By NEIL HARTNELL
Tribune Business Editor
Bradley Roberts was yesterday branded “delusional” for asserting that the Christie administration had “rescued the Bahamas from the brink of the fiscal cliff”, after it emerged that this nation’s debt-to-GDP ratio ended 2016 at 78 per cent.
The timing of the Central Bank’s 2016 fourth quarter report release was unwelcome for the Progressive Liberal Party (PLP) chairman, who yesterday attempted to bask in the Government’s Value-Added Tax (VAT) introduction.
Referring to the upcoming general election, Mr Roberts said in an e-mail statement: “We will continue to stand on our record of rescuing this country from the brink of the fiscal cliff and the smooth implementation of VAT....”
The Central Bank’s report, though, dents some of that optimism, as it shows that the national debt increased by $373.1 million during 2016 to break the $7 billion barrier at year-end, closing at $7.042 billion.
The increase was exacerbated by the blow from Hurricane Matthew, which forced the Government into some $130 million in unanticipated borrowing from a syndicate of commercial banks, while also negatively impacting its revenue collections.
While Matthew was a key factor behind a 168.6 per cent year-over-year increase in the fiscal deficit for the final three months of 2016, rising from $85 million to $228.3 million, the Central Bank report emphasises this was not the sole factor.
Robert Myers, a principal with the Organisation for Responsible Governance (ORG), and a leading fiscal reformer, told Tribune Business that Mr Roberts’s comments suggested he was out of touch with the fiscal reality and what it meant for ordinary Bahamians.
With the Central Bank’s report suggesting a different reality, Mr Myers said of the PLP chairman: “He’s delusional. I’d like to see that rescue plan if he has one.
“If they’ve got a plan to rescue us from the fiscal cliff, I’d like to see it, because we’ve certainly not benefited from that; not by a long shot. Definitely not.”
Mr Myers, who chaired the Chamber of Commerce and the Coalition for Responsible Taxation (CRT) for much of the VAT build-up, said that while implementation had been smooth, much of that had been down to the private sector.
He emphasised that VAT was not a ‘cure all’ or panacea for the Bahamas’ fiscal woes, adding that it needed to be accompanied by other reform measures, especially spending controls and cuts.
And Mr Myers pointed out that the $1 billion-plus in VAT revenues collected since the tax’s January 2015 implementation represented monies sucked away from Bahamian consumers and the private sector.
“VAT is part of the measures; it absolutely helps, but in many ways it has hurt a tremendous amount of Bahamians,” he told Tribune Business. “It can’t be considered as the end all, be all.
“There’s a tremendous amount of more work that has to be done. We’ve not started on a Fiscal Responsibility Act, achieving a balanced Budget.
“That’s a long way off, and once we’ve got a balanced Budget, we’ve got to figure out how to repay the debt. If the idea is to grow the economy to repay the debt, his [Mr Roberts’] economics leave a lot to be desired.”
Rick Lowe, a fiscal ‘hawk’ with the Nassau Institute think-tank, was just as scathing of Mr Roberts’s assertions, pointing out that as a veteran politician he had been involved in many of the decisions that had brought the Bahamas to its present fiscal crisis.
“Unfortunately, many of the political class will be dead and gone,” he told Tribune Business, “but what we’re leaving to our children, we should be so embarrassed.
“Until they [the Government] decide to hold the line, nothing’s going to change. The deficit and spending are out of control, and they can’t seem to find a way to put the brakes on. It’s pedal to the metal; damn the torpedoes.”
Mr Lowe added: “There’s no incentive for people to invest in or expand their business. There’s too many doubts out there.”
The Central Bank’s report said the Bahamas’ debt-to-GDP ratio hit 77.9 per cent at year-end 2016, a 2.6 percentage point rise on the 75.3 per cent some 12 months prior.
The 2016 increase, blown by Matthew, was greater than the percentage rise in 2015, pushing the Bahamas’ debt-to-GDP ratio well beyond the so-called 70 per cent ‘danger threshold’ identified by the International Monetary Fund (IMF), above which countries can lose control of their financial affairs.
The Government’s direct debt, which strips out the borrowing it has guaranteed on behalf of public corporations, closed 2016 just below that threshold, standing at $6.313 billion or 69.9 per cent of GDP. It increased by $399.2 million or 6.8 per cent year-over-year.
Mr Myers said the total national debt-to-GDP ratio at end 2016 was lower than he anticipated, having predicted it would be between 80-85 per cent. However, he acknowledged that at 77.9 per cent, “it’s still way too high”.
The Central Bank’s report said: “Provisional data showed that the Government’s overall deficit increased during the second quarter of fiscal year 2016-2017 to $228.3 million, from $85 million in the same period of the previous fiscal year, attributed in part to a rise in unplanned hurricane recovery related spending and disrupted revenue collections following the storm.
“Deficit financing was secured primarily from domestic sources and included a special $130 million syndicated hurricane relief loan.”
It added: “Budgetary financing for the second quarter of fiscal year 2016-2017 was primarily obtained from domestic sources, reflecting a mixture of commercial banks’ loans ($249.5 million), Government bonds ($240 million) and a net Treasury bill issuance ($70.7 million).
“Quarterly debt repayments totalled $279.1 million, the bulk of which (97.5 per cent) went towards retiring Bahamian dollar debt.”