Thursday, May 27, 2010Tough Budget Necessary

Taneka ThompsonPM: Tough Budget Necessary

Prime Minister Hubert Ingraham expects many people will be unhappy with the budget his administration will present to Parliament today but said the tough measures are necessary to restore financial headroom for the ailing economy.

Without getting into specifics, Mr Ingraham told The Tribune that "significant" tax increases will be included in the 2010/2011 Budget presentation - presumably meant to put a dent in the country's hefty debt estimated by the Central Bank to be around $3.9 billion at the end of 2009.

He also revealed plans to take a 16 per cent pay cut for one year - along with a seven per cent cut to government ministers, and a proposed five per cent cut for members of Parliament - as well as promotion, hiring, increment freezes and other restrictions in the public service which will be announced during today's budget communication.

"This budget will not be popular with a number of people but that's a different story. But in terms of what we must do for the economy of the Bahamas we are doing the right thing, I'm absolutely satisfied of that. One might argue that if we wanted to be more political we wouldn't do some of the things we are going to do, but we are seeking to do what we think is best for the Bahamas and let the politics take care of itself."

Along with raising taxes, the new budget will show restraint in public spending.

"We're going to seek to keep spending at the same level as it was in this fiscal period, which in itself is a reduction, because when you take into account inflation, etceteras," Mr Ingraham told The Tribune ahead of the Budget communication during an interview at the Ministry of Finance.

He noted that the stringent measures are a necessary evil to ensuring financial stability in the long-term.

"We did the best we could to sustain the economy when the recession hit, we're now at a stage where we have exhausted our headroom, we must now pay and return the Bahamas to a state where it is having less debt - less meaning as a per centum as opposed to in absolute terms," the Free National Movement (FNM) leader said.

When asked why government did not institute these hard-line tactics when the recession first hit, Mr Ingraham said his administration was lucky to be in a position to offer stimulus packages to offset the economic turbulence.

"We were in a fortunate position that we were able to increase government borrowing for short term, sustain living standards to the extent we could, create as much employment as we could, improve the infrastructure of the country to the maximum extent possible under the circumstances and now we are going to have to pay for it.

"We've done as much as we think we can do and now we think we need to reverse what we've been doing," Mr Ingraham said.

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