CLOSING OF THE MID-YEAR BUDGET DEBATE
On the 31st of May 2023, I will return to this House to present the 2023/2024 Budget. It will be the country’s Jubilee budget and will feature important and innovative policies that will lay the foundation for our next 50 years as a nation.
This will be just our second full fiscal cycle to deliver on our promise of a new day for the Bahamian people and fulfil our mandate as the duly elected government of The Bahamas.
In that budget, as always, we will put the Bahamian people first, focusing on creating widespread and diverse opportunities at all levels, while creating a more equitable society and providing more support for those who need it the most.
And yes, Madam Speaker, we expect to see increased revenues and disciplined expenditures as we work toward our goal of a 25% Revenue-to-GDP ratio, fueled primarily by increased efficiency and fairness in tax collection and a booming economy.
Already, we are seeing the fruits of our strategic approach to fiscal management come to bear, as we have successfully lowered the debt-to-GDP ratio from over 100% under the previous administration to just over 80%.
We expect continued decreases, as we seek to take it all the way down to 65% by the 2026/2027 fiscal year.
The country’s fiscal performance is finally improving, after years of missed targets and broken promises.
I know that there are some, like the leader of the opposition – the current leader, not the leader in waiting, or I should say, not the former leader, who believes that our projections are too optimistic.
If this current mid-year budget before us didn’t already happen, such that the numbers represent incontrovertible fact, they would be saying that the six-month out-turn, which has been presented, is too optimistic.
Madam Speaker, our optimism seems to be at the heart of their argument. It means they think we are too filled with hope.
It means they thought we were wrong to lower customs duties and lower VAT. It means they thought we were wrong to increase the tax exemption for first homeowners and wrong to increase our investment in agriculture.
It means they think it was wrong to bet on the Bahamian people.
I know they never really understood our approach. They did not see how the strategic and targeted lowering of taxes, combined with tax incentives, would boost economic activity and increase government revenue.
They did not see how empowering the Bahamian people financially leads to healthy revenue performance for the government.
When they fail to understand basic economics, Madam Speaker, they drown in their own pessimism.
But to the Bahamian people, the improvement in fiscal performance feels like a New Day. Gone is a government constantly warning of imminent fiscal disaster; instead, Bahamians can rely on steady, determined steps in the right direction. We have replaced perpetual crisis with calm and steady progress.
We are not responsible for the opposition’s confusion or their lack of faith in the Bahamian people.
I encourage them to watch us and learn.
They can take notes if they have to.
When they increased VAT by 60%, they didn’t meet their own revenue projections — so they are struggling to comprehend how we lowered VAT and lowered or eliminated customs duties on dozens of food items and essential goods, and not only met our revenue projections but still be on track to have the highest recorded revenue as a percentage of GDP in the last ten years.
Madam Speaker, do you know that during their 4 years in office, year after year they failed to meet their budget projections?
Year after year, the deficit grew to alarming levels.
Year after year, the debt-to-GDP ratio grew to unsustainable levels, until finally overwhelmed and out of ideas — or as the Bahamian people would say, they had run out of rope — they were forced to an early election, with a clear understanding that if by some slight chance they won, they had to increase taxes, including increasing VAT to 15%.
Now they’re gonna say that ain’t so, but there are only two possibilities: Either they had NO plan to rescue the country from a fiscal crisis, or they did have a plan – but were so sure it would lose their support that they kept it hidden before Bahamians voted. Remember, Bahamians were offered no details, just vague warnings that dire fiscal conditions required a new mandate.
So what has been crystal clear throughout this debate is that nearly all of their commentary is either the product of typical political posturing, or ignorance concerning the tenets of sound fiscal governance and basic economics.
Permit me a moment to clear something up, last week, I spoke about a headline in the Nassau Guardian about the fiscal deficit.
I said that the headline was wrong; but in fact, that headline accurately reflected what was said in my communication but was inconsistent with the technical information we provided, that is, The Mid-Year Budget Performance Report, which was tabled. I want to take responsibility and apologize, to thank the Guardian for their follow-up reporting on the progress the government has indeed made on fiscal matters. When we get something wrong, we will say so.
If only everyone in this House had the same interest in getting it right. Because while one opposition leader is saying we are too hopeful – the other leader, the once-Leader and current Leader-in-waiting – the one who neglected the poor in his first term but promised to remember them in a hypothetical second term — now has numerous insincere complaints about this government’s spending.
