Halkitis aims for 50% debt by 2016/17

By DANA SMITH

Tribune Staff Reporter

dsmith@tribunemedia.net

ALTHOUGH the country is “moving in the direction where we are borrowing less,” the government is planning on borrowing $465 million this fiscal year, according to Minister of State for Finance Michael Halkitis. 

Speaking to the press in the Majority Room at the House of Assembly after Prime Minister Perry Christie had delivered the 2013/2014 budget, Mr Halkitis also said the government is “confident” it can lower debt to 50 per cent of GDP by 2016/2017.

Mr Halkitis noted the planned $465 million borrow is down from the hefty borrow the government had taken last fiscal year.

“In this, we introduced the resolution to borrow $465 million, which we are happy to say is down from the $500 million plus that we had to do last year,” he said.

“As you know we have introduced in the budget presentation last year, the mid-term budget, and this budget, the medium-term strategy where we are gradually consolidating and putting our finances on a better footing. It’s a gradual process – we have to do it gradually so that we do not put too much shocks into the economy.

“And so while we are borrowing additional funds, we are happy that we are moving in the direction where we are borrowing less and we look forward to when we have successfully implemented this budget and we go into the next budget, the number that we do next year will be even lower.”

When asked about the prime minister’s announcement of a debt reduction to “a level in the area of” 50 per cent of GDP by 2016/2017, Mr Halkitis said the government “thinks it’s realistic”.

In the last budget, the government forecast a deficit of 6.5 per cent and “even in the face of reduced revenues”, Mr Halkitis said, “we were able to actually beat that forecast and get it down to about 6.2 per cent, this year”.

The government forecasts that will drop to 5.1 per cent by next year, he continued, also noting the government was “very successful” with its call for all government agencies and departments to “identify savings” in their budgets.

“We believe that if we continue on our disciplined and focused strategy, we’ll be able to get it done,” Mr Halkitis said of the debt reduction. “So, we’re confident.”

Mr Christie had announced in the House yesterday, the government is “acting decisively” to “improve the health” of the country’s finances and to pull the country out of the “debilitating public debt spiral” the government inherited upon coming to office.

“We are also strengthening the foundations of the economy to secure steady growth and private sector employment creation,” he said.

“In this way, we are positioning my government to have the resources with which to implement, over the full course of our mandate, initiatives that will strengthen law and order, promote stronger growth and job creation and solidify our firm commitment to maintaining and reforming our social safety net for the effective delivery of relief to the disadvantaged and needy in our midst.”

Noting there should not be a “misconception” about the government’s commitment to “healthier public finances,” the prime minister noted: “We find ourselves at present severely constrained in our ability to fully implement our changed agenda.”

That severe constraint is owed to “fiscal mismanagement” that left the “resources stretched too thin,” he said.

“The legacy of high public deficits and spiralling debt burden that we inherited is brutally onerous: almost one out of every four dollars in revenue collected by the government must be allocated to pay the interest charges on the public debt and cover the debt repayment,” Mr Christie said.

The near-term implementation of the “vital portions” of the government agenda – including job creation, attacking crime and strengthening the social safety net – will come about through a “re-prioritisation” of how public sector resources are spent and maintaining a “strong focus” on medium-term fiscal consolidation, he added.

Mr Christie also said yesterday: ”Through our fiscal consolidation strategy, we expect to eliminate the GFS deficit and return the government’s finances to surpluses. We will also reverse the government’s primary balance position from deficits to surpluses, and in so doing cause the burden of public debt to decline over time.”

The GFS deficit next year will reach $443 million or 5.1 per cent of GDP, as compared to the estimated outcome of 6.1 per cent of GDP this year, he said.

And, the government will continue to “exert discipline” on recurrent and capital expenditure so that the levels of both continue to decline as a proportion of GDP.

February’s tax reform package as well as the “ongoing structural enhancements” to revenue administration will also contribute to a “significant improvement” in the revenue yield of the country’s tax system, the prime minister continued.

“As a consequence and barring unforeseen developments, we expect to be able to adhere to the fiscal objectives of our medium-term plan, namely: both the deficit on recurrent account and the GFS deficit will be eradicated by 2015/2016; the primary deficit will be eliminated by 2014/2013 and that is critical to reversing the upward trend in the debt to GDP ratio; (and) government debt will return to a level in the area of 50 per cent of GDP by 2016/2017, as opposed to a level approaching 70 per cent in the absence of our decisive action plan to redress the public finances.”

Comments

banker says...

This is the final catalyst of the Bahamian slide towards economic devastation and the making of the Bahamas a true third world country. The slide into oblivion will hit us much harder than it hit Jamaica, and it will take at least three generations to get the Bahamas back to the 2007 economic levels.

Crime will continue to increase. Tourism will shrink. In a couple of years, the government will not be able to manage the debt and there will be an economic crisis like Greece, with one exception. There are no economic engines for recovery.

Financial services will continue to decline. The Bahamas is already not a good place for money because of the primitive infrastructure. The flight of wealth capital under management will not abate, and the first and second pillars of the economy will crumble. This will bring with it, social unrest and further deterioration of the fabric of life in the Bahamas.

In my banking job, I see more and more Bahamians of the merchant class diversifying to American dollar accounts, and establishing branches of their businesses offshore to hedge against the coming economic devastation and devaluation of the Bahamian dollar.

The only way out of this mess, is to contain debt, and with this government, that ship has sailed. There is not a one among this government that understands economics, or the grave peril that the country is in.

Posted 30 May 2013, 1:10 p.m. Suggest removal

ThisIsOurs says...

I had a conversation with a friend last year, we were discussing the blind support that the govt was getting despite evidence that they were heading down the wrong path on a number of fronts. I said to him what will these same people say the month the govt says they cannot meet salaries. He said to me that that is a long way off, I really hope he is right for all of our sakes

Posted 30 May 2013, 7:18 p.m. Suggest removal

Grillup says...

Tax the struggling
and give to the "less fortunate"

Posted 30 May 2013, 4:56 p.m. Suggest removal

expandables says...

They borrowing couple 100ths of millions and the prime minister is rolling in "BENZ", I don't know if we Bahamians are "stupid or just plain stupid", No jobs and all of this borrowing, what has the money amounted to. Welcome to the new Jamaica, where there are increase in crime rate, high debt rate, Jamaican music and women that dances and dresses like they are Jamaican.

Posted 30 May 2013, 5:05 p.m. Suggest removal

ThisIsOurs says...

Who is he talking to anyway?onerous..., fiscal consolidation strategy..., ongoing structural enhancements...., decisive action plan to redress....say whaaat?

Posted 30 May 2013, 7:25 p.m. Suggest removal

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