Business
The Bahamas: Austerity as gov’t to implement spending cuts – social services will not be affected
The government in the Bahamas has ordered its various departments and agencies to cut 10 percent from their budgets in response to serious challenges facing public finances.
“We think we can do the spending cuts without cutting back on essential services,” said Minister of State for Finance Michael Halkitis.
Halkitis said critical agencies like the police and the Department of Social Services won’t have to cut their budgets.
The government is expected to formally announce the spending cuts in its mid-year budget statement to be presented in the House of Assembly on February 20.
“We’re trying to bring down the US$550 million deficit”, said Halkitis.
The projected deficit for 2012/2013 is US$550 million or 6.5 percent of GDP, as revealed last May in the prime minister’s budget communication.
Government debt is forecast to stand at US$4.6 billion or 54.5 percent of GDP at the end of the fiscal year.
Recurrent revenue for 2012/2013 was projected at US$1.55 billion, up from US$1.45 billion at the end of 2011/2012.
Various credit rating agencies and the International Monetary Fund have repeatedly pointed to concerns regarding the government’s fiscal position.
When it downgraded the country’s credit rating in December, Moody’s cited limited growth prospects and weak recovery in tourism and construction; significant and rapid deterioration of the government’s balance sheet exacerbated by a low revenue base, and high and rising levels of debt and weakening of debt sustainability relative to other countries.
“The Bahamas has a limited revenue base and the government relies disproportionately on volatile trade-related tax revenue and property taxes. One-time revenue inflows, the divestment of the Bahamas Telecommunications Company and stamp duties on several large tourism projects financed by foreign investment, masked a decline in recurrent revenue in 2011, and will not be credit supportive going forward,” the agency said.
“We do not expect reforms necessary to increase recurrent revenues, most importantly the introduction of a value-added tax and a modernization of the property tax system, to materialize before 2014/2015.”
Halkitis told reporters that the government does not intend to raise taxes but will focus heavily on improving its tax administration system.
Source: Nassau Guardian