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Prime Minister the Rt. Hon. Perry Gladstone Christie leads Cabinet Ministers and other Members of Parliament, as they head to the Parliament for the Prime Minister’s presentation of the 2012/2013 Budget Communication. (BIS Photo/Patrick Hanna)
NASSAU, The Bahamas -- In light of the very serious deterioration in The Bahamas Government’s fiscal position in 2011/2012, this administration must set the fiscal parameters prudently in 2012/13 to begin the process of getting the Government’s fiscal house in order.
But at the same time, the Government still has to achieve its short-term priority initiatives, Prime Minister the Rt. Hon. Perry Gladstone Christie said while presenting the 2012/2013 Budget Communication in Parliament, Wednesday, May 30.
The Prime Minister said the fundamental challenge for fiscal policy is the very large negative imbalance that has been allowed to develop in respect of the Government’s Recurrent Account.
“The gap between Recurrent Expenditure and Recurrent Revenue, both expressed as a per cent of GDP, has quadrupled in the last five years.
“In 2006/07, the negative spread between the two stood out at 0.8 per cent of GDP,” he said.
This year, the imbalance has grown to 3.2 per cent of GDP. In the last five years, the ratio of Recurrent Expenditure to GDP has grown from 17.4 per cent to 21.3 per cent, Prime Minister Christie said.
“However, the ratio of Recurrent Revenue to GDP has only risen from 16.6 per cent to 18.1 per cent.
“In essence then, rather than only borrowing to finance productive investments in our nation’s future prosperity, the previous administration was also increasingly borrowing to pay for an increase in everyday expenditures in the form of salaries, rent and utilities that was not matched by an increase in revenues,” the Prime Minister said.
The Government’s key priorities will be to redress the unsustainable imbalance in its Recurrent Account, he explained.
It will do by constraining the growth of Recurrent Expenditure relative to the growth of the economy and by engineering a transformation of Recurrent Revenue to bring it to a more appropriate level relative to the size of the economy, the Prime Minister said.
“Having stated this reality as clearly and as forcefully as I can, let me be clear. My Government fully acknowledges and accepts that the fiscal deficit must be constrained in the short term and significantly reduced thereafter.
He added, “As such, in the very short period that has been available to us since coming into office and, given the expenditure commitments already on the books for the coming fiscal year, we have done what has been feasible to achieve the objective.”
The Government will implement the fiscal measures necessary to improve the Government’s fiscal position and rein in the growth of Government debt, Prime Minister Christie said.
As a means of reducing the Government’s expenditure in respect of interest charges on the Public Debt, the Government is working toward the implementation of a modern Debt Management Strategy, he said.
A Debt Management Committee has been established comprising representatives of the Ministry of Finance, the Public Treasury and the Central Bank, to develop and put in action a debt strategy that will lead to lower borrowing costs while minimising risks incurred, the Prime Minister noted.
This is being done with the technical assistance of the IMF.
“We will report on progress made in respect of the structural fiscal reforms that we are initiating at the time of the Mid-Year Budget Statement in early 2013,” he said.
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