Deficit Forecast Revised
More than three weeks after his deficit projections in the budget communication sparked criticism in some quarters, Prime Minister Perry Christie has revised those numbers, providing a more positive forecast.
Mr. Christie told the Journal shortly after Members of Parliament passed the 2004/2005 budget late Friday night that new revenue figures seem set to improve the fiscal outlook and GFS deficit for next year.
The budget projects a GFS deficit of $164 million, but the prime minister said it is likely that the figure will be less.
He said the new expectation is that the deficit for 2004/2005 could be closer to 2.5 percent of GDP as opposed to the 2.9 percent he projected in the budget communication on May 26.
At the time, the prime minister said, "If the process of reviewing the national accounts data leads to substantial increases in the GDP data, the actual level of GSF deficit could be considerably lower."
While speaking to the Journal, he said his hopes have been realized.
"We were projecting an outturn for 2003/2004 of $920 million," Mr. Christie said. "We have now been informed that the revenue of $920 million has already been registered and it is likely that we will record an amount nearer to $950 million. We believe that this is indicative of the improved techniques and procedures in revenue collections."
The prime minister said it is important for him and his government to see this as an indicator because they have argued in the budget presentation that there will be 3 percent growth in the economy this year.
When added to improved revenue collections, this would allow the government to "attack" the GFS deficit, he said.
"What I think is to be learnt from this is that the efforts of the Ministry of Finance to introduce technology and expertise inclusive of equipment for the enhanced collection of revenue is serving to be to the advantage of the government," the prime minister said.
"We have truly predicated our budget on this basis: We believe that rather than pass additional taxes, which in part was recommended by the [International Monetary Fund], that we are able to, based on historical evidence, take advantage of the capital inflows as a result of the Kerzner development."
He told the Journal that the government has every reason to continue with its optimism.
Only days after he introduced his "no new taxes" budget, Prime Minister Christie faced opposition in and outside of parliament.
Although saying that he was not seeking to put himself at odds with Mr. Christie and his government, Central Bank Governor Julian Francis spoke of the need for Bahamians to pay more taxes to finance government services.
Mr. Francis also warned against continued borrowing to cover the deficit.
When asked to respond to the governor's suggestions, Mr. Christie said, "It shows that if he has done that, and he is able to do it independently of the process of governance of the country, that there is something that we should be doing to harmonize the efforts of those who advise me in the Ministry of Finance and those agencies that are a part of the financial governance of the country, like the Central Bank."
He added, "We ought to make every effort to ensure that we're working together."
Mr. Christie's revision to his deficit forecast came only a day after former Prime Minister Hubert Ingraham told parliament that the new budget does not provide the right tonic for the country's fiscal predicament.
"I assert that now is not the time for reliance to be placed upon unrealistic revenue increases from existing taxation," Mr. Ingraham said.
He also urged the prime minister to "rein your colleagues in."
"They are spending and committing to spending too much," Mr. Ingraham said. "You have to tell them there are no available government jobs now; they will come when there is strong economic growth and larger investment inflows. And tell them unless spending is restrained, there won't be any jobs for them."
But a confident prime minister said Friday that, "The growing strength of the economy in 2004 and 2005 will generate significant additional revenues."
The budget debate is scheduled to begin in the Senate today to give Senators enough time to pass the spending plan in time for the new fiscal year, which begins July 1.