Bermuda Government September 2nd Press Conference – Minister of Finance
Thank you for being here.
Since the beginning of the COVID-19 pandemic in Bermuda, the Government has taken extraordinary measures to manage this crisis appropriately. We focused on the health of our community, we were guided by science, we listened to our local experts, and we have taken vital steps to prevent the spread of the coronavirus on our Island.
This approach was essential not only to our health and safety but also for our economy. From a health perspective, our efforts have stood us well – we have among the lowest number of cases in the world, and the Minister of Health mentioned in her remarks yesterday – as a result of our stringent testing, Bermuda ranks 6th in the world for tests per capita and is the highest in the American continent.
We have also taken decisive measures to support the economy and our citizens during this period. Although COVID-19 will cause a severe economic shock in all directly affected economies including ours, the economic policy actions that we have taken during the crisis will assist with the pace of our economic recovery.
During this period we have supported the functioning of essential sectors, provided resources for people hit by the crisis, and taken steps to limit excessive economic disruption by providing support to businesses, and we have quickly and safely reopened our tourism sector putting over 1,000 Bermudians back to work.
Today, I am happy to provide an update on some of the actions being taken as part of the Ministry of Finance COVID-19 Pandemic – Fiscal Plan as we move to the economic recovery stage.
They are as follows:
In the last legislative session we amended the Government Loans Act 1978 to increase the legal limit on government debt from $2.75 billion to $3.5 billion. The decision to increase the debt ceiling was taken to assist the Government as we navigate through the COVID-19 pandemic and beyond. This action allowed the Government to raise $1.35 billion at historically low rates to help with funding of the Government and its economic recovery over the next two to three years. This debt strategy was supported by the independent Fiscal Responsibility Panel, the Financial Policy Council, and endorsed by Bermuda First.
COVID-19 will have an adverse impact on the Government’s 2020/2021 budget. The combination of lower fiscal revenues and higher public spending is expected to result in an increase of the projected budget deficit.
The Ministry of Finance’s preliminary estimates are that revenue for the 2020/2021 fiscal year could contract by $200 million. After factoring in the impact of lost revenue and additional expenses relating to the COVID-19 pandemic and the Government’s responses, the revised deficit for the 2020/2021 fiscal year was estimated to be in the range of $275 million to $315 million, assuming no cost-saving measures were taken to reduce spending.
However, giving effect to cost-saving measures implemented by the Government, the Ministry of Finance was targeting a deficit level for the 2020/2021 fiscal year of as much as $225 million.
Such cost-saving measures include, freezing the funding of vacant Government posts that are not required to address COVID-19-related matters or to protect Bermuda’s national interests, banning non-essential government travel and reducing all discretionary spending, including training, materials and supplies, clothing and uniforms.
Additionally to reduce the deficit further, other temporary payroll or government employee overhead savings are being considered and the Government has been in negotiations with the Unions on this matter. I can advise that the 3 largest unions representing over 80% of public sector employees have agreed to the Government’s cost saving measures. I would like to thank those public sector workers, and those in government funded organisations who have agreed to actions which will contribute to reducing the deficit.
Although our COVID–19 Pandemic – Fiscal Plan originally called for a delay in some capital projects that have not commenced, we have revised our approach to not only support essential capital projects that must continue, but to support additional projects. Therefore, some of the funding from our recent debt raise will be used to bring forward some aspects of the Government’s long term capital plan. These capital projects will support our economic recovery, provide employment for Bermudians, and improve our quality of life. Additionally, we will fund new projects, such as investments in renewable energy that will reduce the Government’s electricity bill in the long run while providing jobs for Bermudians. These stimulus measures ensure that there is a degree of sustained economic activity in the Bermuda economy until the expected return on cruise visitors next April.
Some of the projects that will be funded or have been moved up:
- Department of Public Transportation (DPT) Bus Depot Improvement for staff bathroom and changing facilities in St George’s and the Devonshire Bus Depots.
- Improvements to Marine and Ports East Broadway
- Interior fit out for Child and Family Service 131 Front St Offices
- Botanical Gardens Visitors Centre Improvements
- Sessions House [Parliament Building] Exterior and Interior Refurbishment.
- Westgate improvements for new boilers system, HVAC and water supply system. New steel doors and windows.
- Solar installations on 6 Government Buildings
- Shoreside Facility for Local Fishing Cooperative
- Halfway House for the Department of Child and Family Services
- Refurbishment of Parish Clinics
- Reconstruction and repairing of Retaining Walls
- Upgrades to Pembroke Canal
In addition to bringing forward a number of capital projects, recognizing the importance of empowering and providing financial support for our community clubs additional Capital Grant funding will be provided for community club development.
We are continually evaluating our Fiscal Plan, and we will make appropriate amendments in line with changing circumstances. However the overall targets remain, bringing our budget back into balance in 3 years, when we expect full economic and tourism recovery to take effect in 2022.
Before I move onto the work of the Economic Advisory Committee, I want to speak to those who preach nothing but doom and gloom about the Bermuda economy, both before the pandemic and now.
Here are the facts.
Independent International observers have praised this Government handling of the country’s finances before the pandemic, during the pandemic, and after the pandemic. Regarding our economic performance.
