The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Hurricane Joaquin has delivered “a significant hit” to the Government’s finances, with infrastructure repair costs alone set to run into the “tens of millions” of dollars at least.

K P Turnquest, the Opposition’s finance spokesman, predicted that the Christie administration may have to seek additional financing from the international capital markets to meet the physical and human costs created by the Category Four storm.

He described this as “necessary debt”, as the Government could not leave Bahamians in the worst hit island suffering and vulnerable.

Yet Mr Turnquest said the Bahamas would have to perform a balancing act between doing what was necessary to deal with Joaquin’s aftermath and ensuring the Government met its ongoing obligations.

“I imagine this is going to be a significant burden to the Government as we try to restore these communities back to a sense of normality,” the FNM’s deputy leader told Tribune Business.

“You can’t ever Budget for these things, and to the extent we don’t have a hurricane reserve fund, this is going to come straight out of the Consolidated Fund, which we know is already under pressure.

“We can certainly anticipate that the Budget is going to see some negative effects for the rest of the year. I think it’s going to be a significant hit.”

Pre-Joaquin, the Government had passed a Budget designed to continue its fiscal consolidation plan through 2015-2016. It is projecting that its GFS fiscal deficit, which strips out debt principal redemption, will fall to $141 million or 1.5 per cent of GDP in 2015-2016, down from $198 million or 2.3 per cent in 2014-2015.

Joaquin’s 130 mile per hour winds, rain and storm surges may well have put paid to achieving that goal. The Government will now have to either adjust its spending plans, and re-direct funds from elsewhere in the Budget to storm relief and repairs, or borrow extra funds to cover the expense.

Either way, it is likely that the national debt and fiscal deficit will end the 2015-2016 Budget year higher than projected, at a time when the international credit ratings are subjecting the Bahamas to extra scrutiny.

Standard & Poor’s (S&P) has already cut the Government’s creditworthiness to one notch above so-called ‘junk ‘ status as a result of the protracted Baha Mar dispute, and Joaquin will add further potential stress.

“I think that it’s going to be incumbent upon the Government to employ all prudent measures to ensure it does not have any significant effect on its meeting its current obligations,” Mr Turnquest said of Joaquin.

“I anticipate they will have to go out to the market again to borrow specifically for these infrastructure repairs, and to the extent we are going to be increasing the debt level again, we certainly have to keep in mind the downgrade by S&P earlier this year.”

The Bahamas has in the past obtained emergency debt financing from multilateral agencies in the aftermath of hurricanes, as it did from the Inter-American Development Bank (IDB) following Hurricane Frances in 2004.

Mr Turnquest said he thought Joaquin’s infrastructure and disaster relief costs would total “in the tens of millions” rather than the hundreds, although it was impossible to estimate a precise figure until the necessary assessments were completed.

Joaquin spared the Bahamas’ main islands of New Providence, Grand Bahama and Abaco, where the majority of its infrastructure assets and insured risks are located.

The storm instead spent 48 hours pummeling the more sparsely-populated islands of the central and southern Bahamas, particularly Acklins and Crooked Island, Long island, Rum Cay and San Salvador. Exuma and Cat Island were hit to a lesser extent.

There is generally less insurance coverage for property and infrastructure assets the greater the distance from Nassau, meaning that many of the buildings damaged or destroyed by Joaquin are unlikely to enjoy such protection.

Mr Turnquest conceded this would add to the demands and burden placed on the Government, given that many of the hardest-hit communities already relied heavily on it for employment and sustainability.

“There’s going to be a lot of calls to assist the residents of these islands,” he told Tribune Business. “I imagine there’s going to be a significant burden or call for assistance on the Government, and that’s going to have an impact on its financial condition.

“It’s necessary debt. We can’t leave our citizens vulnerable. It is very unlikely most of them are covered by insurance. A lot of these communities depend on the Government for their subsistence anyway, and there’s going to be more pressure on the Government from that aspect.”

The east Grand Bahama MP added: “Based upon our experience in Grand Bahama, we know this recovery is going to be a significant cost to the Government.

“Having experienced two hurricanes in Grand Bahama, we know the devastation it can bring on a community, and how long it takes for a recovery to fully happen.

“They’re even further removed from the centre of Government and the consideration of the citizens of this country. They’re going to have some difficult times and difficult days ahead, and they’re going to need all the support they can get.”

Apart from electricity and communications assets, Mr Turnquest said damaged infrastructure would likely include buildings, roads, bridges and docks.