NASSAU, BAHAMAS- Finance Minister K Peter Turnquest said yesterday that the country’s fiscal deficit for the fiscal year 2019/20 is likely to be nearly $573.4 million or an elevated 4.5 percent of its gross domestic product (GDP).
Turnquest noted this figure exceeds the $137 million or one percent fiscal target prescribed by the Fiscal Responsibility Act.
As a result, he said the government is required to devise and present a fiscal adjustment plan outlining three components, namely; the reasons for the departure; the measures the Government intends to take to get back on track; and an estimate of how long it will take to do so.
“As required by the Act, we intend to provide such a plan to both the Parliament and the Fiscal Responsibility Council in November as part of the upcoming 2019 Fiscal Strategy Report,” Turnquest said.
“We will also present a supplementary Hurricane Dorian budget that will outline the adjusted revenue and spending positions, alongside a request for the additional borrowing authorizations.”
According to Turnquest, early estimates by the Ministry of Finance point to a government revenue short fall of nearly $215 million or eight per cent of its overall projected revenue for the fiscal year 2019/2020 as a dire result of Hurricane Dorian.
He acknowledged the storm has put a ‘strain’ on the Government’s finances and will impact the pace at which the government is able to deliver on its medium-term macroeconomic and fiscal plans.
“Before Dorian, the Government had successfully met its fiscal target for FY2018/19,” he said.
“In the 2019/20 Budget, we plotted a path for further fiscal consolidation over the medium-term horizon, in the context of a relatively mild, yet stable growth assumptions. As it now stands, this plan has to be adjusted to take into consideration the fiscal cost of the Hurricane Dorian response.”
Turnquest continued: “Early estimates prepared by the Ministry of Finance point to a revenue shortfall of nearly $215.0 million, or 8 percent of the overall revenue projected for FY2019/20 as a direct result of Hurricane Dorian.
“When it comes to spending, initial estimates show we will need to spend an additional $222.4 million, with a split of $80.9 million for recurrent spending and $141.5 million for capital.”
Turqneust said: “These funds will primarily be used for rebuilding critical infrastructure on Abaco and Grand Bahama, including electricity and water services, the reconstruction of affected medical facilities, the construction of temporary housing and the delivery of targeted Government services and assistance to affected populations.
In terms of economic activity during the fiscal year 2018/19, Turnquest said Abaco accounted for 6.4 percent of Government revenues, while Grand Bahama constituted 7.3 percent of total revenues.
Turnquest noted that to offset hurricane related expenditure and replace loss revenue, the Government proposed to make use of several loan offers from international and domestic lenders in addition to the $100.0 million Inter-American Development Bank (IDB) Contingent Loan for Natural Disasters, the $12.9 million from the Caribbean Catastrophe Risk Insurance Facility (CCRIF) for recovery related costs and $20 million from Dormant Account Funds for disaster related recovery activities.
Turnquest said the Government has held early discussions with other multilateral lenders, as well as local commercial banks, on the provision of possible loan facilities to cover the remaining financing need.