**Sen. the Hon. James Smith**
The Minister of State for Finance presented the **2006-/2007 National Budget** to the Senate on Monday. The Budget had been passed in the House of Assembly on Wednesday of the previous week.
He took the opportunity to speak to the state of the economy noting, in fact, that the budget was being presented against the backdrop of positive global and domestic economic trends. Global economic growth was highlighted at 4.8%, while the Bahamas economy was said to have grown by 3.7% in 2005 with expectations for 2006 in the region of 5.8% — reportedly 1% above the global average. He pointed out, however, that the outlook is dependent on continuing strong performances in the tourism sector, high levels of foreign direct investment, and a further strengthening of the commercial and residential construction sector. The Minister also pointed out that small economies such as The Bahamas have certain built-in vulnerabilities. In this connection, he said a key challenge will be to develop and strengthen monetary and fiscal policy to help the economy to weather potential storms.
Comparing these figures with International Monetary Fund projections, it was noted that for fiscal year 2006/2007 the IMF forecast Bahamian economic growth at 6.5%, with 6.7% and 5.6% recorded for 2007/2008 and 2008/2009, respectively – and with the growth rate tapering off to an average of 5.1% for the remaining years to 2012/2013.
Minister Smith pointed out that there is no reason why a high rate of economic growth cannot be achieved beyond 2012. *”By any reckoning that would amount to a high rate of economic growth in at least seven out of ten years between 2002 and 2012. Given that outlook, there is a strong basis for the claim that the Bahamian economy is set to take off into a lengthy and sustained period of high economic growth which is probably unparalleled in our history since Independence.”*
Noting that the Government has employed the resources available to it to improve, expand and intensify the services it provides to the nation, Minister Smith said the main objectives of this 2006/2007 Budget are in keeping with that commitment. *”I am hopeful that this presentation would in some way indicate the appropriateness of existing Government policies and programs to bring maximum benefits to all the people of The Bahamas.”*
An overview of major government initiatives would, he said, provide a glimpse of how budgetary resources were applied in the recent past to construct a platform for the 2006/2007 Budget as well as for budgets going forward. These included:
• The promotion of a touristic “anchor” project in most of the inhabited islands in The Bahamian archipelago.
• The supply to many of those islands of modern potable water facilities.
• The linking up of Family Islands by modern fibre-optic telecommunications infrastructure which not only provides improved communications but also enhances security, facilitates hurricane relief – and provides a basis for e-government, distance learning and electronic access to health professionals.
• the central Government’s continuing efforts to assist in the restoration of Grand Bahama following the widespread property destruction in wake of the recent hurricanes.
• the Urban Renewal charge which extends beyond rehabilitating neighborhoods and community policing to encompass rebuilding the lives of the disadvantaged youth,
the elderly and the poor.
• New and expanded law enforcement programmes to combat crime, illegal immigration and poaching of marine resources from our waters.
• Strategies to improve the educational system with special emphasis on technical and vocational training.
• much needed reforms introduced into the primary and secondary school systems including enlarged regulatory oversight in the former and enhanced security in the latter.
• efforts to transform the College of The Bahamas into a full-fledged University.
• a full frontal attack on housing shortages with the construction of nearly fifteen hundred homes for low and middle income families throughout The Bahamas.
• a concerted effort to raise the standards of health-care delivery while at the same time laying the foundation for what may prove to be the most profound and ambitious social undertaking by any Bahamian Government: The establishment of a National Health Insurance Scheme.
Turning to financial services, Minister Smith acknowledged that the Government has been quite busy over the past four years in a sector that accounts for approximately fifteen percent of our GDP. *”With respect to the legislative framework for the local financial services sector, the Government has enacted or is in the process of developing a series of measures to modernize and add value to that important sector.”* he said. Specifically:
• A new Domestic Insurance Act has been passed, and will increase oversight of that industry, provide for stronger governance measures and provide for more consumer protection by way of well defined capitalization, solvency and reserve requirements protocols.
• Amendments have also been made or are in the process of being made to a number of Acts to facilitate and accommodate increased business activities in the financial services sector. Those include the Financial and Corporate Services Providers Act, the Private Trust companies Act, the soon to be introduced External Insurance Bill and legislation governing securitization. To this list, are added the recently amended Trustees Act, Perpetuities Act, International Business Companies Act; and the new Segregated Accounts, Foundations and Purpose Trusts legislation.
• Work is underway to explore ways and means of introducing Government debt instruments on the Bahamas International Securities Exchange (BISX); this would increase the size of the stock exchange from the current historically high market capitalization of $2.6 billion.
• Relaxed exchange control policies on the capital account could effectively deepen and widen the local capital market by permitting residents – ncluding the National Insurance Board – to access foreign securities while at the same time, allowing non-residents, to a limited degree, to access local securities.
• The Securities Industries Act is being amended to conform with international standards and practices including providing more protection to investors against rogue operators.
The Minister also took note that the Securities Commission introduced in 2005 a fast-track system for the approval of certain categories of investment funds geared towards sophisticated investors. (There are currently approximately six hundred and fifty international investment funds in operation in The Bahamas with total assets under management in the region of $165 billion)
*”There is still much ground to be covered in the financial services sector and therefore plans are underway to promote The Bahamas as a centre for international arbitration of commercial disputes. And, to top off the reformation agenda of this Government, plans are well underway to consolidate regulation and supervision of the financial services industry in order to achieve efficiency and cost gains while simultaneously, meeting or exceeding international standards in the area of financial services regulation.”*