Spending is down against our budget projections.
Spending is also on a downward trend relative to revenues, in the first 6 months of fiscal year 2021/22 expenditure was 12.6% of GDP, for this fiscal period it was 11.6% of GDP, yet they continue to cling to this desperate narrative.
Luckily, facts and numbers are stubborn things.
Facts do not conform to the fantastical ramblings of bygone leaders.
As I have patiently explained in my contribution to this debate, The Bahamas has been greatly impacted by the global rise in commodity prices. In this, we are not unique. In fact, these price increases have affected every nation — but we have weathered this storm better than many others.
This administration has taken proactive measures to reduce the impact of inflation, including an increase in the minimum wage and addressing long outstanding public sector wage negotiations.
As a result, we have directly poured tens of millions of dollars into the hands of ordinary hard-working Bahamians and mandated the private sector do the same. This resulted in across-the-board salary increases for tens of thousands of public servants and a quality-of-life increase for all families reliant on the minimum wage to make ends meet.
The result of the increase in minimum wage meant that those persons received an extra 1 week’s pay every month or an increase of 24% in their base salary.
Both of these moves were necessary to protect people as much as possible from the ravages of the global inflation crisis.
We have done this without taking on extraordinary funding to support our balance of payments and without any drastic rundown on our reserve levels.
Despite concerns raised by the Leader of the Opposition last year October, we see no downsizing by Bahamian businesses.
In fact, we are seeing current businesses expand and many new businesses springing up every day.
Our confidence and faith in the Bahamian people are being reciprocated, as we see Bahamians investing more and propelling the nation’s economic growth. It’s always a bad idea to bet against the Bahamian people.
One of the purposes of annual incremental increases for government workers is for salaries to keep pace with typical inflation rates.
When a government, like the former administration, elects to put a stop to annual salary increments, it leads to stagnant wages that are made smaller each year by the rise of annual inflation.
Thankfully, this administration was able to bring salary increments back for 20,000-plus public servants.
But what we cannot do, Madam Speaker is go back in time and reverse that ill-informed decision in the first place.
Their decision undoubtedly made a bad situation worse for many Bahamians as global inflation increased.
I do not know where the side opposite, and their leader in waiting, finds the gall to level his commentary at us, Madam Speaker.
They brought on the largest increase in VAT since it was implemented – a 60% increase in prices for the Bahamian people.
Prices skyrocketed under them long before the pandemic began.
They should know better.
Instead of making their ill-informed commentary, they should be hanging their heads in shame and apologizing to the Bahamian people.
Their leader-in-waiting, who led a government that saw deficits climb to the highest levels in Bahamian history, has the nerve to talk about spending binges.
I feel ashamed of them.
The facts do not support their assertions.
Overall, expenditure is roughly in line with last year’s expenditure and is actually smaller relative to the amount of revenue we have collected.
I should explain this so the side opposite understands: when we say the deficit has decreased, we are saying that we are spending less, relative to what we are making, and this amount is trending downward year-over-year.
When it comes to meeting our fiscal targets, we’ve already surpassed even their best pre-pandemic and pre-Dorian years.
We have surpassed their fiscal performance even while raising the minimum wage, addressing payment backlogs, increasing pensions, decreasing VAT, decreasing and eliminating duty on scores of items, conducting record amounts of repatriations of undocumented migrants, and incentivizing home ownership, all while maintaining robust social support initiatives.
They did not build a single low-cost home on their watch, Madam Speaker, not one! Nada, Zilch!
We have built dozens of homes and hundreds more are in the pipeline.
They did not build a single hospital – we have two on the way.
We left 4 schools under construction in 2017, 3 in the Family Islands, Lowe Sound, Staniel Cay, and Holmes Rock, and 1 in Nassau, STAR Academy.
After 4 ½ years in office, they didn’t complete one.
Not even one!
I want that to sink in for a moment.
Record deficits, record debt and they couldn’t even finish 1 school we left under construction.
Most of which were more than 50% complete.
I cry shame on both leaders!
But I know they have no shame, because if they did, when it came to fiscal and budgetary matters, they would be quiet, and hope we forgot how they mismanaged the economy and deprived our people of even basic needs.
Throughout The Bahamas, infrastructural improvements are being rolled out.
Here’s just one example: we just paved 45 miles of road in Rolleville, Exuma, a few weeks ago.
