The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s proposed hurricane reconstruction bond shows the Bahamas is “one disaster away from financial disaster”, the Opposition’s finance spokesman said yesterday.

K P Turnquest, admitting that he was “concerned” about the Christie administration taking on further debt, argued that its comments about ‘fund raising’ and private sector participation showed the Bahamas had used up all “fiscal headroom” prior to Matthew’s passage.

And, echoing Chamber of Commerce chairman, Gowon Bowe, the FNM’s deputy leader queried why the Bahamas had yet to establish its own hurricane insurance fund, financed by annual contributions from the Government’s Budget.

Mr Turnquest also called on the Christie administrations to use the funds it had allocated as ‘contingencies’ to numerous Ministries and departments in the 2016-2017 Budget for hurricane relief, prior to borrowing more monies.

Questioning whether it was the Government’s responsibility to act as ‘chief fund raiser’, Mr Turnquest told Tribune Business: “The fact they’re going out to borrow tells us something.

“The fact they’re talking about fund raising tells you the [fiscal] headroom that might have been available is not. There is no room.

“It appears that we are only one disaster away from financial disaster, and if we don’t get Freeport up and running quickly, that’s going to be a significant issue for this country.”

Tribune Business revealed just prior to Matthew’s passage just how little ‘room for manoeuvre’ the Government has, a result of the Bahamas’ ever-increasing national debt and worsening fiscal ratios.

The Central Bank’s latest quarterly report disclosed that total public sector debt was a mammoth $7.604 billion, a sum equivalent to more than 90 per cent of national economic output (GDP).

That figure includes both the guaranteed and non-guaranteed obligations of public enterprises, alongside the direct charge on central government. The latter, and the national debt, as a percentage of GDP, stood at 70.8 per cent and 79.6 per cent.

Both exceed the so-called ‘danger threshold’ set by the International Monetary Fund (IMF), in the belief that countries above these ratios could fall into an ever-increasing debt spiral, as they borrow more to meet existing interest payments.

Placing his concerns over the reconstruction bond in context, Mr Turnquest said: “Our Government brags about taking home $600 million in VAT, some $200 million more than budgeted, yet the debt has not gone down and they still have cash flow problems.

“If you look at the Budget, there’s all kinds of contingency allocations for every department. Why can’t we use that money? To go out and borrow more money, in the absence of alternatives, is one way to do it.”

Mr Turnquest joined Mr Bowe in calling for the Government to establish its own hurricane insurance fund, financed by annual contributions from the Budget.

“It’s a lack of planning, a lack of being proactive, and a lack of being disciplined,” he told Tribune Business.

“This is the hurricane belt. There’s no reason why we could not have a $10 million fund ready for this situation. We should not be hand to mouth like this. It doesn’t make sense. Put in $1-$2 million per year, and build it up to $10-$20 million.”

Mr Turnquest also agreed that the fiscal and economic blow dealt by Hurricane Matthew would likely create the danger of another credit rating downgrade for the Bahamas, something that would drop the nation to ‘junk’ status and cost it its current ‘investment grade’ position.

“They’ve [the rating agencies] already been giving us warning signals about spending, and here is a significant blow to the Bahamas that has not been planned for, with not compensating offset in terms of reduced spending in other areas,” he added.

“It will be interesting to see how we fund this recovery, and what effect the hurricane has on the GDP numbers.”

With just 0.5 per cent GDP growth projected for the Bahamas in 2016, and the economy having contracted for two consecutive years prior, the Opposition’s deputy leader warned that Matthew “may push us further into negative growth again”.

Mr Turnquest, the east Grand Bahama MP, added that the devastation to Freeport and the island as a whole would weigh heavily on the country’s 2016 economic performance.

He added that he had been “led to believe” that major employers and industrial concerns, Polymers International and Bradford Marine, had incurred “significant damage” as a result of the Category Four storm.

Mr Turnquest said the key issue for Grand Bahama was the restoration of electricity supply, as this drove both water services and the island’s economy. He added that the private sector’s recovery was vital to providing Bahamians with the jobs and incomes necessary to finance repairs to their homes.

Tribune Business reported yesterday that 700 electricity poles, some carrying key distribution lines, were down on Grand Bahama.

“I think that people are trying to pick up the pieces,” Mr Turnquest told Tribune Business, “but without electricity not much can happen.

“A major concern for most people is the status of their employment, as areas such as Port Lucaya sustained tremendous damage. The hotels are also assessing where they are and when they will get back on line. These things are further stressing out people.”

Mr Turnquest said Grand Bahama would now likely have to endure a recovery period similar to the one it went through following Hurricanes Frances and Jeanne in 2004, two ‘back-to-back’ storms that left the island “on its knees”.

“Commerce in Grand Bahama has suffered a significant setback,” he added. “It will be a while before we get back into the swing of things and contribute to the economy.

“I couldn’t put a number to it at the moment, but it’s been a significant blow to the economy. If we can’t get the hotels up and running quickly that becomes an issue.

“Getting the properties back on line, and people back to work, that’s the most important thing here, so they can generate income and rebuild.”

Mr Turnquest said his post-Matthew travels on Grand Bahama had revealed that many residents lacked both the incomes and insurance coverage to rebuild, and were “hoping NEMA and the Government come through”.