Higher than expected Government revenues this year have been overtaken by pandemic-related expenses, the House of Assembly heard yesterday.

Curtis Dickinson, the Minister of Finance, told the House that estimated revenues for the year would be $8 million higher than budgeted – but that expenditure would be $56.9 million higher than anticipated.

But he said he was confident the Government could meet the budget deficit target of $124.7 million by cutting back on capital spending.

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Revised Budget for the Financial Year 2021 2022.pdf

Mr Dickinson added that $92.9 million had been allocated for capital expenditure, but the finance ministry has proposed a $25 million reduction.

He said that capital expenditure for the year was already lower than predicted because of the impact of Covid-19 on the availability of resources needed for capital projects.

Mr Dickinson explained: “After factoring in both proposed current and capital expenditure savings, increases in revenue and the impact of work being done to further reprioritise spending, we remain confident that the budget deficit target of $124.7 million can be achieved.

“It is important that we continue to ensure that fiscal matters are managed in a prudent and considered way, and that we continue the fiscal discipline that is required for the achievement of a balanced budget in as timely a period, as possible.

“In that regard, it is intended that the Government will continue its work to progress on the implementation of the Government Reform initiatives, including rationalisation of all Government Departments, quangos and services.”

Mr Dickinson added that $13 million in current expenditure savings had already been identified – the bulk from a freeze on filling vacant Government posts.

He said: “Steps are also being taken to ensure that overtime is further managed and limited to use in essential matters only.

“In addition, ministries continue to re-examine and reduce lower priority budget expenditures, to ensure the deficit target is achieved.”

Mr Dickinson added the economy had grown by between 3 and 5 per cent in the first three quarters of the year.

He told MPs: “The majority of the key economic indicators, such as employment income, imports, visitor spending, construction activity and retail sales increased during this period.

“Although several of the 2021 key economic indicators experienced positive results, it should be noted that some of these figures such as imports, construction and tourist arrivals and spending are below the 2019 figures.

“This indicates that the economy is moving in the right direction but has not fully recovered to pre-pandemic levels.”

Mr Dickinson said Customs duty was seven per cent higher than forecast and revenue from stamp duty had increased because of an increase in land conveyancing.

But he added costs related to Covid-19 had surged because of outbreaks throughout the year.

Mr Dickinson said: “Based on the submissions by ministries coupled with Ministry of Finance forecasts, additional Covid-19 expenditures are estimated at approximately $21.3 million for this fiscal year.

“These additional Covid-19 expenditures directly relate to the impact of the third and fourth wave of Covid-19 which occurred during the April/May and August/September periods.

“The related rise in positive cases triggered a requirement for increased testing, contract tracing, lab operations, quarantine mandate and benefits related to the temporary unemployment benefit programme.

“Taking into account the amounts that were included in the Government’s 2021/22 budget, total projected spend for Covid-19 expenditures is approximately $34.8 million for the fiscal year, of which unemployment and related supplemental benefits are projected to total approximately $12.7 million.”

Mr Dickinson added that, despite the problems faced by the island, the Government was committed to supporting the public.

He said: “We recognise that these are extremely challenging times, not only for Governments but also for individuals and businesses.

“We remain conscious of the continual need to provide appropriate support for our community, while ensuring that we execute a financial and fiscal strategy that is credible and sustainable.

“As we continue our work to appropriately manage the financial affairs of this country, our focus remains on taking actions in a way that contributes to a bright future for all.”

Mr Dickinson said it was projected that the annual cost of debt service would be $127.5 million.

But he confirmed that discussions about refinancing had started.

Mr Dickinson said: “We have started having preliminary discussions with a keen eye on interest rates.

“We are in the early stages, but it will happen in earnest at the start of the new year.”