By NATARIO McKENZIE
GOVERNMENT spending creates jobs "only up to a point", a top Inter-American Development Bank (IDB) executive said yesterday, noting that studies have shown it reduces economic growth.
Therese Turner-Jones, the IDB's Bahamas country manager, said: "Everyone has a notion that government's responsibility is to create jobs, and government spending creates jobs, but only up to a point. We know that based on studies government spending can be deleterious to growth. "It sounds counter-intuitive but government spending tends not to be either well-targeted or is only going to wages and salaries of public servants. These are the two main items on the public's Budget; wages/salaries and debt servicing."
Mrs Turner-Jones continued: "Where we would like to see government spend more money is on the capital side. A part of the idea of 'fiscal rules' is to say: 'Let's not have debt-to-GDP over 60 per cent of GDP in any one given year'.
"I think we have to be careful how we view government spending. The Government is there to provide the environment in which the private sector should thrive. Government provides core services for its citizens."
K Peter Turnquest, Deputy Prime Minister and minister of finance, expressed confidence that the Minnis administration is on the right path to correcting the Bahamas' fiscal imbalances. "I feel confident that we are on the right path overall to correct our situation, increase our credibility in the international community and the rating agencies, and we have some fundamentals in the economy that are showing signs of productivity that will help us to achieve our overall consolidation efforts and help us to improve the economy," he said.
"At this point I believe our fundamentals are good, our prospects for the medium term are good, based on our book of investments, both domestic and international. We hope for the best."