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Dpm Blasts ‘Unpatriotic’ 35% Devaluation Claim

Deputy Prime Minister Peter Turnquest in the House of Assembly. File Photo: Terrel W. Carey/Tribune Staff

Deputy Prime Minister Peter Turnquest in the House of Assembly. File Photo: Terrel W. Carey/Tribune Staff

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The deputy prime minister yesterday slammed “false rumours” of a 35 percent currency devaluation and second VAT hike as “unpatriotic” for threatening The Bahamas’ economic stability.

KP Turnquest, moving rapidly to dispel social media speculation that had “gone viral”, blasted the spread of such claims as “very irresponsible” given that they could “shake the confidence” of both consumers and Bahamian businesses in the economy’s prospects.

He warned that it could also “cause concern internationally”, given that it may be picked up by foreign investors and companies conducting business with The Bahamas, as well as the likes of the International Monetary Fund (IMF), Moody’s and Standard & Poor’s (S&P), with the latter two constantly monitoring this nation’s creditworthiness and ability to pay its bills.

Voicing concerns over the potential damage to The Bahamas’ reputation, Mr Turnquest said the situation was “not a very good reflection on us as a people” and expressed hope that the rumours were not ignited by political mischief.

He urged Bahamians to apply more scepticism and critical analysis to social media postings, rather than immediately accepting them as fact or Gospel truth and starting to spread them themselves.

Mr Turnquest and the Ministry of Finance were forced to assert that the Bahamian dollar is under “zero threat of devalaution” as even attorneys were asking Tribune Business whether the claims relating to this and another VAT hike were true.

Alarmist social media messages seen by Tribune Business, under the banner “Breaking News”, warned: “The financial crisis will hit by March 2019. The Bahamian dollar will be devalued to 65 cents to every US dollar.

“The VAT will increase to 15-18 percent by March 2019. The Government is not being truthful at all. We need help.” Another referred to “the upcoming increase in VAT to 15-18 percent that the Government has planned for us on July 1”.

Hitting back, Mr Turnquest told Tribune Business: “It’s very irresponsible of people to be floating these kind of false rumours as they tend to shake the confidence of the general public who are unsure whether they are true or not. It does also have the potential to cause concern to international parties.

“It is very unpatriotic, very damaging to our reputation, and certainly not a very good reflection on us as a people or the body politic. I’m hopeful politics is not behind it.”

Admonishing Bahamians to be responsible, Mr Turnquest said persons could support the political party of their choice “aggressively” without resorting to sparking and fuelling claims that could potentially undermine the economy.

“It’s unfortunately gone viral,” he told Tribune Business of the devaluation and VAT hike chatter, “and it’s unfortunate we had to respond to it. We watched it for a couple of days hoping it would peter out, but it continues to have legs.

“People are asking about it, so it’s important to respond to it and dispel that rumour once and for all. Given the ability of these words and postings to fly around the world, people need to be more responsible in putting out this kind of nonsense.”

Calling on Bahamians to analyse social media postings more carefully, Mr Turnquest added: “It’s very unfortunate that people are somewhat gullible to these things.

“Now, with What’s App, it allows the most uninformed of us to be a newsmaker, so it’s incumbent upon all of us to take a second look at the story and question the reasonableness of it before taking it to hearty and spreading them ourselves.”

Mr Turnquest said he believed “reasonable people” would immediately see there was no “truthfulness” to the devaluation and VAT hike claims, but “enough of us” were reading and circulating it to force the Ministry of Finance “to clear the air” and prevent any actual economic word.

The “D-word”, devaluation, is among those dreaded most by Bahamians because it means the Bahamian dollar will have lost its one:one parity exchange rate with the US dollar. Online purchases and Florida shopping trips would immediately become more expensive, import costs will rise and inflation increases, leading to a drop in living standards for all.

“VAT” is feared almost as much, especially since the 60 percent rate hike to 12 percent in last year’s Budget is still fresh in everyone’s mind. That, too, has cut purchasing power for many Bahamians, and the combination of the two was likely to spark concern among all who read the post.

