The Tribune

BAHAMIANS seem to have one thing in common – no one likes Value Added Tax, whether it be 7.5 percent or the 12 percent percent to which it was recently increased.

Many of us understand the need for the 12 percent increase because we are aware of the critical state of our country’s finances. However, most Bahamians cannot fully appreciate the serious financial position we are now in. Instead of decreasing our debt as the 7.5 percent tax was supposed to do, it was increased by irresponsible spending, signing contracts to raise the salaries of certain civil servants, which in the present situation will not be able to be met, and adding to the already overloaded civil service by hiring Bahamians — qualified or not — just before last year’s election. The PLP’s reason for the unconscionable spending of the people’s money was obvious, but we wonder how they would have met their obligations had they won the election. They certainly would have had a lot of explaining to do.

We only have to look to the south of us to see the desperation of Barbados to understand that it would be better to suffer the difficulties of VAT than to have a visit from the International Monetary Fund (IMF), which has already been called in by Barbados’ new prime minister and will be going to Barbados next month to get down to the business of administering the bitter medicine for that island’s financial recovery. What Barbadians will have to go through might force Bahamians to tighten their belt with VAT and say their prayers.

Mia Motley, QC, not only recorded an historic landslide victory at the polls in May last year, becoming Barbados’ first woman prime minister and winning all 30 parliamentary seats, completely obliterating the Opposition — but she is now faced with a problem that is far worse than she and her Labour Party had imagined. She said that she knew that the former government was deeply in debt, but she never imagined the extent of that debt. Sounds familiar? The FNM faced the same financial shock when they took over, and from what we can understand, more surprises still await them.

Talks between the Central Bank of Barbados and the new government revealed that the gross international reserves amounted to US$220m as of May 31, 2018, with a series of foreign debt payments totaling up to US$50m between June 5 and 18. The critically-low levels represents the equivalent of seven weeks’ worth of export cover, according to Barbados’ Nation News. Financial experts generally advise that countries such as Barbados should have no lower than 12 weeks of import cover.

“When the last Administration,” Ms Motley told the press in referring to the administration of defeated Freundel Stuart’s government, took over they complained that they had “inherited a debt of about $6bn (US$3bn). They complained that it was too high. Yet they have left us with a debt level, when arrears are added, of over $15bn (US$7.5bn). Public debt as a proportion of our national income is being regarded as high as 171% of GDP – the third highest in the entire world,” she explained.

“We are members of the International Monetary Fund,” she said, “and last night I called Madame Lagarde, its managing director. I briefed her on the present state of the public finances, the current debt, and reserve positions, and assured her that we are committed to taking decisive action to rebuild Barbados. In turn, Madame Lagarde assured me that the IMF stands ready to lend Barbados the necessary assistance and support to these actions.”

Ms Mottley said the first team was a fact finding team. However, she said, the team that is flying to Barbados from July 2 to 12 “will actually be a negotiating team with the Barbados government, to be able to settle on what would be the terms and conditions of the contract that underpins how much they will supply to us, and what conditions there will be, if any, to that money.” Recalling the cries of Greece when the IMF exacted its harsh demands on the people of that nation, we think there will be much belt tightening in Barbados. For example, if it were the Bahamas, the civil service would be the first to be reduced to size with no consideration for who was related or was a friend of a particular politician. When the IMF is around, the reputation is that if you are a burden on the system you are expendable. This alone should make Bahamians sit up and take note — stop their complaining, close their ears to the political trouble makers – particularly those who have been a part of the problem— and get down to securing their own families.

Unless we understand our problem and seriously try to do something about it, time and events will take over and Bahamians will be crushed in the confusion.