The country’s national debt now stands at approximately $2.2 billion and at the end of the 2002-2003 fiscal year authorities expect at least a $60 million shortfall below projected revenue, Minister of State for Finance James Smith revealed last night.
Minister Smith, who was the third minister to deliver a nationally-televised address to the nation in recent weeks, said that the slowdown of the U.S. economy prior to the Iraq War has had an adverse effect on the economy, especially in the area of government revenue.
For the period July through October last year, revenue collection was about $60 million behind projections, authorities had earlier revealed.
But between December and February, officials had reported that revenue collection was more than $30 million above projections.
While this news was promising, authorities recognized that there were measures needed to further improve the situation.
In February, the government ordered its various ministries and departments to cut back on spending by 5 percent, underscoring a growing response to harsh economic conditions.
On a $1 billion budget, this cutback represents a reduction in expenditure of $50 million.
The Ministry of Finance, meanwhile, was holding back on approval of releases applied for by the various ministries. Without these releases, none of the ministries or departments could pay their bills.
With crucial budget preparatory days ahead, the government faces the task of coming up with new revenue projections in the face of uncertain economic times.
Minister Smith said last night that, “Without disclosing budgetary secrets, one can state that careful control over the growth of government expenditure will be one priority.οΎ”
He said that the balance between expenditure and revenue will be improved as the economy begins to gather momentum “as I am sure that it will.” Minister Smith pointed out that over the past year, the government introduced counter-measures to deal with concerns regarding revenue. Those included amendments to the Stamp Tax Act, Real Property Tax Act, Passenger Tax Act and Tariff Act.
“Taken together, these measures could be regarded as a part of the government’s stimulus package to jump-start a sluggish economy and hopefully improve government revenue collection so that we do not have to rely too heavily on debt to make up the deficiency in government revenue,” he said.
He said the path of prudent economic and fiscal management requires that for the next few years, the government must eliminate the imbalance between government revenue and expenditure which brought about the increases in government borrowing over the last two fiscal years.
“If the imbalance between expenditure and revenue is not progressively eliminated, then further increases in government borrowing would become imbedded into our fiscal situation resulting in a rising level of government debt,” he said.
“This rising level of government debt would require government to either raise additional taxation to finance the debt or require reductions in expenditure on our major government services such as education, health or security to release resources to service the debt.”
He said he expects that Bahamians would support reasonable steps by the Progressive Liberal Party administration to bring a better balance between government expenditure and revenues to reduce and eliminate the recent enhanced level of government borrowing.
The Bahama Journal
