By NEIL HARTNELL
Tribune Business Editor
The Ingraham administration demitted office in May 2012 after leaving all the Government’s short-term credit facilities “maxed out”, a Cabinet Minister saying borrowing of this nature rose by 78.7 per cent during its five-year term.
Hitting back at the former Prime Minister for criticising the Christie administration’s forecast $550 million deficit, Michael Halkitis, minister of state for finance, said he “outright rejected” taking advice from persons he blamed for causing the Government’s fiscal predicament.
Suggesting that the Opposition Free National Movement (FNM) had failed to heed its own advice while in office, Mr Halkitis said that the $377 million in short-term debt left by the first Christie administration, when it demitted office in May 2007, had mushroomed to $674 million some five years later.
He accused the former government of “using up all the short-term borrowing” facilities, with the Government’s overdraft at Royal Bank of Canada standing at $192 million - just below the $200 million limit - in May 2012.
Pointing out that the first Christie administration had left a $100 million overdraft come May 2007, Mr Halkitis said the former government had also “maxed out” both the short-term advances available to it from the Central Bank of the Bahamas and Treasury Bill issues.
Addressing comments made in The Tribune yesterday by Hubert Ingraham, the minister of state for finance said: “You use up your headroom, exhaust all the short-term facilities, you max it out, there’s no room and then you get in the newspapers and say things are tighter than 2001?.......
“I reject all, any advice.. I reject it outright from those who previously held the seat,. They should have taken their own advice.”
The former administration would likely retort that government spending had to ‘pick up the slack’ caused when the private sector contracted rapidly during the 2008-2009 global recession.
Revenues dropped sharply as economic activity reduced, while demands on the spending side rose due to unemployment-related social security needs and various capital works projects.
Effectively, the Ingraham administration took a ‘calculated gamble’ that much-needed infrastructure improvements would both prevent the bottom falling out of the economy and position it for when the world returned to more normal growth levels. The Bahamas still remains overly-dependent on the US and world economies.
Promising that the Government would produce a Mid-Term Budget that improved revenue administration and addressed the overall fiscal position, Mr Halkitis acknowledged that the Bahamas “did not get into the situation we are in overnight”.
“We understand it is what it is, and have to do the necessary things to fix it,” he added, suggesting that a “disciplined approach” was required to effect a turnaround.
The Minister also acknowledged that the Government had to “do a better job” in forecasting its revenues, so that these could “match” and determine its spending levels. Resources, he added, were being put in place to do this.
Hitting at the former Ingraham administration for increasing spending while revenues underperformed, Mr Halkitis said that in 2007-2008, revenues came in just $44 million below projections - at $1.445 billion as opposed to $1.49 billion. Spending was at $1.5 billion.
Yet the following fiscal year, 2008-2009, Mr Halkitis said revenues dramatically underperformed projections - coming in at $1.331 billion as opposed to $1.574 billion, a $243 million gap.
Yet the Minister noted that spending rose further to $1.729 billion, creating an almost $400 million deficit.
Mr Halkitis also dismissed the fevered debate surrounding whether the Government might have to borrow more money in its Mid-Year Budget.
Again implying that such a move might result from the former Ingraham administration’s prior commitments, which were unknown during the three weeks the PLP government had to craft the 2012-2013 Budget, Mr Halkitis said returning to Parliament for supplementary borrowing approvals was a normal event for the Government.
He added that the Ingraham administration had to do this in 2009-2010, 2010-2011 and 2011-2012, to the tune of $270 million, $165 million and $205 million respectively.
“Why should it be a surprise, or revelation, to anybody that there are bills left over that we have to pay, and will pay, as the Government of the Bahamas,” Mr Halkitis said.
“We have to honour commitments of the Government of the Bahamas made by the previous administration.”
The Opposition, though, is likely to question whether the increased borrowing is needed to support the Christie administration’s new hires across government, and increased spending in areas such as Urban Renewal.