All of this, and yet we will still have better fiscal performance than their pre-pandemic years. And we accomplished this while reversing their ill-advised policies and initiating the nation’s economic recovery. If they were thinking about the country instead of politics, they would be applauding the progress they see.
And we have not done it by bringing in new major taxes or increasing VAT to 15% as they were contemplating.
We have done this by growing the economy.
We have done this through more efficient revenue collection.
For my first Supplementary Budget, you may recall that I spoke of the need for a fully empowered Revenue Enhancement Unit.
Today, we are seeing the results of this effort.
We have to ensure that everyone is paying their fair share in this country. Paying taxes is not something people can just choose not to do.
The vast majority of people are paying their taxes, and it’s not fair for those who follow the law to shoulder the financial burden of those who do not.
We are seeing the best real property tax compliance rates in many years.
The worst culprits when it came to non-payment, and the records reflect this, Madam Speaker, were many owners of the most valuable properties in The Bahamas.
We have ensured that they are paying their fair share. And I believe the side opposite doesn’t like that, Madam Speaker.
Many of these property owners are their friends, their funders, and some would even say that they are the real leaders calling the shots for the side opposite.
We saw evidence of this with the unjust and unfair regime they imposed over the hill during the pandemic.
One set of rules applied for over the hill, and another for their friends in the west.
Or when these same friends wrote a public letter that prevented the previous administration from bringing in Real Property Tax reform.
We can see who the real bosses are.
Much of our revenue gains can be attributed to the widespread economic growth our policies have created.
More Bahamians are working now and many of those who are working are making more money to take care of their families and spend within the domestic economy.
Tourism numbers are at record levels, bringing money into our economy.
We have also achieved results through more disciplined spending, prioritizing high-impact initiatives, and making hard decisions where necessary
Where certain projects or activities have exceeded the allocation in the budget, they have been funded mainly by re-allocation within the budget, not by unfunded increases in the budgetary allocations.
Where we have increased the budgetary allocations, for example in Social Services and with respect to certain wage payments, they have been supported by money in the bank. and informed by our need to take care of those who need it the most.
We are fully committed to our deficit targets in this fiscal year and fully committed to empowering and providing support for Bahamian people and businesses.
I heard comments about this administration benefiting from the inherited policies of the previous administration.
I note that these comments do not identify the policy initiatives which we have benefited from, simply because there was no policy initiative of theirs that had a positive impact.
That is the reality.
The previous administration was lost and rudderless, headed for collision on a rocky shore.
It was our administration who made the wise decision to re-establish the Revenue Enhancement Unit and re-employed private collectors for property tax.
The results speak for themselves, and I presented this evidence when I opened the debate.
Revenue in the first six months accrued at a rate not seen in several years, and certainly better than the pre-pandemic fiscal year 2017/2018 when it was 40.9% of the budget or fiscal year 2018/2019 when it was 38.2% of the budget.
I want to remind the House that this year it was 44.9% of the budget.
The Member for East Grand Bahama made comments about the new Public Financial Management Bill and, specifically, about the removal of the independence of the Fiscal Council.
These comments simply reinforce what we have been saying.
The Fiscal Council as constituted in legislation was unworkable: vital issues had not been considered in designing the membership composition of the Council.
There were no guardrails to ensure that the composition of the Council adequately enables them to perform the job they are being asked to do.
This is not to say that they are not professionally accomplished individuals, but what the public needs is the surety that the Council was composed in a way that maximizes their ability to get the job done.
I believe that the member from East Grand Bahama will greatly benefit from a technical explanation of the Bill, which is being prepared.
This Bill had input from a wide range of internal stakeholders and benchmarks against similar legislation in other countries.
What is being done is in accordance with international best practices.
It will correct many of the flaws with the current legislation, one of which was to treat the Public Financial Management Act as if it was a part of the penal code.
The present Act is overly prescriptive and does not reflect the current realities of the systems and processes used for public financial management in The Bahamas. It is as if the drafters never engaged with the practitioners. The legislation reflected a government totally disengaged from the people on the ground.
Our reforms are far from done.
We are moving ahead with our review of The Central Bank Act, The Statistics Act, and the Public Debt Management Act.
With respect to The Central Bank Act, we have tabled an amendment to align our legislation with the IMF’s intent, with respect to the use of the special dispensation of Special Drawing Rights.
I believe the Leader of the Opposition –
the current leader, not the Leader-in-Waiting – received a special briefing from the Central Bank in this regard, explaining to him how this all works after his remarks at the beginning of the year.
