The overall budget deficit decreased to $37.2 million from $68.9 million in the first six months of this fiscal year when compared to the corresponding period of 2001/2002, according to preliminary estimates revealed in the newly released Central Bank Annual Report for 2002.
The report comes as the government prepares to introduce a new spending plan for 2003/2004 next week, amid talk of revenue shortfalls and overly generous tax breaks.
Minister of State for Finance James Smith has said that at the end of this fiscal year, the government expects a revenue shortfall of at least $60 million.
The 2002/2003 budget projected an overall funding shortfall of $146.5 million, which would represent a $23 million improvement from the $169.5 million deficit for fiscal year 2001/2002.
When compared to the first six months of 2001/2002, revenue collections rose broadly by $28.8 million – or 6.9 percent – to $445.4 million, representing roughly 46.3 percent of the budget, the report said.
Financial experts point out that if the trend continues, the deficit during the year 2003/2004, should be narrowed even more.
“Provided there are no international events such as the war in Iraq or 9/11, the government has every reason to be optimistic that it would go a long way in reducing the budget deficit and come closer to producing a balanced budget,” one observer said after reading the report. “In light of the Central Bank’s most recent report, the public no doubt waits with great anticipation to lose what projections will be produced by the Finance Minister in his communication to parliament next week Wednesday. It seems almost paradoxical that the budget deficit is being reduced at a time
ï¾ when the economy appears
to be not performing as well as one would hope it would perform.”He said that it should be interesting to see what the actual deficit for this fiscal year will be when the year ends at the end of June.
“I think that will tell the tale,” the observer pointed out. “In 2001, the country was reeling from the effects of 9/11 and there was grave uncertainty in the international markets. So we can see why the deficit was where it was. In 2002, the budget was based on certain assumptions that the FNM government had. Now the budget for 2003/2004 will be a total PLP budget, no hangovers.”
The Central Bank report also said that expenditure decreased marginally (.06 percent) to $482.6 million, to represent approximately 43.5 percent of the approved target.
According to the Central Bank report, government’s net lending to public corporations was more than halved to $16.3 million.
The annual report also reflected some other positives that were evident in the first half of 2002/2003.
It said that a “modest” turnaround in economic activity led to an expansion of tax collection by $23.8 million (6.2 percent) to $409.2 million. Strengthened import duties and stamp taxes on imports resulted in the recovery of international trade and transactions by $13.3 million (5.8 percent).
Tourism related gaming and hotel occupancy taxes were approximately stable at $12 million, and departure taxes gain 13.2 percent to $24.6 million. Business and professional license fees also increased by $5.4 million (47.4 percent); stamp taxes on financial and other transactions, by $5 million (16 percent); and motor vehicle taxes, by $1.1 million (35 percent), the annual report states.
By Candia Dames, The Bahama Journal
