NASSAU, Bahamas -- Deputy Prime Minister and Minister of Finance the Hon. K. Peter Turnquest said given the revenue loss and expenditure increases the Government expects to incur, the fiscal deficit for FY2019/20 is now expected to increase by approximately $677.5 million, to 5.3 per cent of the Gross Domestic Product (GDP). 

“This exceeds the approved budget target of $137 million, and therefore has corresponding implications for the financing envelope,” DPM Turnquest stated as he presented the Supplementary Budget Statement in the House of Assembly, Wednesday, January 29, 2020.

He noted that to cover the costs associated with the hurricane, and the spending imperatives previously outlined, the Government will now require new financing in the sum of some $507.9 million. It is the Government’s intention to source these funds through a number of potential facilities, including:

• the $100 million IDB contingent credit line—of which $80 million is likely to be drawn down;
• a $50 million loan from the Caribbean Development Bank (CDB);
• up to $200million in a club loan from a consortium of domestic bank lenders; and,
• the remaining $177.9 million will be sourced by way of other instruments

DPM Turnquest said, “These sources which I have identified will be supplemented with $20 million from the Dormant Accounts Fund and the $12.8 million payout from the CCRIF which, together with the $507.9 million in borrowings, will cover the $540.7 million required in new financing.”

He added that he would be presenting a draft resolution for the $50 million policy-based loan from the Caribbean Development Bank, which he mentioned as a part of the list of potential financing options for the Government.  “This facility is intended to provide financial support to hurricane recovery as well as to maintain ongoing reform. With an interest rate of 4.8 percent and an eight-year maturity with a grace period of two years, the Government agreed that this facility is necessary to progress restoration efforts.”

The DPM explained that the Government is also using this opportunity to advance its liability management initiatives.

“As was done in FY2018/19 with the conversion of Central Bank advances to long-term debt, the Government will convert $80 million of its short-term debt to long-term in FY2019/20.  This will also meet the continuing demand of the market for longer term Government paper. In doing so, the total financing requirement will increase by this $80 million to $587.9 million; however, as the short-term debt will be repaid once the conversion is complete, the conversion of this $80 million will not increase the level of outstanding public debt.”

He stated that taking the financing requirements into consideration, the level of Government debt is, therefore, anticipated to increase from the projected $7,612.0 million at the outset of the budget, to $8,204.5 million, or some 64.4 percent of GDP.

“It is the Government’s intention to maintain a very close tracking of expenditures and revenue in the coming months, to determine the extent to which we could realize savings from the revised fiscal positions we are presenting here today.”

DPM Turnquest said, “For example, we have seen particularly good performance in revenue collections up to the midpoint of FY2019/20, against the backdrop of our revenue enhancement initiatives, namely, the establishment of the Revenue Enhancement Unit (REU) in July and the rollout of the Customs Electronic Single Window, Click2Clear.  The updated fiscal position of the country will be published in our Q2 Fiscal Update report that will be published in a matter of days.”