The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Chamber’s chairman yesterday said he “fully expects the Government to be responsible” with today’s Budget, and not engage in pre-election spending sprees that will throw the Bahamas’ fiscal consolidation plan off-course.

Gowon Bowe told Tribune Business he was giving the Christie administration “the benefit of the doubt” ahead of this morning’s Budget communication, given that it knew the Bahamas was still in dire fiscal straits.

Emphasising that pre-election deficits and spending that the country “cannot afford” were what the Bahamian people needed least, Mr Bowe added that the Government’s desire to retain office needed to be balanced with fiscal realities.

Acknowledging the collective $1.6 billion increase in the national debt over the three years to end-2015, the Chamber chair said history was less important than where the Government’s finances were headed.

He argued that the key was whether the Bahamas was “moving as rapidly as we need to”, and as quickly as the Government has projected, towards eliminating the GFS fiscal deficit and achieving a ‘balanced Budget’.

Reaching the latter goal would curtail any further increase in the $6.7 billion national debt, which was equivalent to 76.3 per cent of GDP at year-end 2015, and growing further beyond the IMF’s ‘danger threshold’.

“I’ve not set any expectations,” Mr Bowe said of the 2017-2018 Budget. “I think the Prime Minister and the Government fully know what’s facing the country in terms of our fiscal situation.

“I fully expect them to be responsible, so I’m giving them the benefit of the doubt.

“Hopefully, they will be listening to the technical people telling them that they can’t afford certain elements, and hopefully they will not depart from the fiscal consolidation plan they have because it runs smack dab into the general election cycle.”

That medium-term plan calls for the Government’s recurrent or primary balance (revenues minus recurrent expenditure) to move into surplus during the upcoming fiscal year.

And the GFS deficit measurement, which strips out debt principal redemption costs, was forecast last year to narrow further to just $70 million in 2016-2017. A further cut, to $31 million, was projected for 2017-2018, leaving the Bahamas in position to finally reach a GFS surplus the following year.

Yet such progress, which has yet to become reality, could be threatened if the Christie administration were to engage in pre-election spending sprees that have frequently occurred in the Bahamas since independence.

“Reality sets in, and we know there’s going to be a tendency towards things most advantageous to their election efforts,” Mr Bowe told Tribune Business. “It has to be tempered with where we are on fiscal realities.

“I would be very critical of any increase in spending. They [the Government] know what the medium-term fiscal consolidation plan calls for, and the implementation of VAT needed to be accompanied by spending restraint.

“This position has not changed, so from that perspective I expect them to do the responsible thing as a government.”

Mr Bowe clarified that he was not against all spending, such as capital works and infrastructure projects where the Government knew how they were going to be financed.

Pointing to the Prime Minister’s call for airport and harbour upgrades, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman said the Government needed to initiate further private-public partnerships (PPPs) along the lines of the Nassau Airport Development Company (NAS) and the Nassau Container Port.

Pointing out that private financing could provide necessary infrastructure without burdening the Bahamian taxpayer, Mr Bowe said the key issue was whether “there is a plan behind it as to how spending will be funded and paid for.

“Do outflows lead to inflows? If there are outflows of cash with no clear indication as to how things are dealt with, that will be an element I would be critical of.”

Tribune Business revealed on Tuesday how Central Bank data showed that the Christie administration has added $1.6 billion to the Bahamas’ national debt over the past three years.

“The national debt rose by $361.1 million (5.8 per cent) to $6.638 billion at end-2015, albeit lower than the $689 million (12.3 per cent) gain registered in 2014,” the Central Bank said.

“Similarly, the debt-to-GDP ratio firmed by 2.6 percentage points to 76.3 per cent, a notable tapering from the 7.4 percentage point widening to 73.7 per cent in 2014.”

Mr Bowe, though, told Tribune Business that the $1.6 billion increase came as no surprise, given the multi-million dollar deficits that have been incurred in recent years.

“We should not be any more concerned today than when we saw this two years ago, and saw the steady incline [in the national debt],” he said.

“Our concern should be the level of the deficit, and whether we’re moving as rapidly as we need to towards a fiscal balance.

“We should be focusing on the upcoming communication, and whether it demonstrates a true commitment to achieving a fiscal balance by 2017 and 2018,” Mr Bowe added.

“We do not want to see any imprudent spending for the sake of an election, as we cannot afford that in our current situation.

“We must not take a blind view, but what do we expect from the Government going forward in terms of fiscal discipline? Now is the time to shift the dialogue from the blame game. There’s certainly no monopoly on bad decisions.”