NASSAU, Bahamas — The country has recorded the lowest first quarter deficit in more than ten years, Prime Minister Philip E. Davis said yesterday, adding that government collected almost $60 million more in revenue in the first quarter of the budget year 2022/2023 than during the same period in the previous budget year, The Nassau Guardian reported on Thursday, November 17, in an article written by Chester Robards.
Davis added that the government expects the country’s economy to grow by 3.2 percent as predicted by the International Monetary Fund (IMF).
Davis, who made the remarks during a contribution to the House of Assembly, credited his government’s fiscal prudence and “sound policies” for the improvement. He also contended in his contribution that the government’s plan to reduce value-added tax (VAT) from 12 percent to 10 percent had the effect of increased spending in the local economy and therefore increased VAT revenue to government.
He explained that total revenue collected during the first quarter of this fiscal period amounted to $654.3 million, which he said is $57.8 million more than the same period in the previous fiscal year. Davis added that of the $57.8 million, revenue from VAT accounted for the $35.4 million, which he called a “significant portion”.
“We have made the point many times, and now the results prove what we have been saying. By reducing the VAT rate from 12 percent to 10 percent in January, revenues collected increased, because people had more money in their pockets to spend, and each time they spend, VAT revenue improves,” said Davis.
“We would have thought that the simple logic of how VAT works had already been demonstrated back in 2018, when the previous administration imposed a sudden hike of 60 percent in the VAT rate. This put an immediate brake on economic growth, and VAT revenues increased only marginally.
“Madam Speaker, the contractions in recurrent and capital expenditure are, as mentioned, the result of prudent fiscal management by the government.”
He said while the low deficit is notable, the country is “not as yet out of the woods”.
He noted, however, that economic activity in the first quarter is now reminiscent of activity before the country suffered the effects of COVID-19 and Hurricane Dorian.
Davis also noted that the government’s expenditure on travel in the first quarter of the fiscal year already represents 28 percent of the government’s $14.9 million travel budget.
He said, however, that his travel is bearing fruit for the country.
“In my budget communication earlier in the year, I highlighted the difference between money spent on investment, and money which is expenditure,” said Davis. “Fundamentally and ultimately, the test is whether we can show a return on that investment….”
See complete article in The Nassau Guardian at https://thenassauguardian.com/pm-lauds-low-first-quarter-deficit-defends-govts-travel-expenditure/
