Government revenue in 2005/2006 has exceeded expectations and is expected to be at least $55 million or 4.8 percent more than the $1.145 billion projected for the fiscal year, Minister of State for Finance James Smith announced in the Senate on Monday at the start of debate on the 2006/2007 budget in the upper chamber.
As of June 20, 2006, Minister Smith said the actual revenue collected was in the region of $1.159 billion, which already exceeds the estimates. By June 30, 2006 it is now expected to be $1.212 billion.
For fiscal year 2006/2007, the government projects total revenue at $1.347 billion or about $135 million or 11 percent over the 2005/2006 outturn.
He expressed confidence that that target will be achieved in the new year, which starts on Saturday.
"In a continuing effort to improve revenue collection, we have recently established and are in the process of staffing a revenue compliance unit in the Ministry of Finance with the objective of further reducing leakages through the use of improved data collection and analytical techniques," Minister Smith said.
He noted as well that most budget experts agree that the single most important feature of any budget is a reliable revenue forecast.
In making his budget presentation, Minister Smith stuck to a theme adopted by Prime Minister and Minister of Finance Perry Christie in the House of Assembly earlier this month when he led debate on the budget in the lower chamber.
"The Bahamian economy is likely to be in an extremely strong position over the medium term barring any unforeseen adverse events," Minister Smith said.
In 2006/2007, both the International Monetary Fund and the budget documents show that the Bahamian economy is set to grow by 6.5 percent, he pointed out.
The IMF document projects a growth rate of 6.7 percent for 2007/2008, a growth rate of 5.6 percent for 2008/2009, and a growth rate tapering off to an average of 5.1 percent for the remaining years to 2012/2013.
"In the circumstances therefore, there is a reasonable expectation that a high rate of economic growth will be achieved throughout the next political term, that is from 2007 to 2012," Minister Smith said.
"Moreover, there is no reason why a high rate of economic growth cannot be achieved beyond 2012. By any reckoning that would amount to a high rate of economic growth in at least seven out of 10 years between 2002 and 2012."
Also repeating a point made by the prime minister in his budget contribution, Minister Smith added, "Given that outlook, there is a strong basis for the claim that the Bahamian economy is set to take-off into a lengthy and sustained period of high economic growth which is probably unparalleled in our history since Independence."
Minister Smith said that in stating these projections, there is no intent to denigrate the achievements of the previous administration which experienced strong growth in four or five of the 10 years prior to 2002.
"In my view," he said, "that was a fine and timely achievement, but we now are moving to a new level of achievement where we might witness sustained and strong growth for a longer period of time. In that respect, our expectations and our ambitions have widened from those which prevailed in the 1990s."
Minister Smith said just as he wished not to denigrate in any way the achievements of the previous administration, he hoped that the critics of the Christie Administration "would not be in denial about the economic growth prospects developed by this administration which are likely to exceed earlier achievements."
But the minister said the government must continue to proceed cautiously in its approach to expenditure, pointing specifically to public sector pay.
"There is an understandable and quite proper desire to ensure that public sector employees are given the respect and remuneration for their work and in that regard, I would merely wish to caution that if the rate of pay increase in the public sector runs ahead of revenue growth arising from the buoyancy of the economy, then the economy is on a collision course with economic realities," Minister Smith said.
"I am aware that adjustment of pay expectations causes disappointment and dissatisfaction, but failure to adjust results in serious fiscal imbalances which need correction by measures which invariably hurt the most vulnerable in society. Accordingly, a careful watch has to be taken on the evolution of public sector wages."
While stating that the government was committed to ensuring that there is "proper and appropriate recognition of their respective professional competences," Minister Smith said the administration is "extremely careful not to start a destabilizing process whereby an appropriate salary adjustment to one group immediately triggered another group to seek to have a salary adjustment to restore the old relationship between groups."
To achieve maximum objectivity, he said the government will not conduct a salary review itself, but rather it will engage an international consultant to do the work based on the most advanced professional principles.
By: Candia Dames, The Bahama Journal
