Predicted budget deficit up more than $275m to $295m
The Government’s predicted Budget deficit of $19.8 million has ballooned to $295 million, the finance minister revealed today.
Curtis Dickinson said the Covid-19 pandemic is expected to cost Government hundreds of millions of dollars and present Bermuda with a budget deficit that is “unsustainable”.
Mr Dickinson said: “Covid -19 impacts have made the 2020/21 budget presented and approved in this Honourable House outdated.
“This crisis is unprecedented. It is not one of our making, and it will have profound impacts on Bermuda’s economy and our public finances.
“The implications for Bermuda’s public finances, direct and indirect, are extremely serious.
“Our high level of government debt makes us highly vulnerable both to a global economic downturn and to more Island-specific shocks.”
Mr Dickinson was speaking as he presented a revised Budget in the first sitting of the House of Assembly’s new session.
He said the Government had already spent almost $80 million to control the impact of the coronavirus – a figure expected to rise to $125 million by the end of the financial year.
Mr Dickinson added that Government revenues were expected to be slashed by more than $200 million after the pandemic hammered the economy.
He said that $58 million has already been paid out in emergency unemployment benefits after thousands of Bermudians lost their jobs.
Mr Dickinson added $20 million is being paid to assist non-governmental organisations and Government also had to pay out $21 million to the Bermuda Airport Authority because of the minimum revenue guarantee agreement kicked in when flights were halted.
Payroll tax income fell by $70 million and Customs duty revenue has dropped by more than $50 million.
An estimated $36 million windfall in cruise ship departure taxes failed to materialise after the summer cruise ship season was cancelled.
Mr Dickinson said some cost-cutting measures had been introduced to offset the cost of the crisis, including a freeze on Government hiring and a ban on non-essential travel.
He added: “To date, just over $73 million in savings have been identified.”
But he warned: “This level of deficit is not only unsustainable but economically and fiscally imprudent.
“When considering the current high level of public debt, the Ministry of Finance regards this deficit as a serious challenge.
“However, the Ministry recognises that during these unprecedented times, we must support our most vulnerable and ensure our citizens' health and safety.
“In this fiscal year, the Government has had to take unprecedented policy actions to redirect existing resources towards health and social support measures. These actions have allowed us to successfully control the virus spread and provide support to our economy.”
Mr Dickinson said the Government would increase its budget for capital projects from $85 million to $93 million to help kick-start the economy.
He added: “Although our Covid-19 pandemic fiscal plan originally called for a delay in some capital projects that had not commenced, we have revised our approach to support essential capital projects and support certain additional projects.
“These capital projects will support our economic recovery, provide employment for Bermudians, and improve our quality of life.”
Mr Dickinson said lost revenue amounted to more than $208 million.
He added: “During these difficult times, we must continue to manage the fiscal affairs of the country with prudence.
“Therefore, we must be judicious in the use of additional funds borrowed.
“Bermuda has responded well to the immediate challenges of Covid-19. We must now focus our efforts on rebuilding our economy.”
*To read the Ministerial Statement in full, click on the PDF under “Related Media”.