demonstrate the government’s commitment to essential areas of our economy and society that require urgent attention. Moreover, the increases reflect many of the areas that the PLP consistently promised the electorate they would address once they were returned to office.
The increases for the Public Service and Social Services demonstrate the government’s stated intentions to improve the conditions of the average Bahamian, whether working or in need. Enhanced subventions to the Public Hospitals Authority reflect that healthcare is a priority issue and those to the Department of Education and the Ministry of Education, Science and Technology confirm the government’s oft-stated intentions to address the deficiencies in education as a method of creating a better future for young Bahamians. The increases to the Royal Bahamas Police and Defense Forces confirm the government’s determination, as spoken about at every rally, to break the back of crime and to address the problem of our porous borders, with regard to illegal migration, poaching and gun-running.
A substantial percentage of recurrent expenditure, 18 percent, is allocated to servicing the national debt. The interest on the public debt alone is budgeted at $207 million along with debt redemption of $121 million, which in the aggregate represents $66 million more than the preceding year.
Capital expenditure
Total capital expenditure for 2012/13 is budgeted at $400 million. The two largest items in this category are for the Ministry of Works & Urban Development for $229 million and Sundry Capital Expenditures for $132 million. In the Ministry of Works, the largest expenditures have been allocated for road construction, highways, streets and bridges in the aggregate of $175 million. Sundry Capital Expenditures include provisions for the Baha Mar Road Development for $48 million, as well as subventions for Capital Subscriptions to International Agencies, the Broadcasting Corporation of The Bahamas, Bahamasair Holdings Ltd. and the Water and Sewerage Corporation in the amounts of $12 million, $5.5 million, $18 million and $20 million, respectively.
Conclusion
Within a very short period, the Christie administration has quickly sought to address the fiscal realities left by the former administration, while simultaneously attempting to honor some of its election campaign pledges. In this first budget, the government has made a commendable attempt to balance the scales by holding off increasing taxes on Bahamians, while concurrently seeking to allocate its limited resources in an economically anemic environment.
However, the government would be wise to remember that this is a Bahamian public with great needs and little patience. As understanding as the people may be with this 2012/2013 budget, which is a hybrid of the outgoing Ingraham regime and the fledgling Christie administration, that understanding will only go so far before the expectations that were raised so high during the campaign need to be not only met but exceeded and the country put back on steadier, more fiscally secure ground to ensure the glowing future that was promised by the PLP.
Jun 11, 2012
The Budget: Part I
Consider this
By Philip C. Galanis
On Wednesday past, May 30, the prime minister and minister of finance presented his much-anticipated first budget of the new administration that was elected only two weeks ago. This week, we would like to Consider This… does the national budget for fiscal year 2012/13 address the important promises that were made during the recently completed general election campaign?
The short answer is that it begins to do so. However, the extent to which it does is severely constrained by the distressing state of public finances that the Christie administration inherited from the former administration. In addition, there is a time constraint challenge that significantly factors into what was contained in Prime Minister Christie’s recent Budget Communication.
For the past few terms, when general elections were held in early May of 2002, 2007 and 2012, the usual mid-May budgetary process has been punctuated by a change of government which imposed severe restrictions on the victor because of the very narrow time line between the elections and the required presentation of the national budget. Therefore, in the absence of a predetermined fixed election date, successive governments should make a deliberate effort to avoid holding general elections in May because of the constraints that this event places on the implementation of a national budget designed to address the victor’s national agenda. More about that at another time.
The state of public finances
It is now becoming increasingly evident that the former FNM administration that has always claimed to be a government of accountability and transparency has been neither. An early indication of this was first observed in the Ingraham Administration’s deliberate negligence to submit its customary and much anticipated mid-year budget report earlier this year. It can be reasonably surmised that the former prime minister and minister of finance consciously decided to forego this practice in 2012, which he himself introduced with much fanfare and consistent conformity, for purely political reasons.
The former prime minister and his Cabinet clearly realized that if they honestly reported the state of public finances at mid-year, their deplorable financial performance would have been received with shock and awe by the Bahamian citizenry. In the run up to elections, an honest report would likely have brought about an even more devastating outcome at the polls, and therefore, presumably, the FNM government took a conscious decision to withhold such reporting from the public, hoping that the public would place the lack of a report in the “no news is good news” category.
Another example of the FNM government’s willful refusal to report on the true state of public finances pertained to the New Providence road works, which the Public Accounts Committee, under the chairmanship of the Hon. Dr. Bernard Nottage, revealed had incurred a budget overrun of nearly $100 million.
