By NEIL HARTNELL
Tribune Business Editor
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."