The Ministry of Finance, rebutting these fears in its own statement, sought to scotch the devaluation claim by pointing out that the Central Bank foreign currency reserves that underpin the one:one US dollar peg currently exceed $1bn and are likely to be further boosted by a strong winter tourism season.

It also pointed out that the Government’s Fiscal Strategy Report, released in November 2018, had ruled out the need for any further VAT rate increases over the next three years prior to the general election.

“The Bahamian dollar is under zero threat of devaluation,” the Ministry of Finance asserted. “The foreign exchange reserves at the Central Bank that underpin the value of the Bahamian dollar are at a very healthy level, topping the $1bn mark. This is fuelled by the current strong performance of the tourism sector, from which the country earns the bulk of its foreign currency.”

As for VAT, it pointed to the Fiscal Strategy Report, which said last November: “The Government is of the view that no further increases in the VAT rate will be entertained over the balance of its current mandate.”

Whether that specific position may change if revenue continues to underperform, and deficit reduction targets set by the Fiscal Responsibility Act are missed, could be questioned by some.

Still, the Ministry of Finance blasted the combined devaluation/VAT hike claims as “completely fictitious” and “wholly untrue”, adding that they stemmed from an unknown source. “The Ministry decries the malicious use of false information and the unwarranted concerns such untruths can cause throughout the country,” it added.

“The Ministry encouraged persons to check with informed sources whenever they encounter noteworthy ‘information’ entering the public domain for the first time.”

Comments

hrysippus 1 month, 1 week ago

Hmmm...I wonder if this is the same person who promised monthly meetings with the press? Was that fake news as well?

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hrysippus 1 month, 1 week ago

Oh no, that's right it was the other one who promised those meetings.

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Well_mudda_take_sic 1 month, 1 week ago

Nothing hurts an untruthful politician more than the truth. LMAO

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birdiestrachan 1 month, 1 week ago

Did Turnquest admonish the PM when he went internationally and called the Bahamas corrupt. He should have spoken up then, and now Bahamians would understand his so call outrage.

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birdiestrachan 1 month, 1 week ago

Perhaps Turnquest and the FNM Government is reaping what they have sowed. Social media use to be all right with them.

What is good for the geese may be right for all

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CaptainCoon 1 month ago

The country IS corrupt! This place runs like a jungle organized by gorillas and baboons! Nothing works as intended, the power doesn't stay on, money is stolen or 'unaccounted for' in the MILLIONS from almost every public and quasi-public institution/corporation.

We need to drain the swamp.

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TalRussell 1 month, 1 week ago

Yes, no while a 35% drop is debatable, if comrade finance minister KP does not keep introducing new cash grab taxing and government fees. and should the US economy takes a serious downward dive, there is no way in hell keep colony of out islands currency at par US dollar. Yes, no why else are they introducing lots new government fees, including a $700 fee for the release loved-one's body from PMH's morgue?

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Economist 1 month, 1 week ago

But for the increase in the VAT this probably would be the case. But it is not going to happen just now and, if he can stabilize the finances of Government over the next year or two, it won't.

It was well known in, international circles, that had the PLP won in 2017 the Bahamian Dollar would have been devalued by 30% to 40% within six months. Maybe this devaluation comment came as a result of someone referring to that.

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momoyama 1 month ago

on what possible basis could the Bahamian currency be devalued? It is nonsense. All devaluation is is a policy option of governments of countries that EXPORT goods, as it makes those goods more easy to export. It is NOT a policy option of a country that imports everything. The most that would happen to the Bahamian currency in the event of an utter economic collapse is that it would essentially be replaced by the US currency, which Bahamians would turn to the use of. This is a silly debate.

