The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Cabinet minister has warned there will be "some casualties", and that Bahamians will suffer "some pain before there's gain", as the Minnis administration tries to combat the growing fiscal crisis.

Dionisio D'Aguilar, minister of tourism and aviation, told Tribune Business that the Government had no choice but to "right size the ship" following the Christie administration's "orgy of spending" prior to the May 10 general election.

He argued that there was irrefutable evidence of uncontrolled expenditure by the former administration, adding that the new government had "only scratched the surface" with what it had revealed to-date.

Mr D'Aguilar accused the prior government of paying out "outrageous sums" and using the Public Treasury "as their own piggy bank", describing payments to consultants as a particular weak point for the Government's financial controls.

"There will be some tough decisions to be made, and some casualties unfortunately, as we try and right size the ship after the orgy of spending by the PLP government in the last months of their administration," the Minister told Tribune Business.

"We're [Cabinet ministers] all very mindful of the condition the country is in, and are trying to reduce unnecessary spending. We have to remind the Bahamian people to be patient, and that there's going to be some pain before there's gain.

"Coming off this uncontrolled spending, there's going to be some cut backs as we try and right size the ship and prevent further downgrades."

Mr D'Aguilar did not identify the likely "casualties", or how many there will be, but he was likely referring to workers hired on short-term, three month contracts prior to the general election.

Many are likely to be released when those contracts expire, and the Minnis administration is also likely to take a close look at the 6,500 persons it alleges were added to the public service during the Christie administration's 2012-2017 tenure.

Kenwood Kerr, Providence Advisors' chief executive, told Tribune Business on Friday that hard decisions would have to be made over these recruits. Based on annual salaries ranging from $14,300 to $20,000, he estimated that these 6,500 hirings could have added $130 million per year to a Government's (taxpayer) wage bill that was already over $600 million.

As for the "pain before there's gain", Mr D'Aguilar's comments could also mean a slimmer public service combined with cuts to spending programmes that the Minnis administration sees as 'pork barrel' or wasteful.

"People have criticised us for painting a picture more severe than it is, but it is not good, and thank God the Government changed and we have in place people who are very mindful of the people's money," Mr D'Aguilar continued.

"The Minister of Finance has told us in no uncertain terms that there will be no more money than is in the Budget, that we have what we have, and we have to make it work, taking the tough decisions where necessary."

Mr D'Aguilar then slammed the Opposition's vehement denials of irresponsible spending by the Christie administration, saying there was voluminous evidence to the contrary.

He added that the Progressive Liberal Party's (PLP) argument that the Government had jeopardised the Bahamas' sovereign credit rating through its 2017-2018 Budget address were really a disguised call for it to reveal no more details of the previous administration's fiscal profligacy.

"I just wish the Opposition would stop trying to frustrate the process every inch of the way, and continue making claims that they've not been irresponsible," the Minister told Tribune Business.

"What more statistics, evidence do you need. Everything points to uncontrolled, irresponsible spending that has put the country on the edge of another downgrade.

"I'm glad we're revealing the true state of the country. What the Opposition is saying; don't say anything further as it will hurt the financial standing of the country, also means don't reveal anything further about what we did."

The Christie administration added $2.2 billion to the national debt during its stay in office, a record for a five-year term. It did this despite the benefit of more than $1.1 billion in Value-Added Tax (VAT) revenues during the two-year 2015-2016 period, which generated an additional net $756 million for the Public Treasury.

This outturn led many, including Royal Bank of Canada's (RBC) top Caribbean economist, to suggest that the Bahamas' was "squandering" the benefits of the region's best VAT.

By comparison, the 2007-2012 Ingraham administration added $1.5 billion to the national debt, while the Minnis administration plans to borrow $722 million during its first year in office. If the latter outcome is achieved, the bulk of the Bahamas' national debt - some $4.4 billion out of $7.8 billion - will have been incurred in just the last 11 years.

"We've only scratched the surface in terms of fiscal irresponsibility," Mr D'Aguilar blasted of the former government. "There's examples popping up every day of: 'Oh my God, really?'

"People were paid vast amounts of money. I don't care what they [the Opposition] say. They used the Government of the Bahamas as their own piggy bank. I see the sums that were flying out - outrageous sums flowing to people."

Mr D'Aguilar did not 'name names' or give specifics when asked, possibly because these are being saved up as further political ammunition.

"They completely lost touch with the people on the streets, earning $210 a week, and these guys were paying themselves vast private sector salaries," he added.

"A major internal weakness of the Government's financial controls are these consultants. They have no limit on what they earn. They randomly pick a figure out of the sky, and it's never revealed how much is paid to them."

Mr D'Aguilar has already stirred one consultant-related controversy when he attacked the former administration's culture consultant, Ian Poitier, for receiving a $1million contract paying $400,000 per annum.

The Minister was speaking out after expressing confidence that a further 'junk' downgrade of the Bahamas' sovereign creditworthiness, this time by Moody's, would not further impact the Nassau Airport Development Company's (NAD) credit rating.

NAD, the Lynden Pindling International Airport (LPIA) operator, was forced to double its bond reserve fund from $19 million to $38 million after Standard & Poor's (S&P) downgraded the Bahamas to 'junk' status prior to Christmas 2016.

The action taken by Fitch, which rates NAD, was sparked by the perceived increased country risk as a result of S&P's action. But Mr D'Aguilar said: "I don't think Fitch would consider a further downgrade at this time.

"First of all, they've just done their assessment and, hopefully by the time of their next review, they will have seen progress by the Government in trying to operate a lean and mean government, trying to cut waste and see where we can save.

"I think it would be a little premature for them [Fitch] to do that. They need to wait and see whether we perform."