By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition last night slammed the Government’s “disastrous” fiscal performance after it emerged that the $274m deficit for 2024-2025’s first four months is almost four times higher than the full-year target.

Kwasi Thompson, the Free National Movement’s (FNM) finance spokesman, demanded that the Davis administration present a corrective action plan to “dig us out of this fiscal hole” when it unveils the mid-year Budget in less then a fortnight after it was revealed that the deficit for the four months to end-October 2024 was equivalent to 392.7 percent of the $69.8m full-year target.

The Ministry of Finance, in its October fiscal report, revealed that the month’s deficit - which measures by how much government spending exceeds its revenue income - had expanded by 43.6 percent or almost $37m year-over-year, widening from $61.7m to $88.6m. 

The increase, which moved the deficit in the opposite direction to the Government’s desired fiscal consolidation trajectory, was driven entirely by increased spending as tax and other revenues posted a modest $7.8m year-over-year increase to $256m for October 2024. Total expenditure, though, surged by $34.8m or an 11.2 percent increase, to hit $344.5m.

When added to the ‘red ink’ incurred for the first three months of 2024-2025, which represented the year’s first quarter, October took the combined deficit for the first one-third of the fiscal year to $274m - a sum more than double, or 129 percent, higher than the $119.7m run-up during the same period in 2023-2024.

And 2024-2025’s deficit for the first four months is also higher than the $258.7m incurred during the first six months of the prior 2023-2024 fiscal year. Should the Government have endured a repeat of the $69.6m and $65.9m deficits incurred in November and December 2023, respectively, this time around, the combined $135.5m would take the 2024-2025 mid-year deficit to a mammoth $409.5m.

Michael Halkitis, minister of economic affairs, could not be reached for comment before press time last night, but the Government will likely counter that the Budget’s cyclical nature makes it impossible to predict the full-year outcome until all the numbers are in.

This is because the Government typically earns the bulk of its income during the revenue-rich second half of the fiscal year, which is the period The Bahamas is now in. This coincides with peak winter tourism and economic activity, as well as the payment of Business Licence fees, the bulk of real property taxes, commercial vehicle licensing and increased cruise ship passenger fees.

However, the Government will likely need to generate a much bigger surplus than the collective $72m it generated during the 2023-2024 fiscal year’s second half to bring this year’s deficit back into line with target - especially since it is targeting a much smaller sum of $69.8m compared to the prior year’s $131.1m goal which was itself missed by around $55m.

And Mr Thompson seized on the data to blast: “This first four months of the Davis administration’s 2024-2025 fiscal year has been a disastrous first four months. We are anxiously awaiting the mid-year Budget. This fiscal performance for the first four months really has been a disaster..

“You have the full-year Budget deficit, which is [projected to be] about $69.8m for the full-year, and we are just about four times’ what the deficit is for the entire year, which means the Government is in a hole. We are waiting to see what fiscal plans the Government has to dig us out of this fiscal hole.”

Mr Thompson, though, brushed aside Tribune Business questions over how likely the Government is to reverse these trends during the fiscal year’s second half, as it has at least partially done in years past, and whether is is premature to base the full-year outcome on the first four months. He also declined to comment on the timing of the October figures’ release, and why they have been divulged now.

“When it comes out, how it comes out, it does not affect what Bahamians were feeling yesterday, what they are feeling today, and what they are going to feel tomorrow. The main message we must never forget is that Bahamians are catching hell and we should expect the Government to be managing our fiscal affairs to get out of this hole. They are not,” the Opposition finance spokesman argued.

“Bahamians are catching hell and the Government’s performance does not help them at all. I believe I’m being kind to them [the Davis administration]. The first four months of this fiscal year really have been a disaster compared to their performance in previous years. Also, when you look at the overall deficit projection for the entire year, we hope they have a plan to bring us back into line with the Budget.

“We are hoping they come to Parliament in the mid-year Budget with a plan that puts us back in track. At the moment we are in a hole.” Mr Thompson added that the cost of living crisis faced by many Bahamian families is “not over”, based on the latest monthly inflation figures for the US for January, and he said: “I’m focused on the pain that Bahamians are feeling.”

It is unclear why the Government would choose to release the monthly fiscal report for October 2024 now given that the mid-year Budget is due to be presented in the House of Assembly in less than two weeks’ time on the last Wednesday in February.

However, several observers last night suggested the timing could be designed to manage the Bahamian people’s expectations and control the public relations narrative, softening the public up for potentially bad news in the mid-year Budget. “I think they’re trying to take some of the sting out of it and soften people up for bad news,” one said.

The expanding deficit is also ill-timed for the Government given that a general election has to be called within the next 19 months, as it would typically - in common with many of its predecessors - look to prime the spending pump around now to create a voting climate more favourable for its prospects.

However, on the positive side, total revenues for the four months to end-October 2024 were ahead of prior year numbers. And October’s VAT collections, which represent September’s filings by all registrants - monthly and quarterly filers - were up by $5.8m at $132.6. Total VAT collections were also keeping pace with the Budget target, standing at 31.2 percent of the full-year amount with one-third of the year gone.

However, the fact that October 2024’s increase in government spending was driven by a $27.2m year-over-year increase in outlays on goods and services is likely to reignite questions over whether the Government merely kicked a lot of bills over into 2024-2025 to ensure it came in near its 2023-2024 deficit target and thus avoided triggering fiscal responsibility clauses requiring it to present a corrective action plan to Parliament.

“This outcome reflected a 3.1 percent ($7.7m) growth in revenue receipts to $256m alongside an 11.2 percent ($34.6m) increase in spending to $344.5m,” the Ministry of Finance said of October’s fiscal performance. “Tax collections improved year-over-year by 7.2 percent ($15.8m) to $236m, and included the following key contributors.

“VAT receipts rose by $5.8m to $132.6m, reflecting improvement in the goods and services and realty components. International trade and transactions taxes grew by $8.9m to $67m, driven by gains in departure taxes. Non-tax revenue aggregated $19.8m for a 29.3 percent ($8.2m) decrease year-over-year, owing to timing differences of interest income.”

As for government spending, the Ministry of Finance added: “The $321.5m in recurrent outlays for the month represented an increase of 9 percent ($26.6m) from the corresponding period in the prior year. Use of goods and services expanded by $27m to $73.9m, driven by payments for rent and utilities, alongside acquisition of various services.

“Personal emoluments increased by $5m to $73m, and subsidies were lower by $5.7m at $37.3m. Capital expenditures widened by $8m to $23m. The bulk was expended for the acquisition of non-financial assets (95.6 percent), and the remaining 4.4 percent represented capital transfers.” The Government’s outstanding debt also increased by $54.7m during October 2024.

“Aggregate expenditure settled at $344.5m, with the recurrent and capital components at $321.5m and $23m, respectively. The year-over-year $26.6m increase in recurrent expenses was primarily associated with higher outlays on the use of goods and services ($27m) relative to rental and utilities payments alongside the acquisition of various services,” the Ministry of Finance added.

“Under capital spending, the acquisition of non-financial assets, which makes up 95.6 percent of the total, expanded by $7.3m.”