Good after Bahamas.
I am grateful for the opportunity to stand before you today to open this administration’s 4th national budget press conference. I open by acknowledging God and pray for His continual wisdom and guidance in all our decisions.
Before I begin, I want to publicly acknowledge the highly skilled, competent and professional staff at the Ministry of Finance, particularly Acting Financial Secretary, Marlon Johnson, Economic Advisor in the Office of the Prime Minister and former Central Bank Governor, Wendy Craig, and the entire team for their tremendous work. I am proud to be a part of this truly extraordinary team.
This press conference is a tradition we started in 2018 with a clear objective to make budget information more accessible to Bahamians and the budget process more transparent.
For four continuous years, we have upheld our commitment to accountability and transparency by engaging in broad, multimedia public education surrounding the annual budget. This is important to note because before coming to office the budget process was not structured to be accessible for those who will be most impacted by it. This press conference is just one of the ways we maintain that commitment.
The decisions we will make over the next few weeks as part of the budget debate will guide how the government spends public resources for the betterment of the Bahamian people. And, over the course of the next few weeks, the public can expect a steady stream of resources and virtual events, all tailored to ensure everyone has an opportunity to know and understand the government’s fiscal and economic plan for the year ahead.
Indeed, this is really what the national budget represents—a plan, a fiscal and economic plan that guides the government’s strategic activities for the upcoming fiscal year.
While the revenue, expenditure, and deficit numbers are very important, the budget describes our plan, our priorities. It's really a roadmap for the country for the next year. And yesterday, the Prime Minister clearly laid out where we are, where we want to be and how we intend to get there.
Last year, in the wake of hurricane Dorian and with the terrifying scope of the COVID-19 pandemic coming into focus, the government presented a well-thought-out plan to:
● Protect the wellbeing and engender the confidence of our citizens and residents;
● Maintain economic stability during the COVID-19 induced crisis; and
● Plant the seeds for an accelerated recovery.
The priorities and targets to support these objectives were laid out in the previous budget’s Resilient Bahamas Plan and the Fiscal Strategy Report. These were not just pretty books but they were guides that the Ministry of Finance has been committed to over the last year. This Fiscal Strategy was presented to Parliament and International Agencies.
By the end of March 2021, in our report to the Bahamian people, the government invested over $327.7 million in actualizing the Resilient Bahamas Plan, funding COVID-19 public health and safety measures, unemployment assistance, small business continuity loans and grants, and tax credits for small businesses and payroll support.
To put this into perspective, through the Resilient Bahamas Plan we assisted some 85,000 displaced workers, fed 72,000 households, saved approximately 15,000 private-sector jobs, and funded an estimated 1,000 entrepreneurs and small businesses during the height of the economic crisis.
While we are encouraged by these accomplishments, we have a lot more work to do. But even as we can see an end to the global pandemic, thanks in large part to the rollout of vaccines around the world, we are still on the road to full recovery.
Our immediate response was successful at staving off and buffering the very worst effects of the pandemic while continuing to support post-Dorian reconstruction efforts in Abaco and Grand Bahama. As the Prime Minister has made clear, during this budget we are building on that success by sustaining our support for public health and social welfare initiatives while accelerating our national recovery.
ACCELERATED BAHAMAS RECOVERY PLAN
Today, the end of the pandemic is in view, but the full economic recovery to pre-crisis levels is still in the distance, not to mention our true growth ambitions for the medium and long-term.
● Today, the government still has a significant revenue problem.
● Because of this, we are forced to run high, crisis-time deficits which are adding to unsustainable debt levels.
● The country is still facing persistent unemployment, and the private sector is contending with business closures.
● For decades, we have been stuck with anemic growth as key economic sectors have seen declining output.
These longstanding and persistent problems can only be solved if we shift the fundamentals of our economy in a major way.
What is the solution?
Accelerated economic growth!
I do not believe that we can tax our way out of our current circumstances. We must grow our way out!
How do we create that in a down-economy in the middle of a global economic crisis?
We must build a foundation for greater private sector participation and better government facilitation.
At the heart of Accelerate Bahamas is a plan to invest in economic growth. And we are doing so in targeted ways to generate immediate and long-term returns.
The immediate payoff is the support we will continue for families, communities, and businesses still trying to recover from the twin crises that rocked our nation. The long-term payoff: structural shifts in the way our economy works.
As a government, we want to see greater private sector participation in the economic life of our country, and we want to be better facilitators of private sector growth. This vision is not new to us as a government or a party– it is a deeply held part of our political legacy. We believe that our country does well when we create a dynamic environment for the private sector to grow and innovate.
For too long the government has placed itself at the center of national economic life.
