By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
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?”
Comments
bahamianson 4 years, 1 month ago
No such thing as a God aweful situation, no such thing.Thete is nothing That God does, that is aweful.
Right242 4 years ago
Well there’s the virus, childhood cancer, mental illness, death...
moncurcool 4 years ago
Don't blame God for what man does.
BahamianSon 4 years ago
Things happen when we turn are backs on God. But somethings God allows to show us just how powerless we truly are.
Right242 4 years ago
I forgot man created cancer & children born with deformities.
moncurcool 4 years ago
Gaddafi said it best: They create the virus and then create the drug to have you buy it to be dependent on them. Don't place on God what man has done.
OMG 4 years ago
Funnily enougjh when there is a good crop, or someone is cured by medical intervention credit goes to God, but when everything goes wrong even the death of an innocent newborn child, suddenly its not God but mans doing. Can' t have it both ways.
Well_mudda_take_sic 4 years, 1 month ago
A wealth tax of 30% on Bahamians like Sir Snake who having been robbing public treasury of its rightful due for decades might just be the medicine needed to help us get through this God awful bad patch.
observer2 4 years, 1 month ago
Well mudda, great idea on the wealth tax, believe me its coming faster than you think. You can't threaten to lock down a country through April 30, tens of thousands of ppl have lost their jobs, government is supposed to be "working from home" but no one is answering their phones and the e mail server is overloaded and all e mails are being rejected. Something some where and sometime will have to give.
I made the following comments on the Lyford Cay job losses:
As tens of thousands of workers in the private sector are losing their jobs it is ironic that not a single government employee has either taken a pay cut, lost their job or are working at reduced hours.
I say its ironic because the government derives it revenue to meet its payroll by taxing Bahamian citizens and tourist. In any other business there would be some belt tightening as revenues decline.
We just don't the Minster of Health, Finance and the PM telling us how awful it is and how we must stay in our homes. We need hope, we need to see you sharing in our pain. How about taking a 30% pay cut at the top (Minister level) going down to 10% at the Manager level. Leave the salaries of those at the bottom alone.
....I must be dreaming.
tetelestai 4 years ago
Yes, you did make those spurious comments. And in response, I tried to explain - testily, I admit - why your comments have no economic reasoning, much less humane sensitivity. In fairness, you responded with a bunch of babble that was beside the point and, as you perhaps did not even understand, only proved my point. Axing workers, forcing pay cuts, et. al, will have no material financial impact in the short run. This is economics 101 observer (google : David Riccardo theory if you disbelieve me). If this awful situation persists in the long run, then we can revisit you arcane and insensitive remarks.
Bobsyeruncle 4 years ago
Good idea, but unfortunately there are probably insufficient wealthy Bahamians for this to make a difference. If you add corporate tax (medium to large businesses), second home property tax (Bahamians & overseas residents) to the mix, then maybe it would help
concerned799 4 years ago
If we want to encourage more people to build second homes, build more hotels like BahaMar, open new banks this is an exceedingly poor idea.
Now had folks listened we could have earned and saved more from our tourism industry had we banned cruise ships.
Past is the past for now tho on this, for right now and the next few months we need to make our food with local growing and own energy with solar power till tourism returns.
Honestman 4 years, 1 month ago
I consider myself a realist and I can't see Baha Mar and Atlantis operating anywhere near full occupancy for the rest of the year. First they have to announce a re-opening date and then they have to persuade American tourists to take a vacation when many will be reeling from the economic hit they will have taken in 2020.
Well_mudda_take_sic 4 years ago
Most Americans have seen their life savings literally evaporate in their 401k retirement plans as the U.S. stock markets plunged south...perhaps staying south for many years to come. The Bahamas cannot bank on these poor souls even thinking about taking a vacation for many years to come. And that assumes the next Red China pathogen does not come along soon.
GodSpeed 4 years ago
Well that's what happens when you back your currency with US Dollars instead of something like Gold or Silver. Now the US will print all they want and pass the inflation on to everyone using US dollars and you can't do anything for your own people.
Well_mudda_take_sic 4 years ago
...ditto that my friend....
