By NATARIO McKENZIE
Tribune Business Reporter
nmckenzie@tribunemedia.net
Exchange controls are the “single biggest barrier to economic development in this country”, a well-known doctor arguing that their removal would enable Bahamian entrepreneurs and individuals to participate in major investment projects.
“Exchange control, in my opinion, is one of the single biggest barriers to economic development in this country. The Government controls what comes in and what goes out,” said Dr Johnathan Rodgers, who last week gave a presentation to the Nassau Institute on solving the Bahamas’ national debt problem and the impact of Value-Added Tax (VAT).
The leading eye doctor told Tribune Business: “As far as I’m concerned, exchange control equals access denied to competitively priced capital importation for entrepreneurs and all Bahamians.
“It feeds right into the cartel banking system, because it means that you have to borrow from them at exorbitantly high rates. If they don’t like your project, it’s dead.”
Dr Rodgers said the Central Bank could reduce its interest rates, thereby allow the Government the 4.75 per cent rate it paid to investors in its domestic bond issues.
This, he added, would aallow the Government to save on its debt servicing costs.
“The interest paid on government debt in the Bahamas is determined by the Central Bank,” Dr Rodgers said.
“It is within the bank’s purview to lower the amount of interest the Government pays on its debt, and they’re not doing it. That’s a major issue.
“They could easily lower the interest [Discount] rate, which would lower government interest payments every month, which actually helps reduce the fiscal deficit. For the private sector, the loan rates would come down, which would mean that people would pay less on their loans and they would have more disposable income to spend in the economy.”
He described private sector debt in the Bahamas as “a real worry”, and added: “The high cost of real estate has to come down. It is preposterous how high real estate transactions fees are in this country.
“If you reduce the interest rate, the cost of borrowing comes down. If you reduce the transaction costs, you get more homes being built. If you reduce the import duties, the cost of building materials comes down and you get more homes being built.”
Dr Rodgers also suggested that the Government could print $500 million in Bahamian currency to pay off bond-holders.
“They could reduce the debt from $5.5 billion to $5 billion by printing half a billion dollars worth of money, and paying off the debt holders. People will say that’s going to cause inflation, but it wont. Inflation only occurs when you have more demand than supply,” Dr Rodgers said.
Calling the multi-billion dollar Baha Mar resort development “no slam dunk”, Dr Rodgerd said the Bahamas was suffering from a double dependency syndrome.
“That is the Government depends on direct foreign investment for everything, and everyone depends on the Government,” he added.
“We can’t grow our GDP based on the current structure of the economy. That’s the problem.”
Dr Rodgers said the right mix of austerity, debt restructuring and GDP growth was need to improve the country’s fiscal position.
Comments
Reality_Check 10 years, 2 months ago
This wannabe economist is so far off base on most things that no one takes him seriously. He's in the money-gram business making a small fortune off of the exploitation of legal and illegal immigrants alike who are at the bottom rung of our society's economic ladder and who are virtually forced by our banking system to send money to their desperate family members back in their home countries by paying exorbitant commission rates and fees to the greedy doctor's money-gram business. The greedy doctor has been agitating for years for the elimination of exchange controls in order to reduce the costs associated with his highly profitable money-gram business.
John 10 years, 2 months ago
The problem with the Bahamas is that there are too many leakages in its economy. You have a battery of foreign workers that come here, legally and illegally and cart of millions and millions back to their home country. Then you have the foreign investors who come here, carpet bag the government into giving them millions ad millions in concessions. Many of them reap huge profits and take this windfall out of the country without paying appropriate taxes. Then government uses taxpayers' money to put infrastructure in place for many of these foreign concerns to operate. So rather than Bahamians benefitting from foreign investment, they actually find themselves having to subsidize it. Take for example the new airport. Fees has escalated dramatically since that facility was started and is now complete. For example if you travelled on the weekend, parking cost $9.00 for 3 days. Today the cost is $30.00 for 3 days, its cheaper to catch a cab. But Bahamians do not mind paying so much for the airport because they can realize value for money. But still the tourist sector should put these facilities in place at no cost o the Bahamian people. With 5 million tourists coming here each year, and multi million foreign companies operating, the Bahamian people should not be saddled with a $5 billion national debt. And now with the government having sold (ok given away) BTC and looking to do the same with other government entities, our fiscal position will even be weaker in the absence of these assets.
sheeprunner12 10 years, 2 months ago
Right on John................. now add to that the poltical vultures with their claws in the cookie jar (20% of GDP) that actually stays in the economy.
A classic robber economy
ohdrap4 10 years, 2 months ago
That is wrong. When you increase the supply of money, the demand for money increases. Can never be too rich or too thin. LOL.
The DNA could not elect a single candidate because of this myopic eye doctor.
Sign in to comment
Or login with:
OpenID