Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697648190520.pdf (Bahamas)
A CITIZEN’S GUIDE TO THE 2020 FISCAL STRATEGY December 2020 Ministry of Finance Government of The Bahamas – 2020 FISCAL STRATEGY – FROM CRISIS TO OPPORTUNITY A three-year plan to restore the nation’s financial health and build economic resilience beyond the coronavirus pandemic 4 KEY PRIORITIES DID YOU KNOW?

The Fiscal Strategy Report (FSR) is a three-year fiscal forecast that provides a detailed look at the state of public finances and future plans for revenue, expenditure, debt and economic growth.
The Fiscal Responsibility Act, 2018 mandates the annual preparation and publication of the FSR.

CARING FOR PEOPLE The Government plans to maintain a dynamic COVID-19 response that will save lives, provide the necessary safety net and support for the vulnerable and reduce the hardship faced by families.

RECALIBRATING PUBLIC FINANCES Fiscal stability and sustainability are important macroeconomic goals.
The plan calls for better tax enforcement, reforming State-Owned Enterprises, more focus on public private partnerships for critical infrastructure and sustainable debt management.

GROWING THE ECONOMY The Government plans to remove structural impediments to growth, support a more digital and business friendly environment, unleash private sector investment with strong employment growth and embrace innovation.
” PROACTIVE RISK MANAGEMENT The plan calls for the government to be vigilant and proactive in managing the high levels of global uncertainty due to the pandemic and the various risks posed by the country’s long-standing structural issues.

Our plan will ensure the government has sufficient resources and flexibility to meet the opportunities andchallenges of governance for today and into the future.
The Most Honourable Dr. Hubert A. Minnis Prime Minister & Minister of Finance A CITIZEN’S GUIDE TO THE 2020 FISCAL STRATEGY REPORT 2 STATUS CHECK MI D-T ERM FISCAL OUTLOOK MEDIUM-TERM FISCAL OUTLOOKS: BUDGET FORECASTS (B$M) Revenue Recurrent A C T U A L S B U D G E T S F O R E C A S T S 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2,426.3 2,086.9 1,658.2 2,139.5 2,579.9 2,803.9 3,012.8 2,426.3.
2,086.8 1,656.2 2,137.5 2,577.9 2,801.9 3,010.8 Capital & Grants - 0.1 2.0 2.0 2.0 2.0 2.0 Expenditure Recurrent Expenditure 2,645.6 2,898.6 2,985.3 3,094.1 2,910.6 3,014.2 3,086.2 2,422.2 2,526.4 2,555.8 2,677.9 2,646.0 2,733.8 2,792.3 Capital Expenditure 223.4 372.2 429.5 416.2 264.6 280.4 293.9 Overall Balance: Surplus/(Deficit) Less: Interest Payments Primary Balance (219.3) (811.7) (1,327.1) (954.6) (330.7) (210.3) (73.5) 329.7 344.6 396.9 441.8 443.7 429.1 398.4 116.9 (467.1) (930.2) (512.8) 113.0 218.8 324.9 GDP (Current Prices) 13,300.5 12,404.0 11,419.5 12,225.5 13,230.0 14,019.5 14,696.5 Overall balance as % of GDP Government Debt Gov't Debt as % of GDP -1.6% -6.5% -11.6% -7.8% -2.5% -1.5% -0.5% 7,527.0 8,191.2 9,476.2 10,386.4 10,594.7 10,755.0 10,828.5 56.6% 66.0% 83.0% 85.0% 80.1% 76.7% 73.7% ACTU ALS These numbers show the actual budget performance for the past two fiscal years.
BUD GET These numbers show the budgeted amounts approved for the current fiscal year.

FORECAST S These are budget projections that forecast what the budget may look like over the next four fiscal years.

