PLP leader Philip Davis. Photo: Terrel W Carey Sr/Tribune staff
By RASHAD ROLLE
Tribune Staff Reporter
OPPOSITION Leader Philip “Brave” Davis said the country is headed toward a financial crisis and that he is certain it will face a credit downgrade.
He said at a Progressive Liberal Party press conference yesterday: “We are on a fiscal cliff, falling, there is a financial crisis that we think is looming and looming large. A downgrade is for certain. We’ve been there but they’ve been able to gloss over and paint a picture that was not what we believe is right.”
Mr Davis spoke after last week’s communication in Parliament by Deputy Prime Minister and Minister of Finance Peter Turnquest. In large part because of Hurricane Dorian, the deficit for the fiscal year has ballooned to $677.5 million and the government plans to borrow $507.9 million to meet the shortfall, Mr Turnquest said.
According to the government’s 2019 Fiscal Strategy Report, the debt is projected to increase by $1.3 billion over the next five years.
Mr Davis said: “This administration is now at a crossroad. It can no longer pretend that it has a handle on this self created fiscal crisis. The impact of Dorian cannot be used as the reason for the obvious decline in the government’s ability to provide basic public service. Many Bahamian businesses have failed or are now on the verge of failing because of the gross fiscal mismanagement of this ‘balance sheet’ administration who ignores legitimate contractual obligations to achieve contrived and elusive deficit targets.”
Mr Davis said the government should establish an Economic Advisory Council “forthwith” to look at the fiscal and economic state of the country and design a social contract that would “provide binding guidelines for expenditure, revenue, wage and pension reform policies over the next five years.”
“This is a perilous time for the Bahamas as the government has proven itself incapable of managing the economic and fiscal affairs of this country,” he said. “No amount of hubris, arrogance or grandstanding by the current minister of finance can change this reality. It would be incredibly selfish and unpatriotic of me and my political colleagues to watch and do nothing as this administration through sheer incompetence drives this country over a fiscal cliff. We believe that the true fiscal state of this country is worse than being reported by the government as blatant political considerations now seem to govern the reporting and classification of government expenditure and revenue. One obvious example is the treatment of the purchase and ongoing operating subsidy to the Grand Lucayan, amounting to $77 million in expenditure, is being classified as an investment so as to exclude it from the deficit calculation. There are others: the shareholder loan to Aliv of $10.5 million, the treatment of the loan to the Bahamas Power and Light of $15 million and VAT refunds to Buckeye and Statoil estimated at $50 million.”
The economy, according to the government’s strategy report, was expected to grow by 1.7 percent in 2020 but is now projected to contract next year by 0.6 percent because of anticipated weakness in tourism activity in the first half of 2020.
“Employment conditions in The Bahamas are also expected to worsen due to the disruption to business activity and productive capacity in both Abaco and Grand Bahama, which account for 2.6 percent and 13.8 percent of the labour force,” the report said.
In September, the country’s tourism sector registered a 12.8 percent contraction compared to the same period last year, with air and sea visitors posting declines of 14.7 and 12.4 percent respectively.
Responding to Hurricane Dorian will cause a departure from the government’s fiscal targets for the next five budget periods at least, with compliance possibly resuming in the 2024/2025 fiscal year.
According to the fiscal strategy report, the percentage of debt to GDP is projected to increase to a peak of 66.2 percent in 2021 before declining. However, the report notes there are potentially major risks to the government’s projections, including another hurricane or less economic growth than anticipated.
For this fiscal year, the government projects revenue loss of $236 million and an expenditure increase of additional $302.6 million.