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Govt Finances Face 3-Year Dorian Blow

DEPUTY Prime Minister Peter Turnquest.

DEPUTY Prime Minister Peter Turnquest.

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Hurricane Dorian will likely throw the government's finances off-track for the next three years, the deputy prime minister has revealed, although its fiscal "fundamentals" have not altered.

K Peter Turnquest told Tribune Business that a "three-year run-out period" was "not unreasonable" given the extent of the devastation inflicted by the category five storm on infrastructure and other public assets, as well as multiple communities in Abaco and east Grand Bahama.

This indicates that Dorian has blown the government's fiscal consolidation plan off-course until 2021-2022 at least, although the scale of the damage is likely to progressively decrease from the projected $436m increase in the 2019-2020 deficit during future years.

Mr Turnquest, meanwhile, said he was "personally disappointed" that Dorian had prevented the Government's finances from "turning the corner" and achieving a surplus that would enable it to start paying down the $8bn-plus national debt.

Arguing that the Minnis administration was "on track" to achieve this until the storm smashed into The Bahamas, he said the "fundamentals" of the Government's fiscal consolidation plan had not changed and pledged that it would not be distracted by Dorian from its ultimate long-term goals.

Warning against unchecked public spending post-Dorian, particularly that which failed to produce results, Mr Turnquest said that while the Government may not achieve its 10 percent cut in discretionary expenditure it was seeking to reinforce the "belt tightening" message across all ministries and agencies.

Speaking after he revealed that Dorian is forecast to produce a more-than-quadrupling in this year's forecast fiscal deficit to $573.4m, Mr Turnquest suggested the storm's aftermath will force the Government to deviate from its fiscal projections for the remainder of the current administration's term.

"Without pre-empting the Fiscal Responsibility legislation or Act, and strategy report we plan to do in November, I think a three-year run-out period for this upturn in debt and spending is not unreasonable," he told Tribune Business.

"There are those who will say it's too aggressive, and we maybe ought to go to five years and longer, but the plan we've put in to-date - which was for three years, and people said was too aggressive - has been working. The economy has been growing, the unemployment numbers dropping, so all those statistics prove we were on the right path."

Mr Turnquest's mention of November refers to the fact that the Fiscal Responsibility Act requires the Government to present an adjustment plan if it is likely to miss its financial targets. This must detail the measures it will take to get its consolidation plan back on track, and estimates of how long it will take to do so.

This plan is to be presented to both parliament and the Fiscal Responsibility Council (FRC) in November as part of the upcoming 2019 Fiscal Strategy Report, while a post-Dorian budget will outline changes to revenue and spending along with requests for additional borrowing.

Dorian's effects will be with The Bahamas for many years to come, although the bulk of the financial impact will be felt in the early years as restoration efforts start to ramp up.

From a 2019-2020 fiscal perspective, the storm is forecast to wipe out $215m, or eight percent, of full-year revenues while extra spending to rebuild utility infrastructure, public health clinics, temporary housing and to deliver government services in the impacted areas has been pegged at just over $222m.

"The personal disappointment is that we weren't able to continue with the reform agenda," Mr Turnquest told Tribune Business, pointing to the progress made by the Government in slashing the 2017-2018 deficit to $222.4m.

Arguing that the Minnis administration had been "on track" to eliminate the persistent nine-figure annual deficits that have plagued The Bahamas for decades, he added: "That's the only disappointment I have from a personal perspective; that we didn't actually get to turn the corner and get on with the new norm and paradigm of surpluses, so that we can pay down these debts in an aggressive way."

Promising that not even Dorian would deflect the Government from this goal, Mr Turnquest continued: "The fundamentals of what we're trying to do have not changed. We have to continue to be aggressive with the consolidation plan, using aggressive revenue collection and compliance, and being aggressive on cutting costs and using technology to be as efficient as possible, and using good procurement practices to get better value for money.

"If we keep these things in mind, and don't get distracted by the impact of this storm with spending, we should be OK and get ourselves back on a reasonable path in a reasonable time."

Mr Turnquest said the Government's bid to cut discretionary spending by 10 percent, in an effort to narrow the deficit as much as possible and free-up monies for Dorian-related spending, was targeted at items that were non-policy priorities.

"We've put before Parliament a very aggressive budget," he explained. "Amongst the items in the Budget are some high priority policy items and some other things that can be repurposed. We're asking all agencies and ministries to look at those items - not the critical policy imperatives - and see how they can possibly delay or amend those priorities so they're more affordable in the short-term.

"We may or may not be able to achieve 10 percent. We are sending the message these are not normal times. We are all going to have to tighten our belts to fit into the fiscal window and land on the target."

The discretionary spending cuts, though, will not touch at least 80-90 percent of the Budget which has already been allocated to fixed costs, such as debt servicing and principal repayment, civil service salary costs and rents for government buildings.

Mr Turnquest, though, warned against runaway spending in times of disaster. "To the naysayers who have taken the traditional approach to public finances; that we must spend in times of difficulty, what we've been able to demonstrate up to now is that while that is true to some extent, we must not saddle ourselves with debt, particularly debt that does not show results at the end of the day," he added.

"It must be managed and controlled so that we do not fool ourselves into thinking we can drive consumption through spending."

Comments

Well_mudda_take_sic 1 month, 4 weeks ago

No revised budget or change fiscal consolidation plan will be realistic if it does not take into account the very real high probability that New Providence will take a direct hit from a category 5+ major hurricane within the next 10 years at most. That's unfortunately the harsh reality of the impact on us of global warming and changing climate patterns. I just can't imagine New Providence looking like Central & North Abaco did in the immediate aftermath of Dorian.

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birdiestrachan 1 month, 4 weeks ago

how the mighty has fallen. perhaps The Government should reconsider the $9.000 per month for the governor generals' rent the 12,000 for the other ones rent and the 10 thousand just for tea in the office of the Spouse. Then doc can stop jetting all over the place wining, dinning and dancing. not to mention the money they could have saved if it was not the aim and object to put the post office in MR. Brent Symonette;s building.

doc and Turnquest do what they want to do. like free University education even for those who can well afford to pay.

Then tell the civil servants whose matter should have been settled before Dorian they do not really matter.l

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birdiestrachan 1 month, 4 weeks ago

Turnquest there is the saying God don't like ugly. God cares for the poor. you taxed the poor beyond endurance to accomplish your goal. so you can thump your chest.

Apparently your plans and God's pans are not the same.

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BahamaPundit 1 month, 4 weeks ago

Bahamians be ready: China is now in the business of leasing entire islands from small archipelagic countries. In this case the Solomon Islands in the South Pacific. I now see what the Speaker's Little Inagua deep harbor reference was about. He was likely tasked with floating an introductory announcement of the deal to the Bahamian people. Be ready Bahamians, the Government will likely lease an entire island to China to do with as they please under a 50 or 90 year lease, in order to secure Chinese financing and loans to recover from Hurricane Dorian. NYT Headline: China Is Leasing an Entire Pacific Island. Its Residents Are Shocked. 11 hours ago

Now, China is moving in with plans to effectively take control.

Under a secretive deal signed last month with a provincial government in the Solomon Islands, a Beijing-based company with close ties to the Chinese Communist Party has secured exclusive development rights for the entire island of Tulagi and its surroundings.

The lease agreement has shocked Tulagi residents and alarmed American officials who see the island chains of the South Pacific as crucial to keeping China in check and protecting important sea routes. It is the latest example of China using promises of prosperity to pursue its global aspirations — often by funneling money to governments and investing in local infrastructure projects that critics call debt traps for developing nations.

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