NASSAU, Bahamas – The Bahamas government Wednesday presented a budget that Prime Minister Dr. Hubert Minnis said reflects the fact that “our economy will not likely return to full capacity during the upcoming fiscal year”.
Prime Minister Dr. Hubert Minnis delivering budget statement to Parliament.The total government revenues are projected at US$2.247 billion, representing an increase of US$588.3 million or 35.5 percent over the projected 2020/2021 total revenue.
But Minnis told legislators that despite this improvement, revenues are projected to remain 7.5 per cent below the US$2.426 billion achieved in the last fiscal year.
Recurrent expenditure is estimated at US$2.83 billion, an increase of US$270.1 million or a 10.6 per cent increase over the projected spend for 2020/21.
“While we anticipate a reduced need for support as the economy rebounds, the current budget still anticipates some US$100 million in direct coronavirus (COVID-19) related support in the form of food assistance, unemployment assistance and health sector support, as well as the revenue foregone on the Government’s Employment Incentive Program and other growth initiatives,” Minnis told legislators.
On the capital expenditure side, the government is projecting some US$372.4 million in capital outlays in the upcoming fiscal year. While this is below the US$515.5 million budgeted last year, it represents an increase over the projected US$200 million in actual capital expenditure for this fiscal year.
Minnis said as a result of the revenue and expenditure developments, the fiscal deficit is estimated to come in at US$951.8 million or 7.7 percent of gross domestic product (GDP).
In his presentation, he announced that his administration would be launching an employment incentive program that will allow businesses to apply for a value added tax (VAT) tax credit to cover the salaries of up to 10 new employees brought onto their payroll as of July 1.
He said this credit will be good for a salary of up to US$400 per week per employee and that eligible businesses will have to follow certain compliance rules and be in good standing with the National Insurance Board.
Prime Minister Minnis said that he anticipates that up to 250 businesses will take part and this will cost the government an estimated US$40m in revenue. Minnis also announced plans to level the playing field for small and medium sized businesses who are faced with prohibitive start-up costs.
He told legislators that local businesses will be able to apply for and obtain duty concessions on items needed to start or expand their businesses including on the first stock of inventory. He said any Bahamian entrepreneur or small business with an annual turnover of less than five million US dollars will get the same treatment.
Prime Minister Minnis also indicated there were plans to establish a special economic zone in the southern islands to spur “immediate economic activity” in these islands through an amended Family Island Encouragement Act.
According to him, residents and businesses on these islands or people investing in these islands will qualify for duty and VAT concessions on materials they will need to build a house or start/expand a business.
Qualifying islands include Ragged Island, San Salvador, Rum Cay, Cat Island, Long Island, Mayaguana, Inagua, Crooked Island, Long Cay and Andros.
The government also announced a range of impending duty reductions and elimination for some items in the upcoming fiscal year. These include the elimination of duty from disinfectant; the elimination of duty from a range of sporting equipment and apparatus; reduction in duty on a number of building supplies; and a reduction in duty on electrical wires.
He said also that VAT will be removed from diapers and sanitary pads/tampons and to assist residents in Abaco and Grand Bahama, his government is eliminating VAT from property conveyances for two years.
The government also announced that US$10 million will be allocated to continue the efforts to safeguard the population amid the COVID-19 pandemic.
Prime Minister Minnis said that this funding will be used to purchase personal protective equipment
The government is seeking parliamentary approval to borrow nearly $1 billion to finance COVID-19 mitigation expenses for the remainder of the fiscal year, among other obligations, as well as to cover the projected deficit for the upcoming fiscal year.
Minnis told legislators Wednesday that the government intends to borrow US$115,247,319.15 for mitigation and treatment of COVID-19; to support the Public Hospitals Authority’s modernization of the health system; and to incentivize medium and small businesses.
He said the borrowing will exceed the total amount of US$1.3 billion agreed on for the 2020/2021 fiscal year and that the government is also looking to borrow up to $871,645,371 to finance the deficiency of revenue over expenditure in the 2021/2022 fiscal year.
As a result by June 2022, the government debt is projected to be in excess of US$10.3 billion or 84.3 per cent of the GDP..
“Responding to the twin calamities of Dorian and the COVID-19 pandemic has significantly elevated our country’s debt as we have been compelled to mount a response equal to the challenge,” Minnis said, adding “we do not gloss over this fact or seek to avoid our responsibilities as stewards of the people’s money”.
He said gven the substantial increase in financing required during the current fiscal year and the anticipated financing for the new fiscal period, debt servicing charges have increased over US$100 million from the prior period.
Minnis said that the government plans to gradually reduce subventions to the state-owned enterprises has been deferred for this year due to the effects of the pandemic on the customary revenue flows of these entities.
“Despite some return to normalcy, the allocations to Bahamasair, Water & Sewerage and Nassau Flight Services will be higher than typical years, as cash flow slowly returns to normal,” Minnis said.