MACROECONOMIC CONTEXT Decisions made for the 2020 Fiscal Strategy takes into consideration the following macroeconomic realities: • Heightened uncertainty with domestic and global economic indicators (eg.
GDP estimates continue to fluctuate) • Revenue underperformance of $68M for the first quarter due to the pandemic • Additional budget spending of $177M in COVID-19 related outlays • An increase in the fiscal deficit from 6.5% of GDP in FY2019/2020 to 11.6% in 2020/21 • Historic unemployment levels at 25.6% in 2020 vs. 10.1% in 2019 due to COVID-19 • The major fall off in economic activity highlighted by the sudden stop in tourism Risk Assessment & Mitigation Strategy Risks are situations that can derail the government’s best made plans.
It is important to identify key risks and act proactively to prevent or lessen the impact.
KEY RISK FACTORS WHAT TO DO ABOUT IT Persistence of COVID-19 Uncertainty about trajectory of COVID-19, and timing for roll-out of vaccine vvv Natural Disasters Climate change resulting in higher frequency of strong storms Ensure continuous monitoring & rationalization of expenditures Develop a comprehensive disaster risk management framework Pensions Costs Accumulating pension liabilities resulting in unsustainable long-run costs Implement longer-term actions to improve fund sustainability; introduce defined contribution plan.
Contingent Liabilities Contingent liabilities: if state-owned enterprises cannot meet debt obligations, may result in calls on government guarantees.
Accelerate plans for better cost recovery in SOEs; enact public debt & financial management legislation 3 A CITIZEN’S GUIDE TO THE 2020 FISCAL STRATEGY REPORT Achieving sufficient and sustainable inflows over the medium-term with major structural reforms A PLAN FOR R E V E N U E The dual shocks from Hurricane Dorian and COVID-19 have eroded government revenues significantly.

Recovery to pre-crisis levels will take time.

Revenue is projected at 17.5% of GDP in 2021/22.


The expectation is for a gradual firming of government revenue to 19.5% in 2022/23; and to 20.5% in 2024/25.
Accelerate transition to cashless payments across government including adoption of Sand Dollar digital currency Complete major reform of real property tax collection system Develop tax reform roadmap to advance equity and stability in revenue 1 3 5 2 4 6 Maximize Customs’ online Click2Clear platform for efficient revenue collection Conduct diagnostic review of the tax regime to eliminate revenue administration gaps & contain leakages Increase the use of risk-based audits for Value Added Tax (VAT) to protect the yield A CITIZEN’S GUIDE TO THE 2020 FISCAL STRATEGY REPORT After weathering a catastrophic natural disaster and a destabilizing global pandemic, the government is leading the nation toward fiscal sustainability.
Our plan will foster a stable and dynamic macroeconomic environment that can stimulate growth.

Senator Kwasi Thompson Minister of State for Finance 4 ” A PL AN FOR EXPENDITURE Over the medium-term fiscal horizon, the plan is to reduce recurrent spending from peak Hurricane Dorian and COVID-19 levels of 22.4% of GDP in 2020/21 to a targeted ceiling of 19.0% by 2024/25, and to achieve a reduction in capital expenditure from 3.8% of GDP in 2020/21 to a steady 2.0% rate in the final three years.
DISCRETIONARY SPENDING THAT SUPPORTS ECONOMIC RECOVERY AND GROWTH WILL BE PRIORITIZED RECURRENT EXPENDITURE PRIORITIES Accelerate fiscal legislative reforms: Public Procurement & Public Financial Management Curtail overall growth in public sector employment Accelerate state-owned enterprise reform agenda Advance pension reform (defined contribution plan) CAPITAL EXPENDITURE PRIORITIES Increase use of public- private partnerships Prioritize investments in roads, bridges, airports & energy infrastructure Invest in health infrastructure for pandemic management Strengthen project execution & evaluation of capital projects Digitize government services Rebuild residential communities in Hurricane Dorian affected areas.
5 A CITIZEN’S GUIDE TO THE 2020 FISCAL STRATEGY REPORT MODERNIZING & E NHANCING FISCAL MANAGEMENT LEGISLATION Legislative reforms will ensure a strong governance framework is in place to support economic and social development of The Bahamas for many years to come.

IMPROVING EFFICIENCY, TRANSPARENCY AND ACCOUNTABILITY IN THE USE OF PUBLIC RESOURCES.
MONUMENTAL SHIFTS AHEAD FOR PUBLIC FINANCIAL MANAGEMENT PUBLIC PROCUREMENT BILL, 2020 This Bill will revolutionize governance arrangements for government contracts: How they are advertised, how they are managed and how they are awarded.

It will require all government entities, including State-Owned Enterprises (SOEs), to use an open and transparent online procurement portal for all bids, the details of which will be published online and consolidated annually in a published report.
1 PUBLIC FINANCIAL MANAGEMENT BILL, 2021 2 To meet the realities of a modern Bahamas, this very extensive Bill will better define the roles of key officials in the public finance arena and set specific administrative and criminal penalties for lack of compliance and for malfeasance.

