By NEIL HARTNELL
Tribune Business Editor
The Bahamas' fiscal "credibility" depends on it providing a convincing explanation for why the 2016-2017 fiscal estimates changed so drastically in just two months, the Chamber of Commerce's chairman said yesterday.
Gowon Bowe told Tribune Business that while the original $100 million deficit projection had been long blown by Hurricane Matthew, international credit rating agencies and investors would want to understand why the estimate had now had increased to $500 million when March's mid-year Budget pegged it at $350 million.
Underscoring that greater economic growth was the solution to the Bahamas' fiscal and other problems, Mr Bowe said it was "incumbent" on the Minnis administration to demonstrate it has a sound recovery plan and the ability to execute it.
"When they come, they won't be distinguishing between one administration and the next," he told Tribune Business of Moody's and Standard & Poor's (S&P) summer visits to the Bahamas. "It will be incumbent on this government to develop policies and initiatives to meet these new Budget projections.
"As a country, we always have to put our best foot forward and give an accurate and complete picture" of the Bahamas' current and short-term fiscal position based on empirical data and statistics.
Mr Bowe said the real analysis needed to determine why 2016-2017's projected fiscal deficit had increased to $500 million, compared to the $350 million forecast given by the Christie administration in its mid-year Budget presentation at end-March.
Pointing out that the Ministry of Finance officials working on the Budget had not changed from the previous administration, he added: "For the sake of our credibility, and that of the technical staff, there has to be a reconciliation between what was presented in March and what was presented as the outturn now."
The Government has blamed the expanded deficit, and need to put in place an emergency $400 million borrowing facility, on a combination of the former administration's pre-election spending and a payments "backlog" stemming from this and Hurricane Matthew.
The Minnis administration's total $722 million borrowing requirement for this and the 2017-2018 fiscal year, and the massive revisions to the Bahamas' fiscal consolidation path, stunned Moody's.
As revealed by Tribune Business on Monday, it warned the international capital markets that the Bahamas' fiscal position was "much weaker" than expected as a result of the "wider, serial deficits" the Government was forecast to continue incurring.
However, Moody's has held off from following Standard & Poor's(S&P) in downgrading the Bahamas' sovereign creditworthiness to 'junk', indicating it is seeking more data on this nation's projected GDP growth and an explanation for the fiscal changes.
Moody's reaction was yesterday cited by Chester Cooper, the PLP MP for Exuma, to argue that the Budget communication by K P Turnquest, minister of finance, was the "wrong speech, at the wrong time, at the wrong place".
He suggested that its contents, especially the $722 million borrowing projection, would only serve to frighten the rating agencies, private sector and investors "at home and abroad" - thereby further harming the Bahamas' prospects for securing the GDP growth and jobs that it so desperately needs.
"I wonder whether this is the speech we will take with us when we go to defend the international rating of the Bahamas," Mr Cooper, a former Chamber of Commerce chairman, asked. "Is this the one that we will take to the debt market? You don't tell me you broke, you busted, you unemployed and that the 'cupboard is bare', then ask me to borrow $722 million."
Mr Turnquest said that besides covering next year's projected $322 million deficit, the Government also required an extra $400 million to cover a payments "backlog" and unfunded spending commitments left behind by the previous Christie administration.
He added that the Bahamas' "financial reputation" would be in peril should the Government fail to act, given that lenders were demanding it provide $70 million in extra collateral by the first week of July due to the earlier S&P downgrade placing the country on the wrong side of a derivatives transaction related to its borrowing.
But with deficits of $228 million and $106 million projected for the 2018-2019 and 2019-2020 fiscal years, respectively, the Minnis administration - if it stays true to forecasts - will end up adding $1.056 billion to the Bahamas' national debt within its first three years in office.
Mr Bowe, meanwhile, urged the Government to focus on creating an enabling environment that will foster higher GDP growth than the 1-2 per cent forecast for the Bahamas.
"We know that we have to turn economic growth around, and once we do that a rising tide will float all boats," he told Tribune Business. "A lot of challenges relate to depressed economic performance.
"A lot of government policies have to be geared to the economic spurring of activity, money circulating and that becoming a self-fulfilling cycle."