By NEIL HARTNELL
Tribune Business Editor
A prominent Bahamian businessman yesterday urged the government not to implement an overly-huge economic stimulus package or open the economy too soon in the battle against COVID-19.
Sir Franklyn Wilson told Tribune Business that The Bahamas simply cannot afford to copy the US by throwing hundreds of millions, or even billions, of dollars at propping up the economy because it would ultimately create devaluation pressures by undermining the one:one fixed exchange rate peg with the Bahamian dollar.
The Arawak Homes chairman also warned that opening up certain sectors of the Bahamian economy, amid the escalating COVID-19 threat, would be futile unless the pandemic was extinguished and both Atlantis and Baha Mar were able to re-open with “high occupancy levels”.
Speaking as the number of confirmed COVID-19 cases in The Bahamas jumped to nine yesterday, Sir Franklyn argued that opening back up too soon would be equivalent to “shooting ourselves in the foot” - especially since this nation “does not truly have an economy” without its number one industry, tourism.
He added that “the long-term future of the country is pretty much in the hands” of K Peter Turnquest, deputy prime minister and minister of finance, and said: “If we don’t take care of the Public Treasury at this point, the long-run consequences could be very, very serious.”
Warning that Mr Turnquest “has to be careful about how aggressive he seeks to be”, Sir Franklyn said The Bahamas’ economic structure meant the Government “cannot” contemplate a financial bail-out - scaled in proportion to its economy - along the lines of that being initiated by the US.
“There’s a complication,” he argued. “Bahamians are watching TV. They are seeing the US government doing a lot of things for its citizens. A narrative that’s important for this country to understand is our circumstances of reality is very different from the US in very fundamental ways.
“Our reality is that the more money the Government pumps out, the more pressure it places on the foreign currency reserves. The Government pays money out in Bahamian dollars. Because we produce so little, we take these dollars to the food store, the drug stores and the gas station.
“Once it goes through, the food store and gas station have to replenish their stocks,” Sir Franklyn explained, “and to do so they have to convert their Bahamian dollars to US dollars. That’s a drain on those reserves. Our circumstances are different from the US. When they pump out money, they create jobs.
“The reality is we’re in a God awful situation, where any strategy by the minister of finance to alleviate the suffering of Bahamians by giving out money has long-term implications for the foreign reserves.”
Mr Turnquest, in a previous presentation to Parliament, said it was estimated that The Bahamas’ $2.03bn foreign currency reserves will decrease by $900m by year-end 2020 due to the absence of incoming tourism-related inflows to replenish them as a result of the COVID-19 pandemic.
However, Sir Franklyn said that projection was now likely too optimistic, as it had been based on The Bahamas’ retaining 20 percent of its stopover tourist business. The travel and tourism industry shutdown means that this nation will lose all its stopover and cruise business, meaning that the foreign reserves drain will be even more than $900m.
“If they put more money into Bahamian hands there will be even more pressure on the foreign reserves,” he told Tribune Business. “They have to understand that the more pressure that is put on the foreign reserves, the more difficult it is to keep the parity between the Bahamian and US dollars. That’s the consequence.”
Sir Franklyn said former finance ministers, such as Sir William Allen, had argued that the fixed exchange rate peg had served The Bahamas well and should be sustained. “In terms of propping up the economy, we have to get the Bahamian people to understand The Bahamas is different from the US,” he reiterated,
“Regardless of the desire, the wish, the Government does not have the capacity to pursue the same strategy as the US pursues. I would pray that Cabinet ministers will be reasonable in putting pressure on the minister of finance to do what he does not have the capacity to do, not for the long run. We cannot do that. The heart is willing but the pocket is weak.”
Sir Franklyn renewed his call for the Ministry of Finance to review all government spending to determine what initiatives can be cancelled or postponed, so that taxpayer dollars can be saved that way and repurposed towards the COVID-19 relief effort.
The Government to-date has unveiled the $20m Business Continuity Loan initiative to support micro, small and medium-sized enterprises (MSMEs) plunged into distress by the pandemic, along with $10m each for temporarily laid-off workers and the self-employed.
The Arawak Homes chairman, meanwhile, said the true “barometer” of The Bahamas’ return to economic normalcy will be when Atlantis and Baha Mar are re-opened with high occupancy levels. He added that if this could occur by mid-May “the turbulence that comes with the end of this crisis will be manageable”, and this nation could enjoy a strong summer tourism season.
Many observers, though, believe that the COVID-19 crisis in The Bahamas’ major source markets of the US, Canada and Europe will take at least until summer to get beyond the peak infection rate, and that it will take many more months beyond that for tourism - and especially traveller confidence - to rebound.
Sir Franklyn, meanwhile, opposed calls by Robert Myers, the Organisation for Responsible Governance’s (ORG) principal, to partially open up the Bahamian economy rather than continue with the existing lockdown for another month, saying he “doesn’t see it that way”.
Arguing that eliminating the virus, and its spread, locally should be The Bahamas’ top priority, Sir Franklyn said that the only true recovery will be felt when the tourism industry is back on track.
“When do we stand a reasonable chance of getting back to normalcy, and what will the barometer for setting normalcy be realistically. That’s the questions for me,” Sir Franklyn told Tribune Business. “Anything that gets us to the re-opening of Atlantis and Baha Mar is key. Steps in between are the markers to the end point.
“The Bahamian economy cannot be open without Baha Mar and Atlantis functioning with a very high degree of occupancy. Let’s get this [COVID-19] behind us so we maximise our chances of getting Baha Mar and Atlantis open with those occupancies. Anything that doesn’t do that, we’re shooting ourselves in the foot, and I would caution against pursuing.
“If Baha Mar, Atlantis and Sandals are closed and so forth, what economy are you talking about? As long as those properties are closed what type of economy are you talking about?”