The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Sunshine Holdings chairman says “we should all be alarmed” by the Bahamas’ precarious fiscal position, with this nation’s room for manoeuvre “drastically reduced” by the past two decades’ policies.

Sir Franklyn Wilson told Tribune Business that with a $7 billion-plus national debt, and annual deficits of more than $300 million, the Bahamas had “eliminated a lot of headroom” previously enjoyed by the Government during tough economic times.

He pointed to comments by Julian Francis, former governor of the Central Bank, who just after the millennium warned that Bahamians had squandered several years of sustained prosperity, as evidence that both the Government and individuals had failed to ‘save for a rainy day’.

Calling for debate to focus on generating greater economic growth once the 2017-2018 Budget is passed, Sir Franklyn urged all Bahamians to “pray unceasingly” that the country is spared another major hurricane as such an event will make its economic challenges “very, very difficult”.

“I think we should all be concerned,” Sir Franklyn told Tribune Business of the Government’s financial predicament. “I think the Minister of Finance has expressed that. I don’t think anyone is questioning that. I think we should all be alarmed.”

Moody’s, the international credit rating agency, recently expressed alarm that the Bahamas’ fiscal strength is “much weaker” than initially thought after the Minnis administration, in unveiling the 2017-2018 Budget, disclosed it may borrow up to $722 million this fiscal year.

This sum is intended to cover the $500 million projected deficit for 2016-2017, and deal with a $160 million Government payments “backlog”, as well as cover the $323 million deficit forecast for the 2017-2018 fiscal year.

The Minnis administration could thus borrow more than $1 billion in its first three years in offices, following in the footsteps of a predecessor that added $2.2 billion to the national debt during its five-year term.

Sir Franklyn praised K P Turnquest, minister of finance, for his handling of the situation to-date, and particularly his promise that the Government will honour all its debts and obligations.

“That’s particularly important to international financial institutions but also to local stakeholders that the Government intends to meet their obligations,” he said. “Two, he recognised this is an important and serious matter. He stressed that he didn’t make the decision [to borrow $722 million] lightly.

“Three, he recognises the importance of the rating agencies in our national life, and he will do all he can to convince the rating agencies that the Government is serious about arresting the trajectory. That provides evidence of the seriousness of how the Government is going to deal with the matter.

“He’s [Mr Turnquest] addressed the stakeholders, stressing continuity, stressing seriousness and stressed the need to give us a little more time, and I think that’s reasonable.”

Sir Franklyn acknowledged that it was “a necessary step” for the new government to give a public accounting of the present fiscal situation, and what had happened in the past.

“As we get past the stuff about what the former government did wrong, I am hoping that the discussion will move at some point in the not too distant future to where it’s more about the economic plan for recovery and change,” he told Tribune Business, “and we will be able to address what I see as serious problems.”

Sir Franklyn said it was “amazing how history is repeating itself” with regard to the Bahamas’ economic circumstances, recalling how 1991 was “probably the most brutal year in the history of the country in terms of economic performance” due to the first Gulf War and worldwide recession.

He added that this was a major factor in the Pindling administration’s 1992 election loss, with the then-Opposition also blaming its policies for the Bahamas’ woes.

Sir Franklyn said the country enjoyed “a pretty good run” during the 1990s, due to a combination of Kerzner’s Atlantis expansions, a booming US economy and the then-Ingraham administration’s investor-friendly policies that included privatising the hotel sector.

“One of the most candid and professional observations by an official at the end of that boom came from Julian Francis, then-governor of the Central Bank, who raised the question as to whether the country was putting something away for a rainy day,” the Arawak Homes chairman recalled.

Arguing that Mr Francis’s comments were especially relevant today, Sir Franklyn said the Bahamas enjoyed “another really good run” from 2002-20007, but the question of “did we do enough in terms of saving” remained.

Then came the 2008-2009 ‘credit crunch’ and global recession, which the Bahamas has struggled to recover from ever since. Sir Franklyn said the two elections since then had confronted the then-governments with the same problem as the 1992 Pindling administration - namely being blamed for domestic policies that made the situation worse.

“When we stop with the politics of this, there will be some serious questions that professors at the University of the Bahamas will have about the quality of governance the country has had for the past two decades now,” he told Tribune Business.

Sir Franklyn pointed to recent comments by James Smith, minister of state for finance between 2002-2007, that he had seen spiralling debts and deficits coming 14 years ago as evidence to support governance concerns.

“I really believe that what has happened over the past 20 years has eliminated what Prime Minister Ingraham called headroom,” he added. “What has happened is that the headroom has been drastically reduced.

“But let’s not be oblivious to the fact that these last two hurricanes had very serious consequences. I call upon every Bahamian citizen and everyone who loves this country to please pray unceasingly that the Good Lord spares us from hurricanes this year and next, as it could make a difficult situation really, really difficult.

“I had a contractor in my office today, and he expressed the same point. He said: ‘Mr Wilson, I’m still doing work from the hurricane in 2015’.”