We are going even further with our reforms, as the Central Bank has recently indicated to the Government that they will propose another amendment to bring clarity around open market transactions by the Central Bank.
With the Statistics Act, the present staff have been disadvantaged and we must fix this by legislation.
It is an unfortunate thing.
Perhaps the member for East Grand Bahama could explain the former administration’s rationale for depriving benefits of the employees of the former Department of Statistics. I would hope that this decision was the product of the lack of proper consultation and not intentional.
It is true that I recently described the current Leader of the Opposition at a PLP Branch Meeting in Killarney as “a wonderful actor”. I was sorry to learn he took offence. How he could misinterpret my praise as an insult is beyond me.
His acting skills are exceptional, and he brings a lot of drama to our proceedings. Madam Speaker:
To remove any doubt that might still linger, I wish to emphasize how I fully respect the passion and commitment that actors bring to their craft.
And I so admire the range of roles that they take on.
One day they might be playing, for example, an embattled Leader, struggling for political survival, fighting off the plotting and scheming and whispering of those next to him… The next day, they might be playing an outraged but ill-informed representative, bluffing their way through facts and figures.
Actors have a marvellous ability to play different characters and scenes, and I have the utmost respect for their talent and skill.
In fact, in developing the Orange Economy in The Bahamas, my administration is fully committed to providing many more opportunities for all those working in the creative industries.
Throughout the remainder of our term, the Honourable Gentleman will soon see that he will have many more career options available to him, should he be in need of additional or alternative employment.
In his present role, my only regret, Madam Speaker, which I hope he accepts is well-intentioned, is that I wish the Honourable Gentleman would focus more on the serious debate, rather than the theatrics of shouting and banging on the table in this Honourable House.
A reasoned debate would be far more beneficial to the Bahamian people so that they might fully appreciate all aspects of the work that is being carried out in their name and on their behalf.
I also want to address my disclosures made during the opening of the debate about companies and NGOs contracted by the former administration to handle public funds.
The lack of guardrails and accountability mechanisms has been an eye-opening experience for me and my colleagues.
This is what happens when you act recklessly.
That was the real spending binge, Madam Speaker: a 54-million-dollar spending binge that they admit was not properly managed.
Nor was there proper financial oversight and record-keeping, to track how the people’s money was spent.
They would tell you they didn’t put these protocols in place because they were in a rush to get assistance out.
Yet, that logic does not seem to apply to the many protocols they placed on the Bahamian people during that same period.
Their business-strangling regime had the economy on life-support and they went to great lengths to enact and enforce these rules.
But somehow, they didn’t see fit to enact the same level of rulemaking and enforcement for over 50 million dollars of the Bahamian people’s money.
That’s the problem with those on the other side, Madam Speaker, they always suspect the worse of the people while not paying attention to the horrors taking place within their own house.
It seems that every day new evidence is being unearthed about the peculiar practices of the former administration.
Some of these practices go beyond bad governance: some border on criminality and some — as we have seen– have resulted in criminal charges.
We are identifying and correcting as we go along, and many of these matters are being dealt with discreetly.
However, once the information is fully gathered and analyzed, the public must be briefed on what our investigations are revealing; the level of incompetence, lack of checks and balances, and the effects of total abuse of power we met in place and what we are doing to correct these abuses and hold the people and organizations involved accountable.
We are turning the page and entering a new phase of economic growth, healthy fiscal performance, low unemployment, and unprecedented investments in and by the Bahamian people.
We have only been in office for a year and a half, but I believe that the Bahamian people can clearly see and feel the positive impact of our policies and the new direction that the country is headed in.
On our agenda for the remainder of this fiscal year, we will initiate an unprecedented investment in food security, roll out a significant increase in social support, continue our investment in small and medium-sized businesses and lend support for new businesses through the SBDC.
In essence, we will continue with our people-focused agenda, which also includes things like addressing learning loss, redeveloping and expanding 14 airports throughout our Family Islands, protecting our borders, recruiting hundreds of new Defence Force, Police Force, and Immigration officers, and renovating Family Island clinics.
We have gotten off to a good start.
Our policies have started a much-needed course correction.
We have reached many people, and we know there are yet many more still to reach. Everyone is important to us.
And by working in concert with the Bahamian people, through God’s grace, I believe that we can successfully transform our economy and our government to create a healthier, more vibrant, more inclusive and more equitable country for all.
May God Bless the Commonwealth of The Bahamas.