The upcoming mid-year budget could find the government borrowing even more money.
In fact, State Minister of Finance Michael Halkitis yesterday admitted that Parliament has already given the government authorisation to do so, if needed.
“If we have to do anything additional, it would be because we have to pay for prior commitments – things that had been purchased but there was no money for and anything unforeseen like contingencies,” he said.
“But we’re in the process of getting all the numbers finalised. The first half ended December 31. Around next week, we should start getting the preliminary numbers to see where we are. We have actually already started the process of putting the budget together to see if there are any changes we need to make.”
The 2012/2013 budget – the government’s first fiscal plan since winning the May 7 General Election – left the Christie administration with very little wiggle room.
In fact, from the onset, Prime Minister and Minister of Finance, Perry Christie noted that room for maneuver, at least in the short term, was severely constrained by the dire fiscal situation the Ingraham administration left in place.
“My government’s deficit and debt levels at this time are much worse than we had anticipated. We have been left with sizeable, ongoing capital expenditure commitments and a legacy of contracts entered into in the final days of the former administration,” the prime minister said at the time.
“As my government is firmly committed to fiscal prudence and the return of the fiscal accounts to more desirable and sustainable positions, we will need to adopt flexible, innovative and fiscally responsible approaches as we initiate our comprehensive programme of legislative proposals and policy initiatives to address the key economic and social challenges of our country.”
Only minutes after presenting the new fiscal plan, the prime minister announced plans to borrow $504 million to cover the fiscal deficit at that time.
Five months later in October, it passed a resolution to borrow an additional $77 million from the Inter-American Development Bank (IDB) for supplementary financing of the New Providence Road Improvement Project (NPRIP).
The work was initially estimated to cost taxpayers $112 million. However, that figure soared to $206 million due to massive cost overruns.
The multi-million infrastructural project has not yet been handed over to the government.
However, Minister of Works and Urban Development Phillip Davis expects that to happen this month.
Also working against the government is the fact that revenue is not where it should be.
“It’s not as good as we would like,” Minister Halkitis told reporters yesterday.
“It picked up a bit late. We have some initiatives in the works to improve it. Some things we will roll out during the mid term budget that should have some effect on the second half of the year.
In prudent fashion, the government projects recurrent revenue to come in at $1,550 million or 18.3 per cent of GDP, only a slight improvement in performance over the 2011/2012 fiscal period.
Meantime, in hopes of reining in its expenditure, the government established a Debt Management Committee, comprising representatives of the Ministry of Finance, the Public Treasury and the Central Bank to develop and put in action a debt strategy that would lead to lower borrowing costs while minimising risks occurred.
This was being done with the technical assistance of the International Monetary Fund (IMF).
The government is expected to report on the progress made in terms of the structural fiscal reforms during the mid-year budget statement next month.