By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Government incurred a $75m October deficit after it was yesterday revealed that monthly spending on goods and services more than doubled to drive a 24.5 percent year-over-year recurrent spending increase.
The Ministry of Finance, in unveiling the October fiscal performance report, gave no explanation for why spending on goods and services had risen by more than 100 percent year-over-year - from $31.2m in October 2021 to $63.1m this year - although it could simply be related to “timing issues” and when invoices and bills come due for payment.
Still, it represented the major factor driving the $56.7m year-over-year increase in total recurrent (fixed cost) spending for the month. This more than offset the 20.9 percent year-over-year jump in tax revenues, which increased from $169.8m to $205.3m, to result in the Government’s deficit for the first four months of the 2022-2023 fiscal year more than quadrupling compared to the end-September position.
The $74.9m worth of ‘red ink’ incurred during October, representing by how much government spending exceeded revenues, took the fiscal deficit from $21.3m at end-September to $96.2m at the end of the following month. Personal emoluments, meaning public sector salaries and benefits, also rose by $9m or 16.1 percent year-over-year, going from $55.9m to $64.9m, and likely reflecting new industrial and wage agreements for workers at various agencies.
While October’s outturn took some of the gloss off what the Prime Minister previously hailed as the lowest first quarter fiscal deficit for more than a decade, the Government can point to other positive signs regarding its Budget performance. Both tax and total revenue for the first four months of the 2022-2023 fiscal year stood at 31.5 percent of full-year Budget forecasts with one-third of the year gone, placing them close to or on trajectory to hit target.
VAT revenue, representing September payments that included filings by both monthly and quarterly payers, was 13.3 percent or almost $14m ahead of the prior year at $118m - providing further evidence that the economy is continuing its post-COVID reflation with activity and transactions picking up. And VAT, too, was close if not on target at 31.8 percent of full-year projected collections with one-third of the year gone.
All spending categories were either at, or below, one-third of projected full-year spend. And, despite the October surge, the deficit for the first four months of 2022-2023 is just 17.1 percent of the full year’s forecast $564m. That still places it on a trajectory to come in below forecasts, even though it was some $19.3m ahead of the $55.6m deficit incurred in October 2021.
“During the month of October, preliminary results indicate a continuation of a rebound in domestic economic conditions from the COVID-19 induced economic downturn. Despite the persistence of elevated inflationary pressures through September........., visitor arrivals remained strong,” the Ministry of Finance said in a statement.
“During the month, revenue receipts firmed $41.5m (22.4 percent) to $227.2m when compared to the prior year, driven by improved tax revenue performance of $205.3m. The $35.5m (20.9 percent) increase in tax revenue collections are explained by a $21.5m (54.7 percent) improvement in international trade and transactions, a $13.9m (13.3 percent) increase in VAT revenue, and $4.2m (31.1 percent) growth in other taxes on goods and services.
“On the expenditure front, total expenditure rose $60.8m (25.2 percent) to $302.1m. Recurrent spending increased $56.7m (24.5 percent) to $288.1m. Personal emoluments increased $9m (16 percent) to $64.9m, owing to increases in pensions, promotions and other benefits.
“Other key areas of public spending include the acquisition of goods and services of $63.1m, other payments of $27.4m, the acquisition of non-financial assets of $13.4m and capital transfers of $0.6m. The net result was a deficit of $74.9m, a $19.3m increase from the deficit of $55.6m realised in the same period of the prior year.” The
The Ministry of Finance added that the Government’s net debt expanded by $50.8m during October, with borrowings of $476.6m offset to some extent by $425.7m in repayments. “Proceeds of borrowings during the period totalled $476.6m, sourced in Bahamian dollars via $229.4m in Bahamas Registered Stock, $247m in Central Bank advances, and $0.2m in Treasury Bill placements,” it added.
“Repayments totalled $425.7m, primarily driven by repayments of $206.5m of Bahamas Registered Stock, $167m in Central Bank advances, $33.2m in domestic loans and $19.1m for foreign currency loans. Central government’s net debt increased during the period by $50.8m, a 51.7 percent ($54.3m) decrease from the prior year.”
As for spending, the ministry added: “Capital expenditure firmed 41 percent ($4.1m) to $13.9m inclusive of $13.4m to acquire non-financial assets and $0.6m in capital transfers.”