A third instance of the FNM government’s lack of accountability regarding public finances was exposed in the current prime minister’s communication last week when the latter reported the horrendously high and historically unprecedented total deficit for 2011/2012 which rose to a record level of $570 million versus an approved total deficit of $314 million, an increase of $256 million or 82 percent more than was originally anticipated. In line with the International Monetary Fund Government Finance Statistics (GFS) concept, the GFS deficit, which is the total deficit less debt redemption, for 2011/12 is projected to result in $504 million or 6.3 percent of gross domestic product (GDP). This is double the 3.0 percent that was presented by Mr. Ingraham as the forecast in last year’s Budget Communication.
Finally, the FNM government’s legacy to the national debt is equally disappointing and extraordinarily dismaying. The national debt increased from $3 billion to $4.3 billion during its term in office from 2007 to 2012, an increase of 40 percent in five years. This represents an historically high debt to GDP ratio of 56 percent. Because of this inherited unparalleled GFS budget deficit of $504 million for 2012, the Christie administration will have to borrow an additional $504 million in order to pay off the financial excesses of the Ingraham administration.
The national debt will therefore increase to $4.8 billion by the end of the next fiscal year. But it gets worse. Again, because of the excessive commitments and spending of the Ingraham administration, all things being equal, and barring any unforeseen catastrophic developments over the next two years, given a projected record GFS deficit of $550 million for fiscal year 2013/14, is anticipated that the national debt will increase to well over $5.4 billion by 2014. This will represent a disastrously high debt to GDP ratio in excess of 60 percent.
All these unmatched and unequalled negative performance measures that the government inherited were incurred by an FNM government that frequently and triumphantly trumpeted its commitment to good governance, fiscal prudence, sound financial management, accountability and transparency in public finances.
It is fair to say that so-called good governance, fiscal prudence, sound financial management, accountability and transparency in public finances notwithstanding, Mr. Ingraham and his FNM Government have unquestionably left Mr. Christie and his government in a financial pickle.
Promises to keep
In spite of the alarming news, the Christie administration is still very determined to implement its agenda as articulated in its 100 day promises, the Charter for Governance, the Speech from the Throne and the Budget Communication. While it will be enormously constrained by the fiscal realities that it has inherited, the new government has set about delivering on the social contract that serves as a basis of the mandate it was given on May 7.
It will be important for the new government to regularly give the Bahamian people an open and candid account of its stewardship over the next five years if it hopes to break the recent trend of one-term governments.
Conclusion
Next week, we will examine how the new administration’s budgetary provisions plan to remain true to its pledges to an impatient and hurting populace whose expectations for relief and renewal are extremely high and to what extent the national budget for 2012/13 will seek to meet those high expectations.
Philip C. Galanis is the managing partner of HLB Galanis & Co., Chartered Accountants, Forensic & Litigation Support Services. He served 15 years in Parliament. Please send your comments to: pgalanis@gmail.com
Jun 04, 2012
Remaining civil during the election
Passions are rising in anticipation of the general election. The parties are putting up posters and having mass rallies. Bahamians are ready to determine who will be the next Government of The Commonwealth of The Bahamas.
A hobby in The Bahamas around election time is crowd watching. Many people tune in to rallies or pick up newspapers just to see how many people attended events. Bahamians want to get a sense of who has the most momentum heading into voting day. People pay careful attention to who filled this park, or whose motorcade was the biggest.
Among the passionate base supporters of each party, this is serious business. Verbal “battles” emerge between rival sides when rallies are taking place over which party has or had the largest crowd. These arguments are accompanied by other odd arguments over momentum, such as which party’s flags are most visible on vehicles.
With a record 172,085 people registered to vote, clearly there is great interest in the outcome of this election. With all of this enthusiasm and interest we have kept up our tradition of non-violent elections – by non-violent we mean the absence of organized and widespread political violence.
With all the challenges we have had with crime and violence over the past few years, this is something we should be proud of. It was a pleasure over the weekend to witness, in various places, Bahamians losing their voices in robust arguments with friends over politics; each side calling the other a failure and a danger to the future of the country. Even after a few drinks, in some of these situations, the debates only got louder. None even remotely approached violence.
We should be proud of our political tradition of non-violent dissent and we must continue to teach our young people that we can disagree without violence. When you are tired of a government, a politician or a leader, vote against that person or group. You can also work to persuade others to vote against them.
This is the beauty of democracy. We can all have an opinion, struggle for our cause, but do so without seeking to physically harm others. We must remember that the members of our political class have close ties. The leader of the opposition and prime minister are former law partners and are close friends. The families of senior members of the Free National Movement (FNM) and senior members of the Progressive Liberal Party (PLP) intermarry. The children of our politicians attend the same elite private schools.
These close ties are good. We differ politically, but not to the extent of contempt and hatred. This election season we all should seek to remember that all sides care about The Bahamas. And we should commend all the men and women who offer themselves for service to the country.
Apr 16, 2012