By NEIL HARTNELL
Tribune Business Editor
The government needs to borrow $700m from the domestic banking system to support household incomes given that the jobless total may reach six-figures, a Bahamian banker warned yesterday.
Julian Brown, pictured, president and chief executive of BISX-listed Benchmark (Bahamas) president, told Tribune Business that the tourism industry's shutdown and subsequent national lockdown threatens to send between 70,000 to 100,000 Bahamians to the jobless queue to seek National Insurance Board (NIB) assistance.
Drawing on 2017 data provided by the Department of Statistics, Mr Brown said his research suggested that up to $1.152bn in household income could be lost to the COVD-19 pandemic with the hardest blows suffered by the middle, lower middle and lower income classes.
And, in economic terms, he suggested that a "frozen" economy resulting from the virus crisis could cost almost $9bn in lost economic activity based on 2018 national accounts data using current (nominal prices).
Calling for the Government to launch a multi-phase rescue package in conjunction with the private sector, the Benchmark chief said its first move should be to exploit the $2.097bn in commercial bank surplus liquidity that existed at end-February 2020 to raise $700m from that sector via a domestic bond issue priced at 3 percent.
And he also called for The Bahamas to form a "bloc" with other Caribbean nations and negotiate collectively with external lenders for a deferral, moratorium or some other restructuring of their foreign-held debt to free-up resources for economic recovery and provide fiscal breathing space following the pandemic.
"We need to start ramping up that economic fight to the level we are with the health," Mr Brown told Tribune Business of the COVID-19 aftermath. "I'm just trying to get the conversation going about what the outlook is and how serious the second part of the fight is going to be.
"It's probably going to be a little more challenging than the first fight because there are a lot of moving parts.... I think we can do it because that $700m comes form the banking system. The banks are not going to be interested to lend that money aggressively because they're worried about problems with servicing that debt.
"There's even more headroom if the Government wants to make it $1bn. The key is that the money is being borrowed domestically. I don't like borrowing $2bn from the foreign markets because that creates a burden for the country as we have to pay the principal and interest back, and borrow that from ourselves," he continued.
"We don't have the capacity other than to use our own reserves, and we can't use the reserves to pay that debt as we are getting no cash flow" coming in due to the shutdown of tourism and other export, foreign currency-earning sources.
Mr Brown added that The Bahamas should not attempt to negotiate a restructuring of its foreign-held debt by itself, arguing that there was strength in numbers if it chose to do so in concert with other Caribbean countries.
And, while it might prove easier to negotiate a restructuring of its domestic debt with the likes of the National Insurance Board (NIB), commercial banks, insurance companies, pension funds and other institutional investors, the Benchmark chief warned that this presented hidden dangers in terms of disrupting investor balance sheets, capital adequacy and solvency margin requirements.