It will expand the requirements for budgetary and fiscal reporting for central government agencies and SOEs, including the eventual introduction of published monthly summary budget reports.
MANAGEMENT BILL, 2021 PUBLIC DEBT While many of its elements have been undertaken by way of operational policy for some time, the Bill seeks to enshrine proper debt management protocols into the law and improve the transparency around the debt taken on my central government and by SOEs.

43 STATISTICS BILL, 2021 This Bill will transform the current Department of Statistics into a quasi independent National Statistics Institute that will be governed by a Board of Directors.
The new institute will allow the country to leap forward with its collection, analysis and use of data for public and private policy decisions.

A CITIZEN’S GUIDE TO THE 2020 FISCAL STRATEGY REPORT 6 A PLAN FOR ECONOMIC GROWTH BUILDING RESILIENCE BEYOND THE PANDEMIC The government plans to remove structural impediments to growth, support a more digital and business friendly environment, unleash private sector investment to promote strong employment growth and embrace innovation.
GOVERNMENT DIGITIZATION Many new services are now online, including digital wallets for social welfare support, driver’s license renewals, e-passports, cashless payments for work permits and other immigration services and online grants for small businesses.

Much more is underway.

INVESTMENT REFORM The government is modernizing and digitizing its investment regime for Bahamian and foreign investments alike.
The INVESTBAHAMAS framework will cut through the bureaucracy and expand the remit of the current Bahamas Investment Authority.

EASE OF DOING BUSINESS The government is fast tracking its digital land registry and introducing new software at the Ministry of Works for the electronic submission of building permits.

Much more is underway.
PL ANS TO FOSTE R A STABLE & DYNAMIC MACROECONO MIC ENVIRONMENT THAT CAN STIMUL ATE GROWTH • Invest in skills • Drive energy building & education • Expand financial reform through renewables sector opportunities • Modernize Family • Sustain investments in small businesses • Promote the digital economy Island infrastructure & restore Grand Bahama INFRASTRUCTURE DEVELOPMENT Bold solutions proposed to address the national infrastructure gap $ 2 B I L L I O N IN ESTIMATED F INANC IAL SHORTFAL L TO C OVE R I NFRASTRUC TURE N E EDS Public infrastructure is a key catalyst to drive the economic rebound.
The government plans to mobilize substantial private sector capital, resources and expertise through innovative financing mechanisms.

NATIONAL INFRASTRUCTURE FUND (NFI) This will be structured as a Public-Private Master Fund or “Fund-of-Funds” with specific sector sub-funds created over time, such as a Growth Fund for the Family Islands (GFFI), Renewable Energy Fund and Food Security Fund.
SOVEREIGN WEALTH FUND (SWF) The government will be able to lease, joint venture or pledge public assets towards projects and generate new cash flows which would be used to fund its participation into the National Infrastructure Fund and promote economic growth and resiliency.
7 A CITIZEN’S GUIDE TO THE 2020 FISCAL STRATEGY REPORT ” In 2019, the government engaged the assistance of a firm to conduct a review of several State-Owned Enterprises (SOEs), for the purpose of identifying cost savings through legislative, regulatory, or institutional initiatives.

The government is considering several recommendations, including the gradual introduction of cost recovery measures that allow users of the services to substantially cover the costs of operations.
The government is also intent on ensuring the proper governance of the SOEs.

$408 million BUDGETED (FY20/21) SOEs account for major government expenditure The reform of the SOEs remains integral to the government’s fiscal consolidation plans.

The objective is to make SOEs self-sustained entities and alleviate the ongoing need for subventions.
Senator Kwasi Thompson Minister of State for Finance ” ON AVERAGE, NEARLY 16% OF THE GOVERNMENT’S RECURRENT SPENDING GOES TO SUBVENTIONS FOR SOEs $100 million PLANNED REDUCTION (FY20/21) Government plans to reduce subventions annually over the next four years.

Savings from SOE reform to assist with meeting additional expected debt servicing requirements.
STATE- OWNED ENTERPRISE REFORM A CITIZEN’S GUIDE TO THE 2020 FISCAL STRATEGY REPORT Several State-Owned Enterprises required increased funding assistance given the financial stress brought on by the COVID-19 pandemic.

However, reductions will take place over time, and cost-recovery measures are set to commence by mid- 2021 for Bahamasair and the Water & Sewerage Corporation.

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