The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The FNM’s deputy leader yesterday said he would “not be surprised at all” if Moody’s prediction that the Government will overshoot its fiscal deficit forecast by more than $100 million proves true, arguing there was no real evidence it has curtailed spending.

K P Turnquest, the east Grand Bahama MP, said: “As we outlined at the midyear statement, the expenditures are still well exceeding the Budget, as well as the deficit is continuing to grow significantly. I would not be surprised at all if they miss their target.

“If you just look at it, you would notice that they have not curtailed their spending at all. What they have done is hold off on some necessary spending and commitments that are already in the pipeline, for instance, the Baha Mar pay-out,  BAMSI construction,  the full operation of the hospitals, the clinics in Abaco and Exuma, so those things are coming.”

He added: “What they have been trying to do is play fast and loose, hoping that the VAT returns will come in to off-set. Again, if they don’t get the recurrent expenditure under control - and we have seen no real evidence that they have done that - they are going to have a problem.”

Moody’s, in its latest ‘credit opinion’ on the Bahamas, predicted that the full-year fiscal deficit would hit a sum equivalent to 4.4 per cent of gross domestic product (GDP) - more than one percentage point higher than the Christie administration’s own 3.2 per cent forecast.

Based on the Bahamas’ projected $8.932 billion GDP, Moody’s estimate places the likely 2014-2015 fiscal deficit at $393.008 million - some $107 million higher than the Government’s $286 million forecast.

The Wall Street credit rating agency acknowledged that the Government’s half-year fiscal deficit of $273 million, or 3.1 per cent of GDP, was just below the full-year $286 million projection.

And it said the Government’s $150 million VAT revenue projections for the six months to end-June 2015 were too optimistic, with earnings from the new tax set to grow at “a more moderate” pace.

“In order to meet its target, the Government expects that over the coming months revenues will outpace expenditures, as the former will be boosted by the introduction of a VAT in January,” Moody’s said of the Christie administration’s 2014-2015 fiscal goals.

 “Authorities forecast that VAT revenues in a half-fiscal year should come to about $150 million. Under this scenario, the deficit would amount to $286 million (3.2 per cent of GDP) by June 2015.”

   Michael Halkitis, minister of state for finance, offered no comment on the assessment by Moody’s, although some observers noted that the agency has not always been on the mark with its forecasts  relative to this nation, citing its suggestion that VAT would be difficult to implement on its timetable as a recent example.

Still, Mr Turnquest suggested that unless something “drastic” happens within the next few months, the fiscal deficit will continue to grow.

“I think the Government is continuing to put its hopes in Baha Mar, that it would somehow offset this deficit. Hopefully it will come on line. We certainly need it to. Even outside of that the Government has to take a more aggressive approach to containing expenditure and, at the very least, ensuring that we get value for the money that we spend,” said Mr Turnquest.