Eliminating Fiscal Deficit Priority for 2005/06 – Dr. Davies

Achieving a balanced budget aimed at eliminating the fiscal deficit will be the priority of the Finance and Planning Minister, Dr. Omar Davies as he crafts the Budget for the 2005/06 fiscal period.Consistent with that objective is maintaining a high primary surplus, reducing debt as a percentage of Gross Domestic Product (GDP), achieving single digit inflation, reducing interest rates, maintaining a liquid foreign exchange market and accelerating economic growth.
Dr. Davies, who was speaking at the pre-Budget briefing in Parliament on March 1, noted also, that the recommendations from the Tax Review Committee, which have already been tabled in Parliament, would have to be taken into consideration in the construction of the Budget.
The Matalon-led committee, recommended among other things, raising the General Consumption Tax (GCT) from 15 per cent to 16 per cent, reducing corporate income tax, eliminating education tax and HEART contributions, increasing the income tax threshold and restructuring the property tax system.
The Minister did not say which aspects of the report would be included in the Budget, but indicated that the public’s input would be sought before any of the recommendations were adopted.
Other issues, which will be taken into account in preparing the Budget include the commitments to the public sector under the Memorandum of Understanding (MOU), which is now moving into the second year after completing one year on February 17; the devaluation of the US dollar vis- a-vis other currencies in particular the Euro and the Yen and the impact on debt; the export of both goods and services and the impact of hurricanes Charley and Ivan.
Speaking on the latter, the Minister said the country was still recovering from the hurricanes in terms of the performance of the economy as well as the impact on revenues and expenditure. “The fiscal Budget for 05/06 is significant as the rating agencies have accepted the deviation resulting from Charley and Ivan in a very positive way, based on the commitment that we would stick to the commitment to balance the Budget in 05/06,” the Minister stated.
Meanwhile, Dr. Davies said that growth for the next fiscal year had been revised from 2.5 per cent to 3 per cent due to increased construction activity as well as recovery in various sectors. He also pointed out that the Net International Reserve (NIR) was higher than was originally anticipated, which was a positive.
In terms of balance of payments, he indicated there was an improvement in the current account and the devaluation of the US dollar against other currencies assisted in the stabilization of the foreign exchange market.
“The current account, we expect, will, over the last five months of the fiscal year (October through March), deteriorate slightly because of the imports relating to hurricane rehabilitation as well as other projects, which are import intensive, but the balance of payments has improved during this fiscal year,” he stated.