Solid 4 years ago
It's very easy for Sir Wilson to discourage Government from helping people. He is Rich. Maybe he should help Bahamians by helping those displaced by Dorian.
longgone 4 years ago
One of the few times I have ever agreed with Sir Franky---There is no other alternative!
concerned799 4 years ago
Central Bank needs to hear from all the people that its mission to maintain the peg must be supported no matter what. If the peg fails we will become Venezuela or Argentina and it will all fall apart!
concerned799 4 years ago
Hie is right we can not just print more money.
Every dollar must be carefully watched at this point.
BPL must be sold into private hands immediately tho to stop more drainage in terms of the public purse having to prop it up tho.
And we need a massive country wide agricultural program to grow what tourist dollars can not do (pay for import food). Seriously, every community, every parish needs to start a community gardens now given the lead times from planting to harvest. And we need much more solar. We are so behind on both fronts I hope people and government will rise to the challenge and not go the easy route of print more money, deplenish the hard currency and then have total collapse like Zimbabwe. It is that serious folks. This country needs to get it together now!
Atlantis and Bahama Mar will not reopen in mid May! And if they did no one would be there in any event! We need to be prepared for 12-18 months of tourism shut down and start acting accordingly.
OMG 4 years ago
How about this stupid idea of employing Cuban teachers who beside the financial cost often cannot speak reasonable english let alone have the interests of the kids at heart. Why is this continuing when Cuban teachers sole aim is to repatriate as much in the way of USD back to Cuba. Time to employ Bahamians especially in the vocational subjects perhaps using BTVI final year students. Every dollar saved is important.
Entrepreneur 4 years ago
you are absolutely right about the agricultural program....
Jackjawitz 4 years ago
Dont forget the fact that if you want LESS of something just tax it. If you want less smoking, tax cigarettes. If you want less tourism, just tax it. If you want less second home ownership, just tax it. If you want less foreigners, just tax them...etc
Giordano 4 years ago
This is the time for the government to invest in the family Islands and everywhere in The Bahamas with agriculture and fisheries because tourism is actually hospitalized with terrible symptoms & prognosis,unable to sustain good status quo at least for a year or two in favor of the common citizen & residents. We need to allow privilege to "America First" to come here and bridge all family Islands and adds values to this rural areas that are currently full of bush and if necessary to dolarized this local economy with the USDq ($$$). Give them this preveledge first,if they refused this marvelous offert given to them by The Government Of The Bahamas then turns out "The Same Offert",to The Chinese Government also as a pressure not to reject such offert. This current acute crisis is about good leadership in order to save The Bahamas and this small population who will turns out To be one of the best trully richest human being on Planet Earth with all of these private - generational properties then with the interconnection through bridges adding far more values to every land in the family Islands who could be leased by the Bahamian families who own them to private investors like any other business . For example Baha-mar ,Atlantis & Grand Baham a Hotel etc.,etc
jmeadows 4 years ago
The fact of the matter is.In the long run government bail outs will further hurt the economy and the people more so than help. All government spending will eventually need to be replenished by some form of taxation. Let the private institutions deal with giving out small business loans.These institutions use their own personal money to fund these loans and they have a more stringent measures in place to ensure that the monies are going to the people who will actually pay it back and invest it into their business and stimulate the economy. And the end of the day this process would work out better and leave more money in the taxpayers pockets and less of a strain on our Bahamian dollar.
totherisingsun 4 years ago
If the kind Knight would bless the Bahamas with 1% of his net earnings from having complete control of the nations fuel supply since time immorial, our woes would be over. Perhaps is time to "give back"?
adriennecleare@hotmail.com 4 years ago
I must agree with Sir Franklyn Wilson on this one...we have no other choice!
Socrates 4 years ago
Like most of the posters, i agree that many of the businesses closing now will never see the light of day again. Likewise, we will be lucky if Atlantis and Bahamar reengage 50% of their staff for the remainder of this year. Hope we are all wrong. Big, big concern has to be future value of the B$. If that falls, highly likely, then we all become paupers overnight and quality of life as we know it never to be the same again. But, i hope we are all wrong.
concerned799 4 years ago
The B$ must not be allowed to fall.
sheeprunner12 4 years ago
This is the dawn of a new world (economic) order ……… China the Dragon will emerge to challenge the EU and the USA …..... Who is winning right now????????
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