- Reduced the Bermudian unemployment rate from 8.2% in May 2016 to 4.4% in November 2019 according to the Labour Force survey;
- The 2019 Employment Report showed that between 2017 and 2019 719 jobs were created in Bermuda;
- In 2017 the PLP inherited a Budget Deficit of $134 million in 2017, and we have reduced that deficit to $20 million in the last fiscal year, the lowest deficit in 18 years!
The numbers speak for themselves. We have soundly managed the country’s finances, and the confidence of international markets, reflect that assessment.
Additionally, the Ministry of Finance has recognized an uptick in development and construction projects presented to the Department of Planning. This is an encouraging indicator of economy activity.
During May and June 2020, a total of 53 planning applications were received and 81 were approved (for non-residential, residential and solar projects) – resulting in a total estimated construction value of $46 million; while a total of 154 building permit applications were received and 114 building permits were issued (for non-residential, residential and solar projects) – resulting in a total estimated construction value of $68 million.
To further assist key stakeholders in the industry the Government has also made efforts to better streamline the application process reducing the approval period from 10 weeks to 4-5 weeks.
This Government will continue to search and identify to improve efficiency and put the necessary measures in place to ensure we assist Bermudians in getting back to work.
Earlier today, I was astounded to hear the Opposition Leader call Morgan’s Point an example of the success that the former Government had in attracting investment to Bermuda. Anyone can issue a guarantee to a failed project, and have the taxpayers pick up the bill, like we have had to do. But that is not success, it is a bad deal that all taxpayers are paying for. Persons in the opposition have said they would do the same thing if they had to do it again, is that really who you want in charge of the country’s Finances?
This Government has taken a different approach; working with industry and the regulators to ensure our International Business sector remains strong and is growing. We have worked to diversify our economy and our Fintech Industry which is less than 2 years old has created 60 jobs in Bermuda. We continue to attract investment with companies relocating to Bermuda under our economic substance regime. So I am confident that our focus on building on what we have, diversifying the economy, making the government more efficient, and reducing red tape will ensure that our economy recovers and grows, as it did before the pandemic.
The COVID-19 Economic Advisory Committee (EAC) continues to play a vital role in our economic recovery. The Committee has been meeting regularly, and they have prioritized ideas for the retention of existing business, growing existing sectors, and attracting new industries. As noted in previous updates, the Phase 1 focus was on “quick wins” to assist persons and entities in surviving through the early stages of the pandemic and taking actions to mitigate the impact of the economic and financial challenges.
There have been over 50 short-term ideas, prioritized by industry, and their focus areas included taxes, jobs, immigration, tourism, technology, and new-sector growth. All ideas have been submitted to the Government for evaluation and a number of them have already been successfully addressed. Some of the short-term ideas from the EAC which the Government has already executed on include the following:
- Prepare checklists and protocols for business traveler approval, such as pre-testing, antibody testing, travel and visit protocols, to reopen the economy;
- Amend long-stay business traveler regulations;
- Amend the Employment Act in reference to redundancies;
- Expedite the buyer process for foreign real estate purchases;
- Extend the unemployment benefits program;
- Establish a sustainability fund for small and medium-sized enterprises (SMEs);
- Continue payroll and duty deferments at least through year end;
- Support entrepreneurs on the island through programs like Ignite;
- Further economic substance strategy with the Bermuda Business Development Agency (BDA) and the Registrar of Companies;
- Enhance the infrastructure to collect back-taxes; and
- Provide Government digitization projects for small and medium-sized enterprise tech companies
The Committee is currently developing medium–term strategies which can be implemented over the next one-to-three years in order to stabilize and grow our economy. The strategies are being refined and assessed for impact before final submission to the Government.
Before I complete my remarks, I want to take this opportunity to again thank the members of the Economic Advisory Committee for their hard work as we look to expand upon some of their ideas in the near future.
I would further note that at our COVID-19 Update press conference in June, I announced the start of a sub-committee of the Economic Advisory Committee where young people would be invited to present their ideas for stimulating economic growth, job growth, and increasing government efficiency
Yesterday, after six weeks of work, the Junior Economic Advisory Committee presented their recommendations to the Cabinet. Their recommendations covered suggestions on banking, reducing mortgage interest rates, ideas on better supporting entrepreneurs, and their view on turning Bermuda College into a four-year institution of higher learning; everyone was thoroughly impressed.
I remain confident that Bermuda and her people will emerge from this crisis stronger. Together we have already successfully navigated through a wide range of challenges brought on by this pandemic, we appropriately addressed them, and so far, as a country, we’ve done a remarkable job.
We must continue to follow the rules and do our part to stay safe. We must ensure that our COVID-19 numbers do not rise. This pandemic is not over.
I urge everyone to continue to be vigilant and maintain a healthy routine. It is important that we do our part and help and support one another and our country to weather this health and economic challenge.
As I have said previously, our progress is due to the hard work and dedication of our many frontline workers, other persons in the community as well as many earnest and hardworking public officers. I would like to thank them all. As well, I would like to thank the team at the Ministry of Finance, and our industry partners and stakeholders for their tremendous assistance and support as we continue strengthening our economy.