The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The rate of growth in central government debt will drop to a five-year average of 11.4 per cent of GDP, as opposed to the current 12.7 per cent, if the Bahamas smoothly implements planned fiscal reforms.

Outlining the expected benefits from its $33 million project to improve the Government’s financial management and procurement processes, the Inter-American Development Bank (IDB) has revealed that it scores less than 20 per cent on two key project management indicators.

Documents associated with the Public Financial Management Reform and Performance Monitoring project disclose that, using the IDB’s PRODEV system for evaluating government effectiveness, the Bahamas scored just 0.8 out of a perfect ‘5’ for project monitoring and evaluation.

And, when it came to programme and project management, the Bahamas scored a matching 0.8 out of ‘5’. “Scores on these areas have been unchanged since 2009, while government has made progress in other pillars,” the IDB said.

Setting out the problems facing the Government’s fiscal position, and how these can be tackled, the IDB report said: “The fiscal situation in the Bahamas has deteriorated relatively quickly due to a sustained level of expenditure in the face of reduced revenue streams.

“From 2009 to 2013, the Bahamas faced consecutive primary and overall deficits in its finances, reaching an annual average deficit of approximately 1.46 and 3.9 per cent of the GDP respectively.”

Revenue fell by the equivalent of 2 per cent of GDP between 2011 and 2013, and the IDB report appeared to criticise the former Ingraham administration for exacerbating the fiscal woes by loosening the purse strings in the run-up to the 2012 general election.

“Recurrent spending, especially on wages and goods and services, remained elevated at a time of general elections, increasing by 1.87 per cent of GDP from 2010-2013,” the report said.

“Capital expenditure increased by 0.86 per cent of GDP from 2009-2013, as an effort of the Government to promote economic growth. In this context, it is important to mention that the way the Budget is formulated and monitored in the Bahamas does not promote economic growth.”

Elsewhere, the IDB blamed the poor PRODEV scores on the Government’s “weak management capacity in the public sector to identify and complete priority projects, as well as to deliver priority programmes and to promote economic development”.

Poor quality data and the absence of a structure to monitor government performance in executing key projects were also cited as weaknesses.

“The capacity to monitor the implementation of government policies at the centre of government is inadequate, lacking annual targets or objectives, and therefore no actions arise from non-fulfillment of the Government’s objectives,” the IDB said.

The Bahamas also scored just 1.9 out of 5 on PRODEV when it came to public financial management. And the main financial systems within the Government are “currently behind two maintenance upgrades”.

“The Government of the Bahamas lacks efficiency in the allocation of funds for the budget execution process, contributing to the escalation of the public debt,” the IDB said.

“The Budget formulation process does not take into account the sectorial strategic plans from the Ministries, and does not promote economic development.

“ The current budget classification is not programming or results-oriented, making it impossible to identify the source of the funds corresponding to a payment, and does not allow the generation of reports with information about the details of expenditures.

“Additionally, cash management is neither structured nor automated, contributing to public debt escalation. The payments issued by Treasury are currently paid through paper cheques, bringing difficulties in bank reconciliation and availability of funds.”

The IDB added that the “limited availability” of statistical was “undermining the Government’s capacity to plan, budget, monitor and evaluate its actions to solve the nation�s development problems”.

Outdated information technology systems were a key culprit, with the Bahamas scoring less than 50 out of 100 in several key statistical categories.