The country’s GFS Deficit decreased during the last fiscal year, demonstrating the government’s firm commitment to fiscal prudence in the interests of the welfare of the people of The Bahamas, Prime Minister and Minister of Finance the Rt. Hon. Hubert Ingraham said Wednesday.

During his presentation of the government’s 2008/2009 budget communication to the House of Assembly, the Prime Minister said the projected outturn for fiscal year 2007/08 is for a GFS Deficit of 1.7% of GDP, a reduction of 0.8% over the GFS Deficit for 2006/07 – the last year in office of the previous administration.

A reduction in the GFS Deficit means the government is slowing down the growth of the national debt.

“Maintaining a prudent fiscal policy is the bedrock on which the soundness of our economy is constructed,” Mr. Ingraham told parliamentarians. “Without a prudent fiscal stance, The Bahamas would not be as able to attract productive inward investment and employment and living standards would be endangered.”

The Prime Minister pointed out that the prudence with which the country’s economy and public finances were managed over the years especially beginning in 1992 is continuing to enable the economy to ride out the most severe implications of the current uncertainties and difficulties of the global economy.

Those current uncertainties and difficulties led to the government’s “warranted” reduction of its projection on the growth of the economy this fiscal year to 2% in 2008 and 2.5% in 2009.

“Earlier this year, in the Mid-Year Budget Statement I stated that we were not yet persuaded to downgrade the growth rate projected for 2008 by the International Monetary Fund Article IV Mission which visited The Bahamas in September, 2007,” Mr. Ingraham said.

“Indeed, the IMF website entry for The Bahamas continues to give the same growth rates, namely 4% in real terms for 2008 and 3.8% in real terms for 2009.”

The Prime Minister pointed out that the government’s adherence to those projected growth rates was a responsible assessment at the time of the Mid-Year Budget Statement because at that time, even the G-7 Ministers of Finance were unclear about the prospects for the global economy.

“Furthermore,” he added, “investment inflows into The Bahamas suggested some degree of decoupling between the global economy and the Bahamian economy. Thus, in light of the intensity of the assessment of the IMF Article IV Mission, reducing the projected growth rate for 2008 would have been premature.”

Mr. Ingraham said the higher growth rate now projected for 2009 is justified in light of the April 2008 Statement by the G-7 Ministers of Finance which stated: “ …We remain positive about the long-term resilience of our economies…”

It is also justified, he noted, in light of the stance of the US Federal Reserve which stated: “Beyond 2008, factors projected to buoy economic growth included the continued effects of an accommodative stance of monetary policy in conjunction with a gradual easing of financial market strains, stabilization in housing markets, and a leveling-off of oil and commodity prices… Most participants expected real GDP growth to grow roughly at their present estimates of its trend rate in 2009 and somewhat above trend in 2010.”

The ability of the government to make sound economic and fiscal judgments rests in the provision of reliable economic data, a provision in which Prime Minister Ingraham said the Department of Statistics has made remarkable progress.

“We are now at the juncture that each year for the annual budget, the Department of Statistics provides data for the years up to the preceding year. This is a quantum advance from the situation where we had to wait for the IMF Article IV Mission to produce tentative estimates,” Mr. Ingraham pointed out.

He recalled that upon assuming office back in 1992 his administration was “appalled” at the lack of current, accurate and comprehensive economic data available. The previous FNM administration subsequently initiated a major programme to assist the Department to fill this vacuum.

“The progress made by us and those who have succeeded us has been immense and will continue,” the Prime Minister said. “I wish to compliment the Department of Statistics for responding so positively to the pressures exerted by the Ministry of Finance and the Central Bank of The Bahamas for providing reliable economic data on which Government can base sound economic and fiscal judgments.

“The Department of Statistics will continue to have our support to develop our national statistics.”