When the government projected an overall deficit of $123 million at the end of this fiscal year, it neglected to factor in the $24 million that it will have to shell out to thousands of civil servants by the end of this financial term. This was revealed in a newly released review of financial and economic developments.
The report, which analysed trends up to June 2003, was the latest compiled by the Central Bank of The Bahamas.
The revelation means that the 16 percent or $23.6 million projected decline in the national deficit, over the same quarter in the previous fiscal term, would be cancelled, according to the report.
Fiscal experts had predicted that revenue and grant collections will increase by three percent to $991.5 million, while approved expenditures are expected to expand by half percent to $1.1 billion.
"However, excluded from the approved estimates was the proposed $24 million salary increase, which the government has indicated will be paid to civil servants before the end of 2003 and would therefore extend the projected deficit by the same amount," the report pointed out.
Although no government official has said definitively from where the $24 needed to pay civil service wide salary hikes will materialize, the government has given its word that half of the money will be paid on December 9.
And while State Minister for Finance James Smith has dismissed claims that the government will have to borrow the money, he did concede that another possible alternative is requesting overdrafts from local banks.
Holding back on some government projects has also been suggested.
Minister Smith this week acknowledged to the Bahama Journal that the government is breaking even so far this fiscal year in its goal of generating a little over $1 billion in revenue.
Enhancing the collection of money owed to the government is a primary plan of the Progressive Liberal Party administration's aim, which has been running the government since May of last year.
What's also interesting is that the Central Bank report pointed out that during the June quarter, the Direct Charge on the Government rose by over $61 million to $1.854 billion. The figures were in comparison to the 7 percent increase that was recorded in the previous year's quarter when the bulk of U.S. $125 million in supplementary borrowing occurred.
But foreign currency obligations this year increased only marginally.
"When combined with a $9 million net repayment on guaranteed debt of the public corporations to $388 million, the National Debt increased by $52.3 million to $2.2 million at the end of June 2003," the report said.
Economic and financial developments are particularly important these days, with international trends, hovering trade agreements and other worldwide implications hearing making fiscal restraint even more important.
The financial analysts who studied the June quarter trends accepted that the momentum derived in this year's second quarter was marginal.
As for the tourism sector, visitor volumes during the quarter strengthened by 5.5%, reversing the 1.8 decrease posted in 2002. There was also a hike in sea arrivals, according to the report which recorded a 7.2 percent increase.
Tameka Lundy, The Bahama Journal
