Finance Ministry On Revenue, Expenses, Debt

2012/13 Fiscal Year Performance
The audit of the accounts of the Consolidated Fund for the year ending March 31, 2013 is on-going and these accounts will be tabled as soon as the audit is completed. Draft financial statements have been prepared and below is a report on the Government’s financial performance for the fiscal year 2012/2013.

The total revenue raised by the Consolidated Fund for fiscal 2012/13 was approximately $877.1 million, down $37.1 million (4.1%) from the fiscal 2011/12 amount of $914.2 million. Revenues were below the original budget estimates by approximately $32.5 million (3.6%), primarily due to weak Customs Duty collections which were $28.8 million below budget estimates.

The most significant generators of revenues for fiscal 2012/13 were Payroll Taxes, accounting for $339.2 million and Customs Duty, accounting for $171.2 million.

Current expenses, excluding debt service, on a modified cash basis for fiscal 2012/13 were $974.7 million (2012 $990.1 million) down 1.6% on the previous year.

Total capital account cash expenditure was $63.0 million, which was $3.5 million higher than the previous year spend.

The total interest payments made on long term debt for fiscal year 2012/13 totaled $81.5 million with $31.5 million being paid from the Consolidated Fund and approximately $50 million being paid from the Sinking Fund.

Net Public Debt, which excludes guarantees and is net of the Sinking Fund, increased by $240.9 million (2012 – $234.0 million) during fiscal 2012/13 standing at $1.477 billion (2012 – $1.236 billion) at the end of the year. This represents a 19.6% increase from fiscal 2011/12.

The Government Borrowing Sinking Fund decreased for the year by $17.6 million as $50 million of interest on long term debt was paid from the Fund. $30.8 million was contributed to the Fund which stood at $97.1 million at the end of 2012/13.

2013/14 First Quarter Fiscal Performance

The headline numbers for the 2013/14 National Budget were: a revenue target of $871.2 million; current expenditure including debt service of $1.1 billion; capital expenditure of $84.6 million; and a borrowing requirement of $331.6 million (equal to the projected deficit).

Revenues for the three months ending June 2013 were $208.7 million. This is $0.3 million higher than 2012.

Revenues are generally tracking in line with budget estimates.

First quarter Current Expenditures, excluding debt service, are $247.3 million; this is $3 million lower than last fiscal year, but slightly above budget. It should be noted that in certain instances expenditures are not made evenly over the year which may distort actuals when compared to budget especially at the beginning of the fiscal year.

First Quarter capital expenditures were $17.7 million, roughly $9.5 million higher than in June 2012. This is primarily due to expenditures related to the Heritage Wharf.

Total current and capital spending to date, excluding debt service, is $6.2 million higher than last year’s spend.

First Quarter debt service costs were $33.2 million. This represents $23.8 million in interest payments plus $9.4 million which represents one quarter of the $37.6 million to be transferred to the Government Borrowing Sinking Fund. Interest expenses are $15 million higher than 2012. This is principally due to a portion of the 2012 interest expense being paid from the Sinking Fund in 2012.

On June 30th, 2013, central Government gross debt, excluding guarantees, stood at $1.683 billion, while net debt was $1.586 billion.

Bermuda Economy 2013: Mid-Year Economic Review

Summary Economic Indicators: Mid-Year Economic Review 2013

*Comparative data over the first half of 2013, except when otherwise indicated.

• The headline rate of inflation in June 2013 stood at 1.9 per cent year-over year. The year to date average rate of inflation measured 1.9 per cent while the 12 month average rate was slightly higher at 2.0 per cent.

• The primarily causes of inflation during the last twelve months were due to the increased costs of medical supplies, prescription drugs and health insurance premiums in the Health & Personal Care sector, rising food costs and higher prices for overseas travel and accommodations in the Transport & Vehicle Sector.

• During the first three months of 2013 there was a 4.5 per cent decline in the number of visitors to the island. The number of air and cruise visitors declined during this time period with air arrivals decreasing by 1.0 per cent and cruise visitors declining by 45.4 per cent. Although there were three cruises in the first quarter of 2012 and 2013, the ships that visited in 2012 had a greater capacity, this factor thus accounts for the decrease from 2,719 in 2012 to 1,484 in 2013.

• Over the first quarter of 2013, total visitor spending was down by 4.5 per cent settling at $34.1 million.

• Some 470 new international companies and partnerships were registered in Bermuda during the first six months of 2013 representing a 13.5% increase over the 414 registrations in 2012.

• Over the first quarter of 2013, activity in the construction industry nearly double from an estimated value of work put in place of $23.2 million in 2012 to $46.0 million in 2013. Although other sectors in the construction industry have showed positive results, the majority of the increase in the level of construction activity is a result of the work done on the redevelopment of the King Edward Memorial Hospital.

• Employment income grew to $883.3 million in the first quarter, an increase of 0.5%.

• Total consumer spending in retail outlets between January and June 2013 fell by $1.2 million or 0.2 per cent to register a total of approximately $514.0 million. Of that amount, approximately $487.2 million was spent locally while $26.8 million was spent overseas.

• Based on figures released by the Bermuda Monetary Authority, Bermuda’s money supply increased by 2.9 per cent year over year during the first quarter of 2013. The growth in the money supply was driven by an increase in Bermuda dollar savings deposits.

• The Banking sector’s total assets decreased by 4.9 per cent during the first three months of 2013. This decline was mainly driven by a 12.6 per cent reduction in deposits with other financial institutions. Total loans and advances fell by 7.7 per cent during the first quarter of 2013.

Economic data for the first half of this year are consistent with the Ministry of Finance’s view that the current economic malaise will likely persist through 2013.

However, there are signs that the corrective measures outlined in the 2013/14 Budget Statement, as well as various other initiatives, are having a positive effect on jobs and the economy.

As an example, in the second quarter of 2013 there were 226 new Bermudian hires reported in relation to the two year payroll tax holiday for new Bermudian hiring initiative that the Government introduced effective April 1st 2013.

Other positive signs include increased international business registrations and a moderate growth in employment income.

Overall, the Ministry of Finance anticipates that Bermuda’s GDP will be flat to negative 0.75 per cent in 2013.

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