By NEIL HARTNELL
Tribune Business Editor
A governance reform campaigner yesterday said it was “absurd” that the Bahamas is again on pace for a $500 million deficit despite implementing VAT, with the Christie administration set to add more than $2 billion to the national debt.
Robert Myers, a principal with the Organisation for Responsible Governance (ORG), told Tribune Business that there was “no way” the Government could blame all its $314 million half-year deficit on Hurricane Matthew.
Calling on the Government to provide a detailed breakdown on how much extra spending, and revenue losses, resulted from the October 2016 storm, Mr Myers also urged that it delay introducing programmes such as National Health Insurance (NHI) until the Bahamas’ national finances were stabilised.
With the Government on track to run a $500 million GFS fiscal deficit for 2016-2017, Mr Myers said the figures again suggested the Bahamas was squandering the benefits of Value-Added Tax’s (VAT) $1 billion-plus in extra revenues in its first two years.
“Before VAT we had a half-a-billion dollar deficit, and now we’re on target to be over half-a-billion this year. It’s absurd,” Mr Myers told Tribune Business of the latest Central Bank data.
Warning that the Government was increasing spending “beyond its means”, he added: “They’re going to be the undoing of us.
“They’ve got to curb their expenditure in a major way; what they’ve done to-date is simply not good enough. Perhaps the Government can tell us what they spent because of the hurricane. Show us what’s hurricane and what’s not.”
Tribune Business calculations, based on official Budget figures and Central Bank data, show that the current Christie administration will set a new Bahamian record for deficit spending and debt accumulation during one term in office.
Since taking office in May 2012, its first three fiscal years produced GFS deficits of $539 million, $488 million and $381 million, respectively - for a total of $1.408 billion in new debt.
Based on International Monetary Fund (IMF) and Moody’s estimates, a deficit of around $300 million was incurred in 2015-2016. And, with a $314.2 million deficit generated during the 2016-2017 first half, more than $600 million has been added to the $1.408 billion in new national debt incurred during the Christie administration’s first three years - taking the total over $2 billion.
This is more than the $1.508 billion in additional debt that the former Ingraham administration racked up at the height of the recession. Between them, the present government and its immediate predecessor have added more than $3.5 billion to the national debt in the past 10 years, an amount greater than 50 per cent of the total.
The Christie government is likely to blame its initial $500 million deficits on problems left behind by the former Ingraham administration, while attributing more recent woes to Hurricanes Joaquin and Matthew.
The Government will likely be hoping that the fiscal situation stabilises through its ongoing crackdown on tax cheats, and the second half of its fiscal year.
This is when it collects the majority of its revenues, as it coincides with the peak winter tourism season and increased economic activity, plus the payment of all Business License fees and bulk of real property taxes.
However, the 2015-2016 deficit continued to expand throughout the second half despite the increased revenue inflows, and Mr Myers said that without VAT the ‘red ink’ could run to $800-$900 million annually.
The ORG principal added that the Government needed to park new social programmes, such as NHI, until it could demonstrate true fiscal responsibility and efficiency in its operations.
“I’ve said that unless you get fiscal accountability and responsibility in governance, you can’t do NHI,” Mr Myers told Tribune Business. “We’re living beyond our means.
“If you can rob Peter to pay Paul, fair enough, but you’ve got to create fiscal accountability, responsibility and efficiency before you do that.
“The Government has never shown any capacity to do things efficiently. Why, on God’s earth, do we believe them now? I’m not a buyer of that. I’ve been let down to many times. Government can’t run the things it does now efficiently and on budget. Stop blowing smoke up my backside.”
The Central Bank data shows not all the 112.44 per cent first half deficit increase can be blamed on Hurricane Matthew. For recurrent spending, which goes on the Government’s fixed costs, such as the civil service wage bill and rents, grew by $52.6 million or 5.5 per cent year-over-year during the 2016-2017 first half.
This spending category is not impacted by Matthew, as it represents the Government’s normal operational or running costs, with the Central Bank attributing much of the increase to pre-NHI launch activities.
Mr Myers said successive governments had placed the Bahamas in “a very dangerous position” when it came to its fiscal standing, and further deterioration beckoned as a result of the intensifying general election campaign.
He added that there was “a distinct possibility” that the Christie administration will increase spending to bolster its re-election prospects, and warned against this for the Bahamas’ long-term good.
“All you’re doing is creating a hole we can’t dig ourselves out of, creating a deeper and deeper problem for the nation long-term,” Mr Myers told Tribune Business.
“We need to be putting our heads together as Bahamians and figuring out a way out of this mess, and putting politics aside and worrying about the nation, not these self-absorbed political parties.”