By NEIL HARTNELL
Tribune Business Editor
Private sector leaders yesterday warned the government not to “go too far” with its planned $130m spending cuts, pointing out that 40 years of fiscal woe “can’t be undone in three years”.
Jeffrey Beckles, the Bahamas Chamber of Commerce’s chief executive, while backing the government’s ambition to hit its 2018-2019 deficit target said it had “to be careful” not to scale back expenditure too quickly and deeply - especially on capital works projects.
Suggesting that Bahamians “inside and outside the business community have been waiting for an administration” to take the hard decisions necessary to reverse The Bahamas’ fiscal decline, Mr Beckles said a sustained effort lasting well beyond this government was essential to place the public finances back on the correct path.
Praising the Minnis administration for its work thus far, he added that the government needed to “lead by example” on its financial habits rather than simply instructing Bahamians to save and rein in spending when it was doing exactly the opposite.
With “cautious optimism” beginning to take hold over The Bahamas’ economic prospects, Mr Beckles argued that fiscal reform success would translate into improved “attitudes” among consumers and both local and foreign investors, resulting in increased commerce and job creation positively impacting all Bahamians.
“To be fair to them they’ve taken some positive steps,” Mr Beckles said of the Government’s fiscal progress to-date. “We always knew it was going to be a challenge, but I think this administration ought to be given credit for the effort they’re making.
“The biggest concern is how they meet their fiscal objectives in this fiscal year without raising taxes, and while there’s going to be a bit of a rush of revenue that we traditionally see in the first quarter of the calendar year going into quarter two, we don’t know if it’s going to be sufficient to make up the [half-year] shortfall.”
K P Turnquest, deputy prime minister, told the House of Assembly last week that government revenues were likely to come in $185m, or seven percent, below 2018-2019 budget projections this fiscal year.
He blamed the undershoot on a combination of the transition to a 12 percent VAT rate; an $18m drop in expected web shop taxes due to that industry’s settlement with the Government; and the delayed creation of the Revenue Enhancement Unit that was expected to produce a further $80m.
However, Mr Turnquest expressed confidence that the full-year fiscal deficit will come in $5-$10m lower than the forecast $237m, reaching $230m, because the Government was trimming its recurrent spending by $130m or 5 percent to match the revenue shortfall.
Capital expenditure will also be below the anticipated $299m, and Mr Beckles said the Government was merely doing what any prudent business would do if top-line income failed to match expectations.
However, he cautioned: “We have to be careful. The Government is the largest spender on capital works projects. We have to be careful we don’t go too far because government spending has a big impact on the economy. We believe they are mindful of it, and just have to remind them of it.
“While there’s a great need to balance the Budget we’re not going to correct 40 years in a three-year span. We’re advising caution with being prudent. Forty-plus years of doing stuff our way - and that’s not to say we didn’t do good things - but we did not do them consistently to avoid the challenges we face today.
“The correcting of it will not be achieved in single term. We have to continue to produce good results so that there’s a curve of getting back to the middle. We’re trying to reduce our costs, but the Government has to be mindful and realise there’s a degree of cautious optimism out there,” Mr Beckles continued.
“Truth be told, many in and out of the business community have been waiting for an administration to take these very critical steps, making the country more robust in its fiscal responsibility and positioning itself to take advantage of any economic boost that comes its way.”
The Chamber chief executive said improved financial habits by the Government will also rub off on ordinary Bahamians, while ultimately improving the country’s economic outlook and boosting investment by locals and foreigners.
“The Government must lead by example; it cannot tell Bahamians to mind your spending and save money, and not do it itself,” Mr Beckles told Tribune Business. “The Government has to lead in that regard.
“Its responsibility is wider than a family, but the principles remain the same: Don’t spend money you don’t have, and if you borrow, borrow wisely, and always be prudent in what you do. The more this happens, the more we’ll see some level of optimism.
“International perceptions will change because people have different views of The Bahamas; its commitment to better financial management, and it will be in a better position to borrow if it has to, and this will not be such a big deal.”
Mr Beckles continued: “If The Bahamas is going to remain attractive to investors and partnerships, we must really get our fiscal house in order. We cannot be a country reeling in debt and bad fiscal performance and remain attractive.
“Kudos to the Government for their effort, but consistency is going to be the benchmark for this. Once we see that happen you will see a change in attitude for a lot of people. Bahamians will become more confident, and confident people spend money.”