The Accelerate Bahamas Recovery Plan seeks to leverage limited public resources, gathered through the productivity of hard-working Bahamians, in a more strategic way. We will deploy these resources to address the immediate needs of our ongoing recovery and our more fundamental challenges, like revenue shortfalls and anemic growth.
Our plan recognises that by expanding and motivating private sector participation instead of solely relying on direct government payouts, we can create more robust pathways to increase employment, stimulate economic activity, and therefore increase revenue into the public purse.
For too long, we have relied on the government to be the primary source of employment, using public funds as a bandaid for longstanding, acute structural deterioration.
Instead, this administration is choosing to use tax incentives to stimulate private sector employment: to create job opportunities that carry the potential for sustainable long-term security and professional advancement.
Similarly, we are creating special economic zones in the Family Islands to give residents and businesses new impetus for developments that will jump start their local economies.
We have committed to targeted public sector infrastructure projects that will stimulate economic activity and we have recommitted to attracting quality foreign direct investment, as well as leveling the playing field for domestic investors. We will launch the new InvestBahamas agency and streamline the rules for investors.
We are committed to attracting private sector funding through the creation of a fund for public infrastructure projects.
We will expand the Central Bank’s Digital Currency Sand Dollar ecosystem, provide funding for upskilling our workforce and expand provisional businesses licenses.
This budget also provides for more funding for Small Business Development and is committed to new innovative crowdfunding rules.
We are going to drive the digital transformation of government and pivot away from the old bureaucratic way of doing things. By doing so, we will transform the government itself into more efficient machinery that can better facilitate private sector expansion and economic growth.
The elephant in the room is the debt level. Commentators have pointed out that the current fiscal year, and the one to come, have elevated borrowing by some $2 billion. As the Prime Minister said yesterday, in this administration, we do not gloss over this fact.
The $1.3 billion projected deficit this current fiscal year and the $951 deficit projected for the 2021/2022 fiscal year reflect the extreme economic crisis caused by Dorian and the pandemic, and our response to these crises.
This is what has caused us to postpone – only temporarily – the path to fiscal consolidation and balanced budgets that we were pursuing with great success.
It was this administration that brought the deficit down to its lowest point in a decade. But given the circumstances – and only because of these circumstances—we have had to deviate from this very deliberate objective.
Both Bahamian and international economists have pointed out that the government’s fiscal response is the right one. It was even acknowledged by the IMF that postponing our debt targets were appropriate. In its recent Article IV assessment of the Bahamas, the IMF had this to say:
“Directors agreed that the near-term priority is to save lives and livelihoods and postponing the achievement of the public debt target by another two years in response to the pandemic is appropriate. However, putting debt on a clear downward path over the medium-term and rebuilding buffers will require significant fiscal effort.”
This is precisely the balance we have struck in the Fiscal Strategy and continued in this budget.
Some will say take care of the people, now is not the time to focus on debt reduction, and others will say this is unsustainable and we must stop the spending and tax breaks or even raise taxes to reduce the debt level.
This budget strikes a necessary balance.
It provides very targeted and focused tax breaks and concessions that are principally geared on accelerating the pace of economic activity and recovery. Most importantly, all of the tax breaks and concessions are paid for by the incremental tax measures outlined in the budget. We made the deliberate decision that the concessions would have to be matched with corresponding revenue-gains to pay for them.
As far as ensuring that there is a strategy to address the nation’s public sector debt levels going forward, I remind everyone that we are the administration that put in place a Debt Management Act precisely to ensure that this government, and every future government, develops and publishes a debt management strategy.
You will also hear our team speak to the Debt Management Act that comes into force in July that will require a unit to be formed to increase capacity and for the debt management strategy be published. In addition, we will remain focused on meeting the targets in our Fiscal Strategy to reduce the deficit to acceptable levels, with fiscal discipline, sinking funds, and economic policies that accelerate growth.
So, as the Ministry of Finance kicks-off the budget season with old and new traditions - the Budget Communication delivered in the House of Assembly and the National Budget Press Conference - I want to encourage the Bahamian people to join the conversation, tune into the debate, and connect with the Ministry of Finance on social media.
This Administration has a plan that will support the country’s accelerated economic growth and continue support for the most vulnerable in the midst of this ongoing crisis.
We want you to know about the plan, ask questions about the plan, feel good about the plan and understand how the plan can and will benefit you. And, for the entire month of June, the Ministry of FInance will engage in public education activities around the plan.
We have named it the Accelerated Bahamas Recovery Plan (or Accelerate Bahamas, for short), and we are confident that this time next year, we will have achieved its objectives.
With that, I will now turn it over to the Acting Financial Secretary Mr. Marlon Johnson, who will go over the seven key policy pillars of Accelerate Bahamas and the specific budget measures under the plan.