PM gives 2004/05 Budget Communication
By TAMARA McKENZIE,Guardian Staff Reporter
With no new taxes, the total expenditure of the 2004/05 fiscal Budget will be one billion, three hundred and twenty four million dollars - ($1.324 billion), while total revenue is expected to be around $1.063 billion. The figures were revealed by Minister of Finance, Prime Minister Perry Christie while nearing the end of his one hour and 15 minute Budget Communication to the House of Assembly on Wednesday.
The government is projecting $1.176 billion for recurrent expenditure, an increase of $114 million or about 11 per cent over the 2003/04 Budget. Some $31 million of this increase is required for debt service, and $83 million will be for Recurrent Services. The government's capital expenditure for 2004/05 is $148 million.
The GFS deficit is $164 million, which is 2.9 per cent of the projected Gross Domestic Product of $5,630 million. The Prime Minister explained that the deficit of 2.9 per cent was about the same as the projected outturn for 2003/04 and was "reasonable" in view of the fact that the economy was on the threshold of expanding, and it would not make sense to deflate the economy at this time.
"Thus our commitment to fiscal prudence is undiminished. We are still targeting a lower GFS deficit than that realised in the years 2001/02 and 2002/03," he said.
Meanwhile, although briefly interrupted at certain periods by members of the opposition while his communication was aired live on national television and radio, Christie firstly outlined that the 2004/05 Budget contained no new taxes, which would directly impact on the Bahamian people. He mentioned that this strategy was possible because the government was on the threshold of achieving significant improvement in the yields from the existing system of revenue administration. He also boasted that, because of economic and fiscal prudence, The Bahamas had a stable exchange rate and a relatively low level of taxation.
According to the Prime Minister, the government was expected to yield from an upsurge in investment in The Bahamas, particularly the implementation of the $1 billion Atlantis project and from anchor resort developments emerging in the Family Islands. He said that from these "ambitious" projects and others in the pipeline, The Bahamas would witness a "clear growth" in employment opportunities.
"As our economy strengthens, the government's revenues will progressively improve, providing increasing scope for my government to continue with its major priorities," he said.
On the other hand, Christie said the government proposed at a later date to review a wide range of fees and charges, which in some cases, had not been changed in "decades."
2004/05 Budget breakdown
The Prime Minister outlined that, excluding debt service, recurrent expenditure in 2004/05 will be $954 million. However, he did not give a full separate breakdown of all allocations, but stated that cabinet ministers would put "the flesh on the bones" when they made their respective contributions beginning June 2.
The main features of the 2004/05 Budget were summarised as follows:
* $428 million or almost 45 per cent will be spent on: The social sector, including education and training, health, housing, social services, youth development and provision for the start of a youth service programme and special educational needs.
* $188 million or almost 20 per cent will be spent on: National security, including the police, defence force, judicial and legal affairs. The amount spent on national security will increase when a facility fee is put in place, according to the Prime Minister.
* $173 million will be spent on: Administrative services such as foreign affairs, public service, finance and local government
* $100 million will be spent on: Economic services, including tourism, trade and agriculture and fisheries.
* $ 65 million will be spent on: Infrastructure, including works and transport.
Capital expenditure
The government has provided $148 for capital expenditure. Christie said the public had to bear in mind that the government was endeavouring to encourage private sector "buy in" to many of its programmes, therefore a significant proportion of total expenditure on social transformation would be provided by the private sector.
Christie said the principles on which the government based its strategy in formulating the capital estimates were that full and adequate provision had to be made for:
* Urban renewal and social regeneration throughout The Bahamas;
* The maintenance, modernisation and expansion of infrastructure essential to social and economic development throughout The Bahamas; and,
* The provision for sufficient capital to enable the uniformed services to carry out their responsibilities.
Government's national priorities outlined
In its effort to "lock in" enduring economic stability, the Prime Minister firstly outlined that containing the fiscal deficit and progressively eliminating it was one of the government's national priorities. He noted that it was the government's intention to reduce the ratio of government debt to GDP to about 30 per cent within the next five years.
Christie said the government's "clearest" priority was to have in place the essential infrastructure to encourage and support anchor projects in each Family Island. Another priority was providing additional resources for investment in education and skills training, as well as continuing its innovative approach to social policy formation.
Expansion of the Urban Renewal Programme, the creation of a single unified Port Authority to oversee public dock facilities, providing a Venture Capital Fund to encourage Bahamian entrepreneurs with start-up capital and the establishment of various loan guarantee programmes were other national priorities listed.
Meanwhile, the Prime Minister said while each priority was of "equal weight," appropriate balance had to be maintained in allocating the increasing flows of resources between them in the coming years.
"This will involve some degree of patience, because not everything can be achieved or accomplished in one single fiscal year," he said.
2003/04 revenue issues
The Prime Minister highlighted two reasons why revenue was "inevitably" reduced in the 2003/04 fiscal years. He said the 2003/04 Budget envisaged the introduction of a Flight Information Region (FIR) to cover Bahamian airspace, which would have collected significant fees of between $40 million and $50 million to upgrade airports. He added, however, that U.S. authorities had no objection "in principle," to the proposal, but were concerned with the security implications.
Following discussion with U.S. authorities, it was agreed that instead of implementing a FIR, the U.S. would continue to manage Bahamian airspace on security grounds and the appropriate fees collected would be provided to Bahamians authorities, he said.
"The fact that the project did not proceed in 2003/04 because of the external complications to which I have referred inevitably reduced revenue," the Prime Minister explained.
The termination of the privatisation process of the Bahamas Telecommunications Company (BTC) by the Tenders Commission also had repercussions for the public's finances, Christie pointed out.
Removal of customs duties and stamp tax on certain items
The Prime Minister outlined that the government expected a strong growth in the economy, which would generate a five per cent increase in recurrent revenue over the 2003/04 Budget level. He claimed that, until recurrent revenues recovered, the scope for fiscal concessions was limited, but added that the government would remove customs duties and stamp tax on imports from building material for use by private schools, musical instruments, ink and materials required for computers, as well as adding soap to bread basket items.
The focus of the 2004/05 Budget was to position the nation to take full advantage of the imminent surge in the performance of the Bahamian economy, the Prime Minister claimed. He therefore concluded that since May 2002 the government had worked tirelessly to explain its "clear cut" and "unambiguous" goals that were being pursued only after the most extensive consultative process.
These goals included: Maximising job creation, accelerating the social advancement and inclusion of all Bahamians, ensuring that every major settlement in The Bahamas participated in national prosperity and advancement, raising the standards of public service delivery and committing to govern with integrity, compassion and dedication to the interests of The Bahamas.