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bogart 1 month, 1 week ago

IN ALL FAIRNESS.....DA currency is backed by Millions an millions of US currency and under provisions to maintain PARITY WID US DOLLAR 1 FOR 1....months an months worth for business to operate....an to ensure there is eeven law that US must be turned over to banks......whichinin meaning technically ...none of the going to cashiers in grocery store to change up currency...or shipping out widout permission undeclared excess 10k.....all that stuff rnsures stability....business confidence.....to encourage FDI.....do on...

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TheMadHatter 1 month, 1 week ago

"Now, with What’s App, it allows the most uninformed of us to be a newsmaker, so it’s incumbent upon all of us to take a second look at the story and question the reasonableness of it before taking it to hearty and spreading them ourselves.”

So??????? Why don't you inform us? I've been asking for monthly income, expense, loan, and loan payment reports for years? The people have no real income and expense data from you - so - foolishness fills the vacuum.

We dont care about projections, "fiscal strategy", or budgets. Those are pipe dreams. Real figures.

This info was not forthcoming under the PLP, so we put yall in. Why again? Now the PLP talking transparency even. Muddo.

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Greentea 1 month, 1 week ago

Bahamian dollar doesnt have to be officially devalued to have lost value. buying power just ain't what it was

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BahamaPundit 1 month, 1 week ago

I spend like $100 a day easy. $300 on the weekend. Yep. I agree with your point. Don't even try to buy a decent property in NP, unless you have 400K.

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birdiestrachan 1 month, 1 week ago

Economist you appear to be the type Mr: Turnquest is referring too. 'It is well known in international circles that if the PLP had won the Bahamian dollar would be devalued by 30 to 40 %"'

What a shame that you would wright a lie . like that and expect any one to take you seriously. But doc and Turnquest are both master full liars

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momoyama 1 month ago

Whatever else he is, the economist is no economist. Devaluation of the Bahamian currency is a laughably impossible eventuality, given that the Bahamian economy is essentially an extension of the US economy and trades naturally in US dollars. Before devaluing, it would simply be ditched.

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Economist 1 month ago

You both either don't understand how the financial system works, or are part of those who want to mislead Bahamians.

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realfreethinker 1 month ago

Momoyama does have a point. The Bahamian dollar devaluation is up to the gov. not any external forces. I have long felt we should get rid of the Bahamian dollar and go strictly US. it would save millions on just printing alone.Other than for ego purposes the B dollar makes no sense.

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banker 1 month ago

It is the Central Bank that controls and maintains the peg to the US Dollar. They do this through the reserve mechanism. The Central Bank must maintain US Dollar reserves to maintain the peg. Back in the day, we had a Currency Board and the Bahamian dollar was convertible, meaning one to take it to any bank anywhere and trade it for other currency. After the government of the day discovered debt, and maintaining a 1:1 USD reserves with the Bahamian M1 money supply was impossible, it was decided to set up the Central Bank and the reserve system. The Central Bank is the governing authority and to maintain reserve levels, they control the discount rate, the interest rate, currency outflows through exchange controls, bank liquidity measures and whatever John Rolle thinks would maintain the reserve level without being a too-blatant shell game. The reason that I say this, is that suppose the government borrows US Dollars and the note is held by the Central Bank, since it is denominated in USD, it is counted as part of the reserves. Another metric of the reserves that I have heard, is maintaining a 3 month amount of money to service the Bahamian economy for food imports, etc, but I haven't seen a monetary policy document in a long time.

I think that the peg is not sustainable. I think that it is artificial. I think that for now it works because of suasion. But suppose another major hurricane hit, and hit Nassau hard. In conjunction, suppose the national debt was way above the annual GDP and the government was still running deficits. We would have to borrow a billion or more to re-build, and it would have to be in hard currency, and the world bankers would exact a heavy price. It would be collateralized as junk bonds and due to the high interest rate and onerous payback schedule, it would trigger a devaluation because the reserves would have to allocated to the immense hard currency debt.

Having said that, purely as a comment, I read an economic dissertation that asserted that if the Bahamian dollar were to trade freely against the USD, it would be in the range below 25-35 cents US based on economic indicators alone.

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