The government’s fiscal deficit narrowed by just under 21 percent in the first nine months of the 2005/2006 fiscal year reaching $92.8 million over the same period in the previous fiscal year, the Central Bank of The Bahamas reported in its latest financial and economic review.
The assessment was released a few days ahead of the tabling of the Christie administration’s budget for the next fiscal year.
Legislators were expected to turn out in full force for the budget communication that is traditionally delivered by Prime Minister Perry Christie in the House of Assembly.
Due to illness, Mr. Christie did not deliver the budget communication last year.
The Central Bank noted that favourable economic conditions caused total receipts to grow by $136.7 million or 19 percent to $856 million. Additionally, tax earnings rose by 16 percent or $109 million supported by increases in stamp taxes on imports, import duties and other stamp taxes.
Non-tax revenue advanced by $25 million and total outlays expanded by 13.4 percent to $949 million as a result of increases in both current and capital expenditures, the Bank’s report for April noted.
The previous report had stated that initial data for the first eight months of FY2005/06 indicated a reduction in government’s deficit by 33.5% to $79.9 million from the corresponding period a year earlier.
The Minister of State in the Ministry of Finance James Smith said the new budget that the government plans to unveil will resemble last year’s fiscal and financial plan and reflect certain adjustments in areas based on the government’s priorities.
He said the plan is to contain the fiscal deficit.
The Bank had previously reported that the country’s national debt increased by nearly $200 million in 2005 over the previous year, but government officials have continued to point out that there is no cause for any great alarm.
Last year the debt level was $2.7 billion. However that figure was .4 percent lower than what it was in the third quarter of 2005, an achievement that was precipitated by a lowering of the government’s contingent liabilities.
The growing debt brings the country close to the danger level as it relates to the ratio of government debt to the Gross Domestic Product [GDP] which is headed toward about 39 percent of GDP.
The point is for developing countries debt to GDP ratios not to exceed 40 percent. Minister Smith said in a previous Journal interview that in The Bahamian context, the accumulation of debt is not at a dangerous pace because the economy is also growing at a good rate. The Bahamian economy, according to officials, grew by 3.5 percent in 2005 and is expected to grow by at least that this year.
The impact of foreign investment projects on money matters was also thoroughly examined in the Central Bank’s April report. It was stated that the foreign investment projects caused a noticeable growth in domestic foreign currency credit.
It was the funding provided for the ongoing investments which caused domestic foreign currency credit growth to increase more than four fold to $53.7 million, the Bank said.
“Credit to the private sector, which expanded by $12 million a year ago, surged by $37.8 million this year,” noted the report. “Moreover claims on the rest of the public sector firmed by $15.1 million, while net credit to government expanded marginally by $.9 million.”
It was determined that for the first four months of 2006, excess reserves of the banking system also grew by $83.6 million which was $25 million higher than the previous year’s expansion. In contrast, excess liquid assets recorded reduced growth of $67 million compared to the $73 million increase in 2005.
Between January and April 2006, heightened foreign currency outflows via the public sector slowed the build up in reserves, it was reported.
“The Central Bank’s external reserves rose by $65 million, $7.9 million lower than the expansion in the previous year,” the report said. “Net foreign currency purchases fell by 1 percent to $60.2 million explained largely by a more than twofold hike in the net sale to the public sector to $62.1 million.”
In contrast, according to the Bank, the net purchase from banks rose by $26.2 million to $122.3 million. Exchange Control figures for the first four months of the year reflected “significant growth in sales of foreign currency” for current account payments, as non-oil and oil imports increased by $39.8 million and $62 million respectively.
By: Tameka Lundy, The Bahama Journal
