Moody’s projects 2-2.5% deficit for 2018/2019; govt. targets 1.8%
NASSAU, BAHAMAS – Deputy Prime Minister and Minister of Finance Peter Turnquest yesterday called Moody’s assessment that the government will likely not meet its deficit projections based on conservative projections “reasonable and responsible”.
Turnquest adopted a softer tone in response to the international credit ratings agency.
At the time, Turnquest asserted that it was unfortunate that an experienced former minister would enter speculatory statements in the public domain.
Speaking to reporters yesterday, the minister said Moody’s observation, namely as it relates to curbing spending, is consistent with the government’s expressed views about its fiscal targets.
“We don’t take it as a warning because again they have their view [and] we have ours, but we are certainly aligned in the thinking that we do have to maintain our spending patterns to ensure that we do in fact meet our objectives,” Turnquest said.
He continued, “We would have pointed out with full transparency our concerns and what we assess as the risks going forward in meeting our fiscal plan.
“This is not; certainly, I don’t see it as any warning or any negative.
“I think it is a very reasonable and responsible comment that they have made and again, it aligns with our own views.”
The deficit for the first six months of the year, albeit lower than it was at the same point in the previous fiscal year, was over two-thirds of the amount forecasted for the fiscal year.
The GFS deficit for 2018/2019 is projected at $237 million.
As of December, the deficit was $174.2 million, 73.3 per cent of the total forecast.
In a statement following its performance report, which The Bahamas’ outlook improve, Moody’s said the fiscal deficit target of 1.8 per cent of GDP for 2018/2019 was still attainable as a large share of revenue is collected in the third quarter of the fiscal year.
It said, however, this would “still require spending restraint in the second half of fiscal year 2018/2019 and effort to avoid the accounting-led slippage seen in fiscal year 2017/2018”.
“Because the government has no built a track record under the new fiscal rules, we have incorporated conservative projections in our baseline scenario with the deficit reaching 2-2.5 per cent of GDP in fiscal year 2018/2019,” Moody’s said.
“Nevertheless, we project a stabilization of government debt metrics with debt expected to reach 58.5 per cent of GDP in fiscal year 2018/2019.”
In an interview with The Nassau Guardian earlier this month, former Minister of State for Finance James Smith said it would be “extremely difficult” for the government to achieve its fiscal goals.
According to Turnquest, the government’s dialogue with representatives of Moody’s as part of its assessment is wide and curbing expenditure was among them.
“The fact of the matter is we have been making some significant gains, resulting in the upgrade in the outlook from negative to stable,” he said.
“We recognize that there is still a lot of work to be done.
“We did not get where we are overnight and it is going to take a long time for us to get out of it.
“That’s going to require discipline and it is going to require creativity, and a responsible approach to our spending patterns.”
In order to “lock in the gains”, the government must continue to be responsible with its spending and execute its consolidation plan which projects a surplus before the end of the government’s five-year term, according to the finance minister.
He said to achieve the government must be watchful while continuing to invest in growth-enhancing programmes to enhance the revenue base and expand opportunities for Bahamians.
Asked if the government has been responsible with its spending to date, the minister indicated that assessment is best left for the Bahamian people, but he opined that the government has, at this stage, “lived up to its commitments” and is generally in line with where it expected to be fiscally.
The finance minister is expected to make a communication in Parliament today related to the government’s fiscal performance.