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Bahamas: Government budget cuts loom
Related to country: Bahamas

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By JUAN MCCARTNEY ~ Guardian Senior Reporter ~
juan@nasguard.com:



Information obtained by The Nassau Guardian suggests that at the beginning of May the government was planning a 7 percent 'across-the-board' budget cut, which would include personnel cuts.

Documentation received by The Guardian indicates that the substantial shortfall in government revenue during this fiscal year prompted the Ministry of Finance to slash the budgetary allocation for all government departments for the 2009-2010 budgetary year, which begins July 1.

Prime Minister Hubert Ingraham is expected to deliver the 2009-2010 Budget Communication in the House of Assembly next Wednesday.

The document received by The Guardian suggests that the prime minister met with permanent secretaries at the beginning of this month and they were advised that the government's revenue collection was so far off earlier projections that each agencies' allocation would be reduced by approximately 7 percent.

The documentation goes on to suggest that the government "revisited" that position in light of the revised 2009-2010 revenue projection.

For example, the communication instructs the Gaming Board to submit its budgetary expenditure as $6,719,083.

That number is nearly 6 percent less than last year's budgetary allocation of $7,135,653.

The documentation also suggests that the Gaming Board has been asked, or will be asked, to cut its expenditure for the next fiscal year by not renewing the year-to-year contracts of six consultants who are past the Gaming Board's retirement age of 60, and 10 retired police officers who have been with the Gaming Board for 10 or more years.

On November 30, 2008, the prime minister told reporters that he expected a revenue shortfall of $150 million by the end of this fiscal year.

Last month, Ingraham, who is also the minister of finance, said the revenue shortfall experienced this fiscal year is so drastic that collecting "every dollar" that it is owed to the government will not be enough to remedy the situation.

Ingraham was responding to questions put to him by reporters who suggested cracking down on delinquent taxpayers would offset some of the revenue shortfall.

"That will not be enough," Ingraham said. "And if we [collect] every dollar that is available, that is owed, it will still not be enough. If you don't have the economic activity being generated in the economy, you cannot make the money."

Ingraham said there are in fact very few ways to recoup the losses in revenue the government has experienced this fiscal year.

"If you are not making the money, how else do you recoup it? By taxing you more? How else [do we] do it other than taxing you more?" Ingraham asked. "There are only (so many) ways to do it: Cut back on services, which means you cut back on people and the delivery of services; increase taxes; or borrow; or a combination of all three."

According to the 2007 Auditor General Report tabled in Parliament earlier this year, the government is owed nearly $400 million in outstanding real property taxes, an amount which should be sufficient to compensate for revenue lost in the 2008-2009 fiscal year.

Minister of State for Finance Zhivargo Laing recently confirmed to The Guardian that revenue collections were more than $100 million lower than what had been projected.

In his mid-year budget address in the House of Assembly in February, Prime Minister Ingraham announced that the government is arranging a loan of $200 million from a consortium of banks, which will provide funding for its stimulus program and offset the revenue shortfall in the 2008-2009 fiscal year. Last month, Ingraham told The Guardian that he expects the government will have to borrow even more than that.

He pointed out in his mid-year budget statement that the 2008-2009 budget projected a GFS deficit of 2.1 percent of GDP. (The GFS deficit is measured as total government expenditure excluding debt redemption minus government revenues excluding borrowings.)

Ingraham said at the time the global and domestic economic environment and outlook do not now make it possible for a reduction in the GFS deficit.

Earlier this month, the Central Bank of The Bahamas said in a new economic report that the government's budget deficit almost doubled to $173.4 million in the first eight months of the 2008-2009 fiscal year amid continued weakness in the national economy.

thenassauguardian

May 21, 2009

May 21, 2009 | 5:44 PM Comments  0 comments

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