Govt has to raise taxes, curb expenditure or “seriously grow the economy” to cover revenue shortfall, notes finance expert
NASSAU, BAHAMAS — A top banker yesterday cautioned against “mortgaging” this nation’s future amid significant borrowing and increases in government expenditure brought on by the COVID-19 pandemic.
During his mid-year budget statement yesterday, Prime Minister Dr Hubert Minnis noted the year-over-year growth in expenditure of $112.1 million at the mid-point of the fiscal year has been fueled by massive increases in funding to support social programmes, with expenditure rising to $1.41 billion.
Gowon Bowe, Fidelity Bank (Bahamas) chief executive, told Eyewitness News: “It’s really borrowing against the future in order to sustain the current. When you start increasing social expenditure, you are really borrowing from the future in order to meet current needs.
“We have to be careful that we don’t mortgage our future to the extent that we will no longer be able to pay for it. That is the real challenge. It’s not without its consequences.”
Bowe noted that to cover its protracted revenue shortfall going forward, the government will have to either raise taxes, curb expenditure even further or seriously grow the economy.
“In real terms, it really should be a combination of all three. We really don’t hear enough about expanding the economy,” he said.
Minnis yesterday noted that to meet its financing need for the year, the government’s gross borrowing totaled $2.12 billion million in the first half, with a significant portion of that amount to refinance existing debt.
The government’s net borrowing increased by $1.2 billion during the period, indicating its debt-to-GDP ratio was estimated at 78.8 percent at the end of December 2020.
“When you look at it, there was always a quiet preparation that we could be close to 90 percent by the end of this fiscal year, with an intent that it stabilizes; but in reality, if tourism remains impacted in a major [way] like it is now, that recovery time and ability to get back to regular government revenues is going to impeded,” said Bowe.
“When you say you’re at 79 percent in December, what you should really be saying is what you project it to be capped at and what time frame and how we start to reverse that trajectory and bring it back to the 50 percent we targeted in the fiscal responsibility legislation.”
Loading ...
