Prime Minister and Minister of Finance, the Hon. Hubert A. Ingraham, presented the **2008/2009 Budget Communication** to the House of Assembly today. Noting the global economic uncertainty which has given rise to cost of living increases, he said the budget had been crafted to take into account the international economic turbulence that has had harsh impacts on the Bahamian economy. Specifically, he said, the budget embraces *”the Government’s social philosophy, its commitment and its determination to cushion the harshness of the impact of the international turbulence upon our citizens, most particularly low income families who invariably are impacted first and most acutely.”*
Additionally, and as importantly, the 2008-2009 budget was designed to properly position the Bahamian economy for the rebound in the international economy, anticipated to begin during the upcoming budget period.
The Prime Minister noted that while carefully determining the size and components of a fiscal programme which will touch every family with significant financial relief, it was essential not to compromise the sound fiscal status of the economy. *”Indeed, in this context our strategy would certainly have the approval of the International Monetary Fund (IMF) because it is consistent with the views expressed recently by the IMF Managing Director.”* He was referencing a speech earlier this year when the IMF called on fiscal authorities in countries with low fiscal risks* ”to prepare to exploit the headroom for timely and targeted fiscal stimulus that can add to aggregate demand in a way that supports private consumption.”* The IMF recognized that this would have to be temporary, as maintaining a sustainable medium-term fiscal position is still very important. In this context, the Prime Minister said, the Government has sought to strike the correct balance between appropriate fiscal easing that will provide financial relief on the one hand, and the perennial requirement to maintain the fiscal discipline which has been of major importance in attracting investment and employment to The Bahamas.
In addition to covering economic and fiscal developments – prospects, goals and objectives – the budget communication also spoke to crucial issues affecting society today. These included Law and Order; Environmental Sustainability; Good Governance; and Modernising Financial Administration. Trade issues such as World Trade Organisation membership and relations with the European Union were covered too, as well as progress in producing timely and comprehensive National Accounts data.
Tabled in the House were summaries of projected revenue ($1,819,565,181), recurrent expenditure ($1,569,133,938) and capital expenditure ($250,237,073).
The Prime Minister outlined allocations and highlighted infrastructural works planned for the fiscal period. On the latter, he said the 11% increase in capital expenditure signals the Government’s continued commitment to modernizing and expanding the nation’s infrastructure. Noting that education once again is slated to receive the greatest call on the government’s resources, he said this ought to be no surprise, as the Government continues to believe that the education of children is the most critical investment that can be made in the future of the nation.
**Assistance and Relief**
The Prime Minister pointed out that the increase in budgetary allocation for the Department of Social Services will permit meaningful increases in all areas of relief to the poor.
Additionally, budget provisions include the elimination of the stamp tax on some 160 food items, the exemption of personal computers, printers and software from stamp tax, the removal of import duties on a range of food items, and the reduction of import duties on items including building materials, energy-saving home appliances, and hybrid vehicles. Concessions were announced for homeowners as well: the $35,000 ceiling on real property tax is to be eliminated for owner-occupied properties, and for properties valued in excess of $5 million, tax will be reduced to one-quarter of 1 percent, down from 1 percent.
A two-year suspension of customs duty and stamp duty was announced for the fuel imports of the Bahamas Electricity Corporation (BEC), which should provide some relief for consumers concerned about the impact of international oil prices on their electricity bills. *”This is expected to enable BEC to function without further increasing the costs of electricity,”* said the Prime Minister.
He acknowledged that the tax cuts in this year’s budget, inclusive of new and significant concessions being granted to first-time homeowners (e.g. an increase in the ceiling for exemption from real property taxes, from $250,000 to $500,000, for the first five years) will impact revenue. *“Some of these revenue measures will admittedly result in revenue losses for the Government, but that will be money that will stay in the pockets of consumers and homeowners and thereby provide much-needed relief in the period ahead.”*