By AVA TURNQUEST
Tribune Chief Reporter
FINANCE Minister K Peter Turnquest last night blasted his Progressive Liberal Party (PLP) counterpart for challenging whether the government had exaggerated the size of the country’s fiscal deficit.
His attack came after PLP Shadow Finance Minister I Chester Cooper seized on new Central Bank data which showed a deficit much lower than the $500m figure Mr Turnquest reported in his budget address.
It was this half billion dollar number which the government has used to justify new borrowing of $722m.
However, the Central Bank placed the deficit at $284.7m in its latest report published on July 31. The figure represented data on the government’s budgetary operations for the first ten months of the fiscal year 2016-17, which is June 2016 to April 2017.
In a statement yesterday, Mr Cooper, PLP MP for Exuma and Ragged Island, said the government’s earlier statements “seem misleading,” and raised very serious questions he said Mr Turnquest and the Minnis administration should answer.
Reacting to Mr Cooper’s statement on Monday, Mr Turnquest accused the PLP politician of being “disingenuous at best” or, at worst, “obviously trying to mislead the Bahamian people on the basic facts.”
Mr Turnquest said he expected “better” from Mr Cooper, adding the accounting practices the latter is promoting is likely the reason why the country’s finances are in their current state.
He stressed that the Minnis administration met a litany of unpaid bills when it assumed office on May 10, and those liabilities, as well as bill already paid, had to be accounted for in the budget debate.
For his part, Mr Cooper said: “With great fanfare, the current administration levelled a half-billion-dollar deficit at the feet of the Christie administration during its recent budget exercise, sending shockwaves throughout the Bahamas and the international investment and rating communities.
“As the Christie administration was voted out of office on May 10, one wonders how in even the most extreme circumstances, an administration could run up an additional $215 million in deficit spending in just 10 days, if, as the Free National Movement contends, it met ‘the cupboards bare.’
“As the deficit is based on actual disbursements, Mr Turnquest needs to fully explain what the extra $215 million was used to pay that does not seem to have been run up by the PLP.”
Mr Cooper added: “What bills were encountered by the Minnis administration after the election, when the FNM was supposedly tightly monitoring fiscal controls? Or was the estimated $500 million an exaggeration?”
According to Tribune Business, more than $215 million worth of deficit spending had to be incurred during the final two months of the 2016-2017 fiscal year to hit the Minnis administration’s $500 million projection.
Based on previous Central Bank reports, which pegged the end-March deficit at $265.9 million, the former government added a relatively ‘modest’ $18.8 million to it during April - a far cry from the $500 million worth of ‘red ink’ that the Minnis administration is estimating for the 2016-2017 full-year, Tribune Business reported last week.
The Central Bank data suggests either the Christie administration abandoned all spending controls during its final days in office; that previous spending commitments caught up with it; or the current government’s estimate may be excessive, it was previously reported.
Yesterday, Mr Cooper explained that backlogged bills that had not yet been paid should not be factored in to the deficit because government accounting is done on a cash basis.
“The deficit represents actual spending and not what bills were left due or that the government wished to pay, as this is a natural consequence of all governments when control changes hands – to meet some bills unpaid – as was the case when the PLP took over from the Ingraham administration in 2012.
“Indeed this scenario will occur at the end of each budget period. Cash management is key,” he continued.
“After the show that was gleefully participated in by so many ministers of the Minnis administration as the PLP was castigated on the notion of unsustainable deficit spending, it is incumbent on the minister of finance to explain what it spent the extra $215 million on and why; or provide appropriate reconciliation of its numbers versus that of the Central Bank of the Bahamas,” Mr Cooper said.
However Mr Turnquest castigated the political newcomer for his reasoning.
“Having admonished his party to apologise to the Bahamian people for the mismanagement of the country’s fiscal affairs and as a financial services professional himself, I expected better from the shadow minister,” Mr Turnquest told The Tribune.
“Cooper acknowledges that in a cash basis accounting system, bills are only recorded when paid. However, liabilities incurred must still be accounted for and provision made to pay them as they become due or demanded. The practice of deliberately holding over payments at year end to take advantage of the inherent weakness of a cash basis system and under reporting liabilities incurred is misleading and dangerous. This practice likely contributed to the massive national debt every Bahamian is now obligated to pay as successive governments fail to recognise past obligations in planning for future spending.
“On assuming office, the current administration was faced with millions of dollars in recorded payment in the treasury system awaiting available cash and approval to disburse cheques. Many vendors would attest to the fact that they remained unpaid for months leading into the general election, including salaries for groups of workers such as the ‘job empowerment programme,’ more commonly known as the 52-week workers I spoke about during my budget debate contribution and the police overtime pay.
“Pharmaceutical companies were not paid and threatened to cut off supply, insurance premiums were not paid, vendors, including hurricane relief vendors, were not paid, service contracts were not paid, and the list goes on.
“To be frank, I am appalled at the suggestion that the bills incurred in the period from May 10 to June 30 had much of anything to do with the current administration given the massive amount of bills discovered and those that were undisclosed and popped up. The fact is that prudent cash management is an absolute must, given the lack of fiscal control exercise by the former administration.
“During the budget debate my colleagues outlined line after line of fiscal abuse and waste, yet the shadow finance minister is unashamed to raise his head. I had hoped he would be different but I suppose the PLP message remains the same, unapologetic and shameless,” Mr Turnquest said.
He said the Ministry of Finance will continue its modernisation project which will prevent “these distortions going forward” and ensure true accountability and transparency in fiscal reporting practices.