By NEIL HARTNELL
Tribune Business Editor
The Chamber’s chairman has backed Fiscal Rules “principles” for the Bahamas, describing the Christie administration’s failure to initiate consultation on the issue as “a tremendous opportunity lost”.
Gowon Bowe told Tribune Business that the private sector and Bahamian public needed to “force” the Government to establish a Tripartite Working Group that would determine the way forward on greater fiscal accountability and transparency.
Calling for such a group to be formed “in the very near term”, Mr Bowe said it needed to feature representatives from the tax collector (the Government), taxpayers (the Bahamian people), and the ‘intermediaries’ (the business community.
He added that the Government’s failure to follow through on its February 2015 promise of consultation on Fiscal Responsibility-type legislation showed that the Bahamas “cannot rely” on the executive to lead on this issue.
“Philosophically, some form of Fiscal Responsibility and fiscal guidelines are going to be important,” Mr Bowe told Tribune Business.
“I would, and the Chamber would, support the principles set out for fiscal rules for the country, and the introduction of that should be facilitated through Tripartite dialogue.”
The Chamber chairman was speaking after an Inter-American Development Bank (IDB) paper, published last week, warned that the Bahamas and other Caribbean nations need to impose discipline on their governments if they are to escape their debt and fiscal crises.
It argued that the only way this could be achieved was through the implementation of so-called ‘fiscal rules’, which would set limits on the Government’s spending, and the deficits and debts it runs up.
The IDB paper’s authors, Allan Wright, Kari Granade and Ankie Scott-Joseph, said that the Bahamas’s best option was to impose ‘fiscal rules’ or limits on the Government’s spending, so that this was always kept in line with a target debt-to-GDP ratio.
Prime Minister Perry Christie promised, during the mid-year Budget in February 2015, that the Government would initiate consultation on whether a Fiscal Responsibility Act was suitable, and appropriate, for the Bahamas.
A ‘White Paper’, setting out the respective cases for and against such legislation, was to have been released by summer 2015, with all feedback submitted to the Government by year-end 2015, and a Cabinet decision taken shortly afterwards.
None of this ever happened, and Mr Bowe told Tribune Business that “a tremendous opportunity was lost by not seeing it through”, especially when it came to the Bahamas’ long-term economic and fiscal planning needs.
“The Prime Minister previously promised that an analysis would be done, and that has fallen by the wayside,” he said.
“Political expediency dictates; do I want things to handcuff my ability to do things that are socially minded, but not economically minded?”
The Chamber chairman said the episode showed Bahamians they “cannot rely on the Government” to take the lead when it comes to developing, then imposing, fiscal responsibility and would have to instead “force Government” to establish a Working Group on the issue.
He added that given the nature of the political cycle, there had been “a very slim chance” of the promised Fiscal Responsibility Act consultation occurring once the summer 2015 ‘White Paper’ deadline was missed.
A Fiscal Responsibility Act would force the Government to be more accountable and transparent in the management of the public finances, and require it to return to Parliament for approval to raise more money if it had to exceed the limits approved in the annual Budget.
So-called ‘fiscal rules’ go further than such an Act by setting targets/limits the Government cannot exceed, typically debt-to-GDP ratios of budgetary and fiscal deficits.
Some have argued that ‘fiscal rules’ would be inappropriate for the Bahamas, as they would lock or ‘box in’ the Government such that it would not be able to effectively respond to emergencies, such as Hurricane Matthew.
Others, including the International Monetary Fund (IMF), have suggested that the Government’s antiquated public financial management systems are also inadequate to support the adoption of ‘fiscal rules’.
Mr Bowe, meanwhile, said his proposed Tripartite Working Group, and its government, private sector and public stakeholders, needed to first assess the Bahamas’ fiscal position and the existing laws that underpin it.
Then it could move on to determining what new laws and legislative amendments were required, and the type of ‘fiscal rules’ that the Bahamas needed.
“It’s important to have that group formed in the very near term, so it can have a very tangible output,” Mr Bowe said. “We have been haphazardly addressing fiscal issues as they have come up over the last few years.”
He suggested that the Bahamas could adopt a similar model to the Banks and Trust Companies Regulations Act, where much of the Central Bank’s regulatory authority came from regulations and guidelines that “have the force of law” but are outside the main, guiding Act.
This, Mr Bowe explained, would avoid the need to go through “the laborious process of always going to Parliament” when changes were required.
“I believe we can use regulations and guidelines to achieve the same goal,” he explained to Tribune Business. “It will still be very transparent if there’s a move by the Minister of the day to amend things not approved by the public.”
Mr Bowe said the proposed Working Group needed to be given a clear brief and timelines to deliver its analysis and recommendations, so that it was held accountable for its work.
He added that its remit should be to focus on fiscal reform and all its components, not just taxation and spending in isolation.