By NATARIO McKENZIE
Tribune Business Reporter
THE Government will introduce legislation for 'fiscal rules' in February/March 2018 to prevent "runaway spending", the Deputy Prime Minister said yesterday.
K P Turnquest said the Minnis administration was committed to introducing the legislation in time for the 2018-2019 Budget cycle.
Speaking at a fiscal policy workshop hosted by the Inter-American Development Bank (IDB) and the Government, he said: "We have already had the IMF, through its CARTAC Caribbean help desk, come and do an assessment for us to look at some of the restraints that we have. "Working with all of these multilateral agencies, we hope to come up with a set of rules that will be progressive but gives us the flexibility to do what we need to do locally to ensure that our growth agenda is not derailed."
Mr Turnquest added: "The Bahamas has gone through a very steep increase in our debt over the last couple of years, and our fiscal deficit continues to be at a level that is unsustainable. Even with the introduction of VAT we continue to run a fiscal deficit that is unsustainable.
"We have committed to introducing a fiscal rule before the next Budget cycle to help us in not only locking in savings and programmes we have initiated, but to help us to control expenditure and the growth of our expenditure over the medium to long-term." Mr Turnquest said government spending has traditionally grown during election years, and added: "That is a situation that results in potentially short-term gains but long-term pain for the Bahamian people.
"We want to look at putting in rules that will limit the growth in expenditure from year to year, which will prevent that kind of runaway spending for selfish gain. We are looking at targets of debt-to-GDP. We want to look at targets with respect to wages as a percentage of GDP so that we bring ourselves in line with good practices and country norms."
Therese Turner Jones, the IDB's Bahamas country manager, said: "One of the main reasons behind a fiscal rule is to embed some discipline in the Budget process, but also to create some transparency around the Budget; to have expectations around what a government will and will not do."
She said that Jamaica is the only country in the Caribbean to have adopted a 'fiscal rule' thus far, and added that it does not tie the hands of government. "There are escape clauses so, in the event of of some natural disaster, there is a way to suspend the target for two years," Mrs Turner-Jones said.
"There is flexibility built into the rule, but we want to keep it simple so that everyone understands how it works. That helps provide an environment where there is predictability in the policy response of the Government."