By NEIL HARTNELL
Tribune Business Editor
Fiscal watchdogs yesterday voiced alarm that The Bahamas is "on the precipice of abject failure" based on the sharp post-Dorian hikes in the government's annual fiscal deficits and national debt.
Rick Lowe, an executive with the Nassau Institute think-tank, told Tribune Business that "years and years of neglect and kicking the can down the road" had left The Bahamas in a precarious position that was now being exacerbated by the scale of Dorian restoration costs.
The government's 2019 Fiscal Strategy Report, released yesterday, discloses that its direct debt is set to increase by a near-$1.3bn over the next five years due to the huge blow inflicted on the public finances by Dorian's devastation.
The fiscal deficit for the 2019-2020 budget year is projected to increase by a further $104m beyond initial forecasts to some $677.5m, and it will remain in nine-figure territory for four years before finally hitting the Fiscal Responsibility Act's 0.5 percent of GDP target in 2024-2025 - some five years after it was predicted to hit this level.
"This country is on the precipice of abject failure," Mr Lowe told Tribune Business when confronted with the report's contents. "I'm glad to see they're at least taking account, but it's frightening how close we are to bankruptcy. I'm glad they're taking stock, but boy, it's a hell of a hole to dig out of. Holy smoke.
"Neil, it is frightening. I'm glad I'm closer to retirement than just starting out. Maybe retirement won't be so fun after all if I live long enough to retire. It's just years and years or neglect, and kicking the can down the road in every aspect of governance. The only positive thing is that at least we're learning where we're at."
Both Mr Lowe and Robert Myers, the Organisation for Responsible Governance's (ORG) principal, voiced concern that the report was relatively light on plans to tackle the Government's unfunded civil service pension liabilities which are now thought to be approaching the $2bn mark.
While few details were provided, the report did confirm that the Government is planning to require new civil service hires to contribute to financing their own retirement through the creation of a defined contribution pension plan.
"The central Government has an unfunded defined pension arrangement, with a growing liability which is a significant fiscal risk. The Government acknowledges this exposure and is in discussion with advisors on initiatives to limit this exposure," the Fiscal Strategy Report said.
"As part of its mitigation initiatives during the fiscal planning horizon, the Government is intending to introduce a defined contribution-type pension plan for new employees which will allow for greater sustainability of these costs."
K Peter Turnquest, deputy prime minister, told Tribune Business that the Cabinet had not given "a definitive timeline" for the introduction of this pension plan structure even though previous research by the KPMG accounting firm suggests this unfunded liability is now likely to be approaching $2bn.
The 2018-2019 Budget showed the Government is currently allocating between $95m to $100m each year to finance civil service pensions during the three fiscal years to 2020-2021.
KPMG has estimated that the unfunded, 'pay-as-you-go', civil service pension liabilities are set to increase to $2.5bn by 2022, and $4.1bn by 2032, unless reforms are enacted.
And the International Monetary Fund (IMF), in its Article IV report last year, agreed that the current system - where civil servants contribute nothing to funding their retirement - is "unsustainable". It added: "Staff analysis in the 2016 Article IV Staff report noted that accrued government pension liabilities totaled $1.5bn in 2012, and would rise to $3.7bn by 2030 as the population ages."
Mr Turnquest yesterday told the House of Assembly that the Government will "not spend wildly" in financing post-Dorian recovery, and pledged that it will not be "derailed" from its fiscal consolidation strategy.
Yet Mr Myers argued that much will have to go right for the Government over the next five years for its forecasts to bear fruit, especially given The Bahamas' exposure to the effects of a global recession and another Dorian-type disaster. He added that the forecasts will also have to survive a potential change of government at the next general election which must be held by 2022.
"They're not considering that we might have another storm next year, that we might have a global recession next year," Mr Myers told Tribune Business. "These are real issues. Responsible people have contingency plans for these things but we have a hope and a prayer that they don't happen.
"We have no contingency plan, and we already have these liabilities with Bank of The Bahamas and the BTC pension fund. What don't we know? Is anybody else hiding multi-million dollar losses, corruption and inefficiency? For God's sake tighten up. It's just obscene. I don't know what else to say.
"The projections assume whoever gets into government between now and then doesn't torpedo your plans and start some massive capital spending programme, and starts doing more irresponsible things. Come on, we certainly know what the Government and various administrations are capable of. It doesn't give you a lot of faith. We're living through this and it's a disaster. The fiscal condition of the Government is very, very poor."