By NEIL HARTNELL
Tribune Business Editor
The Bahamas’ downgrade to ‘junk’ status “seriously calls into question” whether the Government has breached its fiduciary duty to the public, the Opposition’s House of Assembly leader charged yesterday.
Loretta Butler-Turner told Tribune Business that the primary responsibility of any government was to ensure “the ship of state remains in a state of buoyancy”, but this was now being challenged by Standard & Poor’s (S&P) latest rating action.
Mrs Butler-Turner also accused the Christie administration of performing “a song and dance” over the past four-and-a-half years by frequently lauding its fiscal consolidation efforts, only to repeatedly fail to deliver on its projections.
“This demonstrates more than ever that we need a government with a plan to resuscitate this country from where the PLP has led us,” Mrs Butler-Turner said of S&P’s decision to strip this nation of its ‘investment grade’ rating.
“The Government for the last four years has been giving us a song and dance about bringing down the deficit and debt, and balancing the Budget. It’s more important than ever that caring Bahamians unite to get this government out.”
Mrs Butler-Turner said the latest S&P downgrade, following a trend that began under the former Ingraham administration, of which she was a member, reinforced the warnings provided by the International Monetary Fund (IMF) during its early December visit to Nassau.
The Fund, revealing that the 2015-2016 fiscal deficit was likely to come in at around $300 million, double the Government’s own projections, also urged the Christie administration to “rationalise” and better control its spending.
“We realise the Government was overly-optimistic and misleading in its projections, given where we are now,” Mrs Butler-Turner told Tribune Business.
“It seriously calls into question the fiduciary duties of the Government. It has to ensure the ship of state remains in a state of buoyancy, and the economy, with this bad news, is in a state of sinking.
“This bad news [the latest S&P downgrade] confirms all we’ve been harkening to. It’s very, very sad. Bahamians are really going to have to double down, which they have been doing already, but Government must be more accountable and transparent.”
The Bahamas’ loss of investment grade creditworthiness has been several decades in the making, with successive administrations - including the present one - bearing a share of the responsibility for the persistent fiscal slippage, and seeming inability to reform and change course.
KP Turnquest, the FNM’s finance spokesman and deputy leader, told Tribune Business that the ‘junk/speculative’ downgrade “doesn’t say much for our economy at all”.
“It’s rather sad for us, but I think it does reflect the state of where we are,” he said of S&P’s action, describing the rating agency’s move as “not surprising”.
“It’s all consistent with what we’ve been saying and what we know to be true,” Mr Turnquest added. “The reality is that the promised fiscal consolidation has not happened, and we’ve not only seen that in the recurrent deficit - which has doubled beyond what the Government predicted - but the expanding national debt and in the economy’s performance relative to GDP growth.
“The Government has been pinning its hopes on Baha Mar, which has been slow to take off. When the Prime Minister talks about 1,500 jobs in the 2017 first quarter, he’s being very hopeful, very optimistic, if what we have been led to believe about the state of the property is true.”
Mr Turnquest said he was especially interested in S&P’s projection that the Bahamas would average -0.1 per cent GDP per capita growth over the next three years despite Baha Mar’s arrival, with this downbeat assessment following a decade of such contraction.
“We’ve had an average of 1 per cent growth over the last 10 years, 20 years, and for the last three years we’ve had negative GDP growth,” the FNM deputy leader added.
“I still contend that growth’s going to be flat-lining, if not negative, in 2016. It doesn’t say much for our economy at all.”
S&P is estimating that the Bahamian economy will expand by a meagre 0.3 per cent of GDP in 2016, down from its earlier estimate of 1.2 per cent, but still arresting the negative growth trends.
The S&P forecast is now also more in line with the Government’s, which projected just 0.5 per cent in its May Budget, while the rating agency’s near-term predictions - 1 per cent for 2017, and a 1.3 per cent average for 2018-2019 - also match the Christie administration’s.
“The important thing they raise is that the fiscal consolidation is not being adhered to, or is not as aggressive as we’ve been led to believe,” Mr Turnquest told Tribune Business of S&P’s report.
“We’ve been unable to bring the recurrent deficit down significantly. As much as it has come down in recent years, it’s only been on the back of VAT, and recurrent expenditure has been increasing. It’s only a matter of time before that catches up. We’ve got this national debt that’s growing out of control, while they’re making claims of reducing the deficit.
“We know there’s a serious cash flow problem in the Government. We know they’ve been borrowing from NIB, the Central Bank, and know there are vendors providing services to the Government that have not been paid, or are being paid slowly.”