NASSAU, The Bahamas – With the historic release of the first ever Fiscal Strategy Report (FSR), the Government continued to make good on its commitment to transparency and accountability.

The Fiscal Strategy Report (FSR) is a medium term, three-year fiscal forecast that sets the fiscal parameters and targets for the preparation of the government’s annual budgets. It establishes the broad parameters related to revenue, expenditure, deficits and debt needed to ensure the Government meets its fiscal responsibility targets. The FSR also gives a broad explanation about why these targets, pegged to GDP, are appropriate and necessary, given the Government’s growth and development plans and the various internal and external fiscal pressures constraining its actions.

“The tremendous advances we are making in transparency and openness will have a long-lasting, positive impact for The Bahamas, and I hope this is not lost on the public. We are practicing responsible fiscal management and inclusive governance by fearlessly laying it all out for the public in the Fiscal Strategy Report,” said Dr. Hubert Minnis, Prime Minister and Acting Minister of Finance.

“The FSR provides a once rare glimpse into the Government’s thinking when it comes to fiscal matters. It will be tabled in Parliament and published online annually, every third week in November. This gives parliament an unprecedented opportunity to participate in the budget planning process. It gives the public clear fiscal benchmarks against which they can assess the government’s fiscal management and performance,” said Prime Minister Minnis.

The comprehensive report includes: 1) a review of economic and fiscal performance of the most recently completed fiscal year, FY2017/18 in this case; 2) a macroeconomic and fiscal forecast for the current and next three fiscal years, and; 3) an outline of the fiscal policy moving forward. The FSR also analyses and identifies risk factors and mitigation strategies related to the fiscal policy; and outlines the Government’s debt management policies and activities. “This has never been done by any previous government. More importantly, because of the Fiscal Responsibility Act we passed in October, we have enshrined this process in law. Every future government will be bound to continue in this tradition of transparency and accountability. This is historic. It is a monumental shift towards responsible fiscal management, good governance, and true government oversight,” said Prime Minister Minnis.

The key components of the 2018 Fiscal Strategy are:

1. Targeted investments toward a transformative socio-economic growth agenda
2. Managed growth in recurrent expenditure, targeting a public spending level that is not to exceed 20 per cent of GDP
3. Incremental increases in capital expenditure (approximately 2.5 per cent) to strengthen public infrastructure
4. Enhanced collections to increase the yield of the current tax base
5. Continued assessment and reform of the overall tax system

“We are backing up our commitment to balance the budget in three years and the FSR lays out how. We are committing to no further increases in the VAT rate, and to rebalance the tax burden between the provision of goods and services, which includes implementing some planned $100 million in duty and excise reductions over the remainder of our mandate. We will also continue to look at the efficiency of our current business license tax,” said Prime Minister Minnis.

“We are committing to manage the growth in our expenditure levels very tightly, using a target that is even more aggressive than our regional counterparts. This is important for several reasons. Firstly, if we spend without a reasonable limit that means we have to grow our revenue base at an unsustainable level or borrow, borrow, borrow, which is simply not realistic or financially sound. Secondly, capping recurrent expenditure at 20 percent of GDP when the regional average is 24 per cent, makes us more competitive,” continued Prime Minister Minnis.

“It is not news that we need to reduce our debt, cut out deficit spending, boost government revenue and strategically target our investments. But, we are pleased to be the first government that has laid out a fiscal roadmap for the public to review, scrutinize and benchmark. We are demonstrating what it means to be the People’s Government,” said Prime Minister Minnis.

According to the rules set out by the Fiscal Responsibility Act, 2018, after the FSR is tabled, Parliament must review the FSR and formulate recommendations to present to the Government by the end of January 2019 The Act also establishes an independent Fiscal Responsibility Council, which is mandated to review the FSR, provide commentary on its contents and recommendations to the government. The Council also has the right to access fiscal data from the Ministry of Finance and its personnel.

2018 Fiscal Strategy Takeaways

The release of the Fiscal Strategy Report (FSR) is another historic first in the government’s herculean advance towards more transparency and accountability in government. The FSR is a comprehensive document that presents the government’s medium-term fiscal forecast and states its intentions with respect to future budget planning. It is a building block towards setting the next budget. The Ministry of Finance published the FSR on its website on Wednesday, November 21, 2018, in accordance with rules set out by the recently enacted Fiscal Responsibility Act, 2018.

The process of fiscal strategy reporting is moving the government away from an ad hoc and informal approach to fiscal planning. Instead of planning and operating in one year cycles, the government is adopting a multi-year strategic approach that incorporates data analysis and forecasting over the medium term.

In the 2018 FSR, the Ministry of Finance notes it is in the process of strengthening its internal analytical capabilities in macroeconomic and fiscal modeling and forecasting.  This initiative, together with enhanced collaboration with key agencies, such as The Department of Statistics and The Central Bank of The Bahamas, will strengthen the Ministry’s ability to more fully incorporate forecasting models in respect of future fiscal strategy reports.

Here are a few key takeaways from the 2018 Fiscal Strategy Report, including priority policy plans for the Government:

1. Investing in transformative socio-economic growth plans
2. Balancing the budget
3. Continuing revenue enhancement and tax reform (not to include any further VAT increases)
4. Honoring commitment to reduce customs and excise taxes, rebalancing the tax burden between the provision of goods and services
5. Capping expenditure at no more than 20 per cent of GDP
6. Reducing the debt and containing future debt growth in line with legally mandated fiscal responsibility targets 
7. Strengthen public infrastructure
8. Advance modernization process and move to digital government
9. Proactively address fiscal pressures on the horizon
10. Strengthen internal analytical capabilities in macroeconomic and fiscal modeling and forecasting

Click here to view the Fiscal Strategy Report November 2018