By NEIL HARTNELL
Tribune Business Editor
The Free National Movement’s (FNM) leader yesterday accused the Government of “stunning ineptitude” in its fiscal policies, with the debt-to-GDP ratio now at 78 per cent despite $1 billion-plus in VAT revenue collections.
Dr Hubert Minnis, gearing up for the imminent general election, said the Christie administration has effectively “ignored” the Bahamas’ looming fiscal crisis through its continued “wasteful spending’, which had increased the national debt by $2 billion since it took office in 2012.
“To hear Bradley Roberts tell it, the PLP government rescued the Bahamas from ‘the brink of the fiscal cliff’,” the FNM leader said, in reference to the PLP chairman’s statement earlier this week.
“The Organisation for Responsible Governance called him delusional for making his statement, and said that they would like to see the rescue plan if he has one. A description he eagerly earns with his empty rhetoric and broken promises.”
The Central Bank’s quarterly review for the three months to end-December 2016 revealed that 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 Hurricane 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.
And total public sector debt, which includes debt incurred by corporations and agencies that is not guaranteed by the central government, was pegged at more than 87 per cent of GDP.
Dr Minnis, in his statement yesterday, said of the Government: “Their stunning ineptitude proves the point that you won’t fix a problem when you choose to ignore the problem.
“To turn this around we need to cut wasteful government spending – like the lavish government contracts they hand out to friends and donors.
“You can encourage growth or you raise revenue. Now this PLP Government has already raised taxes, forcing the people to shoulder the financial hardships of an onerous VAT tax. When they came to power they insisted imposing VAT was the only way to bring down both the debt and deficits, yet both our debt and our deficits still remain.”
The Central Bank’s report also showed 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.
Suggesting that the Government was in denial, Dr Minnis added: “Time and time again, the people of our great country receive bad news about our economy, and yet the PLP will not admit that they have not fixed the problem.
“Not only has the PLP not fixed the debt-to-GDP, they have made it worse. In fact, much worse.... The International Monetary Fund (IMF) accurately reported last month that VAT and other PLP revenue ‘reforms’ have failed to eliminate the fiscal deficit, as promised, because the Christie administration had increased spending at the same time.
“Low growth rates are crippling our economy, which leads to high levels of unemployment and violent crime. The IMF sees the problems, the people can see the problems, so why can’t this Government see the problems?”
Dr Minnis promised greater transparency and accountability on government spending from an FNM administration, and to encourage private sector growth and job creation.
However, he also pledged to reduce VAT on ‘breadbasket’ items - a plan that has been criticised by the IMF for undermining the Bahamas’ broad-based, low rate model and increasing business costs.
Mr Roberts, meanwhile, hit out at Dr Minnis as “unfit to lead the country” for his remarks suggesting that an FNM government would undo Baha Mar’s sale to Chow Tai Fook Enterprises (CTFE).
Arguing that the FNM leader was not acting in the interests of Bahamians, the PLP chairman told a joint branch meeting last night: “Zhivargo Laing called this pandering.
“Businessman Franklyn Wilson said those comments were the most foolish he had ever heard from a Bahamian leader in our history. Even the Chamber of Commerce chief weighed in, cautioning Bahamians to ignore Minnis’ ill-advised and foolish remarks in the interest of political stability. So Minnis was roundly condemned from all sides.”