By NEIL HARTNELL
Tribune Business Editor
The Bahamas "must not squander the opportunity" offered by Hurricane Dorian to develop a better "framework" for managing disasters and other major risks, a specialist urged yesterday.
Emmanuel Komolafe, a locally-based risk management professional, said The Bahamas will be forced to constantly adjust its fiscal consolidation targets as a result of natural disasters unless it develops a "robust" national framework for managing these events.
Warning that deviation from the $139m fiscal deficit target for 2019-2020, equivalent to 1.1 percent of gross domestic product (GDP), is "inevitable" in Dorian's wake, Mr Komolafe suggested that such a framework go beyond natural disasters to incorporate external economic shocks such as a global recession and major spike in oil prices.
While The Bahamas has received multiple recommendations over the years to counter its vulnerability to hurricanes, such as improved building codes and zoning, a national disaster fund and insurance for key public infrastructure assets, Mr Komolafe said: 'These are not enough on their own.
"Failing to implement these and other recommendations will likely result in ongoing fiscal adjustments year after year. When you add our susceptibility to natural disasters such as hurricanes to other potential external shocks, we need to go beyond a comprehensive national disaster risk management framework (which we are currently lacking) to a robust national risk management framework."
He explained: "Other external shocks could emanate from the risk of another global recession, US-China trade tensions, threats to oil supplies and higher oil prices, as well as the fallout from a no-deal Brexit just to mention a few.
"If entities in the private sector can ensure that they manage the effect of uncertainties on the achievement of their objectives, the government ought to focus on risk management at the national level where there is much more at stake.
"As a Small Island Developing State (SIDS) with limited resources, and vulnerability to natural disasters and external shocks, we must be more effective, efficient and innovative with our approach to managing the risks we face," Mr Komolafe continued.
"We have an opportunity to rethink how we build and develop our islands. We must not squander this opportunity by not learning from the errors made in the past and repositioning ourselves as a resilient SIDS."
Offering his condolences to Dorian's victims, Mr Komolafe said it was almost guaranteed that K Peter Turnquest, in his capacity as minister of finance, will have to report to Parliament - as mandated by the Fiscal Responsibility Act - on why the government will miss its fiscal targets and how it plans to get back on track.
"I recall that during a discussion in May last year the point was made that the Government will struggle to hit, and maintain, the goals set out in the Fiscal Responsibility legislation unless a multi-faceted, robust national disaster risk management framework is implemented," he told Tribune Business.
"It was noted that the Government will have to keep invoking the provisions of Section 13 (entitled Exceptional Circumstances) of the Act due to our increasing exposure to more frequent and powerful hurricanes.
"That section allows the government to 'temporarily depart' from its deficit and debt targets 'when sudden and unexpected events arising from external shocks, resulting in a significant economic downturn, national security considerations, or natural disasters so require'."
Mr Komolafe added that the increasing severity and frequency of storms such as Dorian might knock The Bahamas off its fiscal consolidation path for several years and "prolong a return to a sustainable path that would enable us to meet established targets".
"The contagion risks from a major disaster like Hurricane Dorian make it difficult to sustain momentum for the achievement of fiscal targets and national development goals," Mr Komolafe warned.
"Using Hurricane Dorian as an example, the revenue and expenditure side of the national budget, fiscal targets, economic activity, national development goals and macroeconomic indicators will be impacted.
"The minister of finance estimated a revenue shortfall of about $200m (which may be conservative), and it is anticipated that there will be upward pressure on government expenditure as restoration and rebuilding in Abaco and Grand Bahama takes place."
Summing up, Mr Komolafe said: "It is likely that a deviation from the established targets is imminent and inevitable. The Government will now have to outline measures and timelines to get back on track bearing in mind that we are still in the hurricane season and located in the hurricane belt for six out of 12 months every year.
"It is noteworthy that we have averaged approximately one hurricane or tropical storm annually over the past 27 years. Since 2015, we have had major hurricanes Joaquin, Matthew, Irma and Dorian impact the islands of The Bahamas.
"With the second and third largest economies of the country having been affected, productivity on those islands has dipped significantly and there has been massive dislocation of the working population from these islands," Mr Komolafe continued. "We are faced with a major challenge.
"The effect that this natural disaster has had on tourism numbers - in terms of cancellations and reduced occupancy - must be considered, and we must increase our efforts in communicating that The Bahamas remains open for business.
"Notwithstanding the economic stimulus from government and private sector spending, as well as construction activity spurred by insurance claim payments, it will be difficult if not impossible to make up for the overall shortfall caused by Hurricane Dorian. In other words, the net effect will likely be negative in the short-term and the outlook for the medium to long-term will be determined by the Government's response and deliberate policy initiatives to spur economic growth."