Bermuda’s level of government net debt, “is currently at $3.1 billion“.
“The revised budget deficit for 2023/24 is $44.4 million, $900,000 more than the original budgeted figure of $43.5 million.
“This projected deficit is relatively on track with the original estimates despite unbudgeted costs associated with the funding boost for the hospital and a negotiated increase in salaries and wages for public officers.
“Keeping the deficit in line with estimates despite these additional unbudgeted expenses is a laudable achievement.“
This from Premier and Finance Minister, David Burt, who said that while “Bermuda’s economy is extremely vulnerable to external events,“ our vulnerability “is compounded by Bermuda’s level of government net debt“.
He was speaking in the Lower House on Friday, during the last sitting of 2023.
When MPs return next year, it will be for the budget session.
He also tabled the Pre-Budget Report in advance of fiscal year 2024/25 on behalf of the Ministry of Finance.
Based on that report, he said: “Total revenue for fiscal year 2022/23 is projected to be $1.113 billion, $35.2 million above the original estimate of $1.078 million; current account expenditure is expected to be $950.3 million, $5.2 million above the 2022/23 original estimate of $945.1 million; capital account expenditures are projected to be $68.2 million, $4.8 million less than originally budgeted.
“I’m pleased to announce that the 2022/23 budget deficit is now expected to be $46.9 million, $23.1 million (33%) below the 2022/23 original estimate of $70.0 million and $30.4 million below the 2022/23 revised estimate of $77.4 million,“ he added.
“The projected deficit also represents a $13.1 million reduction compared to the previous fiscal year.
“This reduction was achieved in spite of not receiving $30.1 million of budgeted revenue due to the impact of the Russia/Ukraine war on the aircraft register, forgone Customs Duty to freeze fuel prices, and forgone Customs Duty as a result of eliminating Duty on essential goods – and in spite of $15.2 million of unbudgeted COVID-19 expenditures, a $15 million grant provided to the Bermuda Hospitals Board and additional funding for firefighters at the airport to ensure we met the necessary requirements to keep the airport open.
“This demonstrates that despite the global economic challenges, the Government’s sound financial management is resulting in continued progress towards a balanced budget,“ said Mr Burt.
On the current Fiscal Year 2023/24, he said: “The Government’s mid-year assessment indicates that total revenue is projected at $1.16 billion, which is on track with the original budgeted figure.
“The revenue figure represents continued economic recovery, evidenced by expected increases in tourism-related revenues, Payroll Tax, and Land Tax.
“Total Current Account Expenditure is revised to be $984.5 million, $11.9 million above the original estimate of $972.6 million. The projected increase is primarily due to a further $16.4 million grant to the Bermuda Hospitals Board in support of the hospital.
“Interest/Guarantee Management costs are projected to be $130.4 million, which is on track with the original budgeted figure as, at this time, there are no unbudgeted or unexpected costs this fiscal year.
“Capital Account Expenditures are projected to be $85.0 million, $11.0 less than the original estimate of $96 million. This anticipated underspend in capital account expenditures is mainly due to the availability of construction resources and continuing supply chain delays.
“The balance of the Sinking Fund as of September 2023 was $199.2 million. The Ministry of Finance’s aim is to maintain a minimum balance of $100 million in the Sinking Fund, and therefore, after funding the projected deficit for this fiscal year, making the $50 million debt repayment, and with a balanced budget projected for next year, the Government expects to achieve this objective, and the $100 million in the Sinking Fund will be set aside for future debt repayments.“
Taking aim at the Opposition, he said: “Though the Opposition may focus on a few missteps – I remind the public that no government gets it 100% right 100% of the time.
“But, we have delivered relief to Bermudians challenged with the highest global inflation seen in 40 years through tax and duty cuts, we have made investments in affordable housing and critical infrastructure, we have maintained our credit ratings, today are repaying $50 million in debt, thus reducing our gross national debt for the first time in almost 20 years!
“Yes, things are moving in the right direction.“
On the pledge to collect at least $7.5 million in back taxes during this fical year, he added: “I’m pleased to report to this House and the people of Bermuda that the Office of the Tax Commissioner, through the month of November, has collected $15.7 million in back taxes far exceeding the full-year budget target.
“This is a result of the Office of the Tax Commissioner (OTC) implementing a new debt management system, which has proven to be effective,“ said Mr Burt.
Key factors which must be considered in the framing and composition of the 2024/25 Budget are as follows:
- The Government’s 2020 General Election Campaign Platform and the 2023 Throne Speech – to ensure that the commitments made are appropriately met
- Relevant economic considerations – whether globally, in relation to our major trading partner the United States, or the economic realities that exist in the Bermuda context
- Taxation sensitivities – recognising that international business is a key contributor to tax revenue, consideration has to be given to the potential impact of decisions on this sector
- The need for continued fiscal discipline to further reduce deficits on the path towards a balanced budget in Fiscal Year 2024/25 and ultimate reduction in net debt levels
- The requirements for continued investment and support for the initiatives within Bermuda’s
- Economic Development Strategy
- Continued effective use of zero-based budgeting and the use of public value assessment outputs to enhance efficiency and cost-effective utilisation of resources.
- The appropriate evaluation of the highlighted risks and implementation of the recommendations from the 2023 report of the Fiscal Responsibility Panel, whose role, and work have already been addressed in this statement.
- Feedback from the Pre-Budget Report consultation.
During preliminary discussions with key stakeholder groups the following policy initiatives were included in the Pre-Budget Report for consideration and feedback:
- Amendments to the existing New Hire Relief that is set to expire this year
- Consideration Increasing Boat Licensing Fees for large pleasure crafts
- Consideration Further reduction of Employer Payroll Tax for the hospitality industry
- Consideration of the reduction of immigration fees for work permit applications
- Consideration for the reduction of Land Tax
- Consideration towards expanding the list of items subject to Customs Duty relief
The Premier emphasised that “none of the aforementioned proposals included in the Pre- Budget Report are policy positions of the Government“.
“They are simply options put forth for consideration, and the Government is inviting the public to be a part of that process by making recommendations for changes in tax policy and spending priorities.“
He also stated that “the pre-budget report is an important document that promotes transparency in the budget process, reinforces accountability and allows for effective collaboration on matters that will have a significant impact on individuals and businesses in the community“.
“As a result, in January, during the consultation period, we will arrange meetings with members of the International Business community, the Chamber of Commerce, the Trade Union Congress, Bermuda Bankers Association and other key stakeholder groups to ensure the upcoming budget is a reflection of the wider communitym“ said Mr Burt.
“It is worth noting that during the consultation period, we also encourage the wider public to read the Pre-Budget Report and submit their thoughts, recommendations and concerns by email to firstname.lastname@example.org or via the Government consultation portal, which is found at forum.gov.bm.
“Once the consultation period has ended, on January 17, we will evaluate all responses as the Ministry of Finance looks to finalise the Budget for presentation to the Cabinet and, ultimately, to this Honourable House.“
He reiterated the Government’s commitment to taking care of its people while ensuring its fiscal and economic policies contribute to sustained growth and stability.
“Our track record has been positively assessed by independent reviewers, our deficits are narrowing, our debt is being repaid, back taxes are being collected and we remain committed to a path that will ensure a bright future for generations to come,“