NASSAU, BAHAMAS — Total government revenue decreased year-over-year by just over $337 million with preliminary data for the fiscal year 2019/20 showing an estimated “threefold” increase in the country’s fiscal deficit.
The Ministry of Finance released its fourth quarter fiscal snapshot and report on budgetary performance for fiscal year 2019/20 yesterday.
Preliminary data for the fiscal year, which ended June 30, indicates an estimated threefold increase in the fiscal deficit to $788.1 million from $219.3 million, in fiscal year 2018/19.
The Ministry of Finance routinely publishes budget performance reports at the end of each fiscal quarter.
“Total revenue decreased, year over year, by $337.1 million (13.9 percent) to $2,089.1 million, which represented 87.2 percent of the revised budget,” the report stated.
“This outcome reflects the combined impact of slower economic activity in the hurricane-affected islands—Abaco and Grand Bahama—and the reduction in business activity amid the series of national lockdowns throughout the last quarter of the fiscal year.
“Recurrent and capital expenditures grew by a combined $231.7 million (8.8 percent) to $2877.2 million, largely due to outlays for Hurricane Dorian and COVID-19 initiatives. In the final quarter of FY2019/20, expenditure spiked due to ongoing Dorian recovery and Covid-19 militating efforts and the seasonal year-end uptick in expenses associated with the closing of the budget year.”
The report continued: “The central government’s budgetary operations for FY2019/20 were adversely affected by two catastrophic events, which caused significant variations in the fiscal performance from the original budget expectations.
“As a result of Hurricane Dorian, a Category 5 hurricane which decimated parts of the northern Bahamas in early September 2019, the government tabled and passed a revised budget for FY2019/20 in January 2020, to address the increased expenditure requirements and revenue loss caused by the storm.”
The report underscored the COVID-19 pandemic forced the government to take extreme containment measures “just a few short months later” in March.
It furthered the closure of businesses, the sudden stop of tourism activity and imposed lockdowns had a material impact on macroeconomic activity.
“The severity of the impact of COVID-19 on revenue performance was evident in the pronounced 55.2 percent contraction in receipts for the final quarter of the fiscal year, compared with the year-earlier outcome,” the report stated.
“Consistent with the pervasive impact of the pandemic on economic activity, this weakness was broadly based, with significant contractions in VAT receipts ($169.2 million or 55 percent), Customs and import duties ($54.2 million or 63.6 percent), departure taxes ($27.6 million or 63.7 percent), license to conduct specific business activity ($37.6 million or 75.1 percent), and gaming taxes ($8.2 million or 47.2 percent).”
In a statement, Deputy Prime Minister and Minister of Finance K Peter Turnquest the government continued to meet obligations while playing an important role to sustain domestic economic activity.
“Consistent with our budgeted plans, we are disbursing millions in unemployment assistance, maintaining public service salaries, and engaging in targeted capital expenditures to support the COVID-19 response and the broader effort to restore the economy,” he said.
“Prolonged shutdowns increase fiscal risks for all governments, including our own, which is why we are closely monitoring the situation. The coronavirus is not going away, so our highest priority is adapting so that business and commerce can occur safely despite COVID-19.
“The domestic economy is going to lead the way with a well-considered and balanced reopening strategy; this is not only important to restore the livelihoods of Bahamians, it is important for the country’s fiscal health. We are actively working on new models and testing our assumptions to determine if, when and where adjustments may be necessary.”