"A deficit of $80.8 million was realized during the month, representing a 32.2 percent ($38.4 million) decline from the prior year. Consequent of repayment efforts, net debt expansion during the month was contained to $0.5 million."
The preceding statement from the fiscal snapshot as at May 2022 sentence represents a very positive positioning of the country’s performance to date. Any assessment must however give due allowance for the fact that the information is somewhat dated.
The results show a declining in deficit compared to last year and a containment in the growth of debt, both are significant positives. Should this trend continue, it positions us well to realize the projected deficit of 4% at the end of the current fiscal, a trajectory that holds critical implications for the cost of debt, and the overall fiscal consolidation and recover. We should be reminded that the midterm budget had set a target for a deficit of 8% and this eventually settled at 6% signaling very positive momentum toward planned surplus in 2025/26. It is important for the country to be able to maintain this planned course and in this regard, the current outcomes are extremely positive.
Very importantly, the revenue growth continues with a 19% increase year over year outturn. Having regard for the fact that the current budget rest heavily on a robust return to pre-2019 levels any resulting growth in revenue is a positive. Recent projections suggest that the current pace of recovery will slow and with the numbers, two months behind commentary have to be tempered. It is hoped though that June and July would experience similar outcomes even though that could be at a declining rate.
Since May, a number of intervening developments necessary to give full context to the performance have emerged. It is impotent to take note of the increase in the US Treasury reference rate. The reduction in output in the US economy for a second quarter, despite robust job growth provides useful context. The World Bank downward adjustment in global growth is also significant for us. The country will face some very clear headwinds at least for the rest of the current calendar year. It is critical that policymakers are able to squeeze out the best performance possible subject to the economic constrains. The current performance of the country’s USD bonds and the recent discussion around the engagement of Rothschild are indicative of the tenuous nature of our fiscal state of affairs and against this backdrop improving revenue, declining deficit and contraction in expenditure is a good thing.
Policymakers will be faced with some bug decisions in the short-term as continued call for support to cushion the effect of inflation increases and as they grapple with the developments mentioned. The challenges are significant but the expectation is that creative means will be found to keep the county’s finance as steady as is possible. There is very little room for mistakes, even less for flexible maneuvering and consequently maintaining outcomes as close as possible to the projected path is an imperative.
Hubert Edwards is the Principal of Next Level Solutions Limited (NLS), a management consultancy firm. He can be reached at firstname.lastname@example.org. Hubert specializes in governance, risk and compliance (GRC), Accounting and Finance. NLS provides services in the areas of enterprise risk management, internal audit and policy and procedures development, regulatory consulting, anti-money laundering, accounting and strategic planning. He also chairs the Organization for Responsible Governance’s (ORG) Economic Development Committee. This and other articles are available at www.nlsolutionsbahamas.com