The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman yesterday said there was “no question” the Government could cut its spending by up to 20 per cent, as he urged it to get “the broadest possible buy-in” on tax reform.

Chester Cooper told Tribune Business he believed the Government could “comfortably shave” at least 10-15 per cent of its current spending levels, warning the Bahamas was now in the position of having to “pay the piper” for past fiscal policies.

He said the 34 per cent drop in the fiscal deficit for the 2013-2014 first quarter showed it was possible to reduce the ‘red ink’ by managing spending, and added: “We call on the Government to show leadership by eliminating waste and leakages in public spending, and collecting existing taxes.

“By employing zero-based budgeting, rebuilding the budgets from the ground up, there is no question that the Government can find 10 per cent to 15 per cent, or even 20 per cent, that might be comfortably shaved from its expenditures.”

Cutting the Government’s spending by this magnitude implies a reduction of between $170-$340 million, based on the 2013-2014 Budget’s estimated $1.7 billion recurrent spending.

So far, the Christie administration has been reluctant to commit itself to specific targets when it comes to reduced spending, viewing fiscal reform as largely a revenue-side game.

This, though, has fuelled concern among the private sector and observers, who have been reluctant to give the Government a ‘blank cheque’ for fear it will spend all its VAT-generated revenues on new projects, rather than debt and deficit reduction.

This was alluded to by Mr Cooper yesterday, who said: “Government must lead on the issue of tax reform. But, more importantly, find the will and fortitude to curb its expenditures to divert a looming crisis.”

Referring to the recent Moody’s country analysis of the Bahamas, exclusively revealed by Tribune Business on Friday, the BCCEC chairman added: “Moody’s clearly articulates what we know already with respect to tax reform: It must happen.

“We must get it right, however, with the broadest possible buy-in, especially from the business community. Much can be said of how procrastination over the decades has forced us into having to take measures without the benefit of adequate public discourse.”

Mr Cooper, though, backed the Government’s target of achieving a balanced Budget on the recurrent side by 2016.

Moody’s had described this as “overly optimistic”, but the BCCEC chairman urged the Christie administration to go even further and aim to beat these goals.

Mr Cooper said: “I do not subscribe to the assertion that the plans to cut the deficit are unrealistic.

“We find ourselves here because we failed to take the prudent steps over the years to preserve the necessary head room for recessionary periods. Now it’s time to pay the piper. It simply must be done; the targets must not only be met, but it would be advisable that they beat their projections.”

Suggesting that Moody’s and its fellow credit rating agency, Standard & Poor’s, were “singing from the same script”, the BCCEC chairman told Tribune Business: “On the current path, we are clearly on the brink of a downgrade and all steps must be taken to avoid this, as this could have dire rippling consequences to our economic framework and way of life.

“Notwithstanding the numerous warnings, I sense there is still much aloofness to actions that need to be taken. We did not find ourselves here overnight, and ‘doing nothing and hoping it goes away’ is simply not an option.”

Mr Cooper described the $2.6 billion Baha Mar project’s opening in December 2014 as “the silver lining” for the Bahamas, and said the development had to succeed.

“Baha Mar’s ongoing construction activities and prospects for employing thousands of Bahamians brings some optimism in reducing unemployment, inspiring confidence in the economy, and driving domestic demand in real terms,” he added.

“This renewed confidence should eventually give banks more comfort in relaxing lending restrictions, which will be further helpful in driving construction, investments and, ultimately, the economy.

“Further, its new, fresh inventory of rooms might just be what the doctor ordered to help revive the sluggish tourist stop]over numbers. This is, however, a late 2014 /early 2015 ambition in my view.”

Mr Cooper said the Bahamas also needed to find new industries and tourism linkages to grow the economy “in a more balanced, disciplined way”.

He described spin-off opportunities from Baha Mar for small and medium-sized enterprises as key.