By YOURI KEMP
Tribune Business Reporter
ykemp@tribunemedia.net
The Fiscal Responsibility Council’s chairman yesterday said the Government needs to “keep the patient alive” and prevent the COVID-19 crisis from collapsing the Bahamian economy.
Kevin Burrows told Tribune Business he felt the government has sufficient capacity to relinquish $60m of income over the next three months to incentivise as many as 200 medium to large-size businesses to retain up to 80 percent of their staff via its tax credit and deferral initiative.
“Yes, I do believe the government has the fiscal space to forego $60m over the next three months in order to retain some economic capacity to pay future taxes when the crisis abates. This is the same decision being made by governments globally,” he said.
“The US just approved a $2tn dollar fiscal stimulus – that’s about ten percent of their GDP and 40 percent of their federal budget. Sixty million dollars for The Bahamas, well under one percent of GDP and 2.5 percent of our budget, pales in comparison, even taking into account our lower borrowing capacity.
Mr Burrows affirmed: “We need to make sure the economic patient remains alive, then figure out how to adjust afterwards. Whether the pay back period beginning in January is realistic, well, we will see.
“Assuming the global and local economy starts to re-open say by the end of June, then six months’ forbearance before beginning repayment seems reasonable. If the economy cannot support it then I’m sure the date will be extended – that’s the nature of managing under uncertainty.
“I expect to see a global debt monetisation the likes of which was unimaginable just a month ago – the very nature of government debt will change. One silver lining is that we are not in this alone; the solution will need to be a global one.”
John Rolle, the Central Bank governor, told Tribune Business yesterday: “I know that if it is one branch of government that would be focused on sustainability it would be the Ministry of Finance, because we work very closely with them on the fiscal projections and, particularly right now, in trying to determine what the Government can provide.”
Asked whether the $60m in foregone revenue is sustainable, Mr Rolle said: “The bottom line is that you are in an environment where you are taking on increased fiscal costs. That is necessary, but you have to be measured in terms of how much costs you take on because you know that you have to defer them.
“I heard that those types of calculations are happening behind the scenes, and they are balancing all of the requests that are coming in. I think the Government is also equally focused on the full fiscal year that is ahead of them.
“Even if you see certain measures announced now you will also need to pay attention to how the government positions itself when they get into the budgeting for the new fiscal year. That’s also going to help how we manage the cost of the crisis.”
The Central Bank governor said of the tax credit/deferral initiative: “It recognises that businesses need assistance and, in some instances, businesses would have had a huge hit on their cash flows, so it is good to provide them with the type of comfort around having to maintain their operations in the near term.
“Some businesses, it is really understanding that the cash flows are going to be disrupted. Some businesses are not even in the position to make due on these obligations right now, and so giving them the deferral helps them until they are able to do so.
“Deferrals are not like forgiveness, and I think when you look at things like that you begin to appreciate that our constraints are different that many other countries, so we can defer and delay certain obligations but we don’t have the capacity to outright write-off these liabilities because it keeps the Government running.”
Comments
Well_mudda_take_sic 3 years, 12 months ago
John Rolle and Peter Turnquest are not the brightest crayons in the Bahamian box of crayons. These two are slightly brighter than James Smith and that's a most worrisome thought right now. Sadly, we have very few bright Bahamians today who are well trained economists steeped in diplomacy at the global level and who also enjoy statesmanship-like standing on the world stage.
John 3 years, 12 months ago
John Rolle is well qualified for the position he holds and the truth of the matter is he has a human side to his personality. He is not one to crunch out the numbers and say, do this or else’. The problem you may have with him, Mudda, is you judging this crayon (John Rolle) by his complexion and not his intelligence and qualifications. And while Peter Turnquest May not have vast experience in public finances, he too holds the interest of Bahamians at heart. And while his decisions would be more effective if based on an economics footing, rather than accounting , Turnquest is one to quickly revise policies and make adjustments. These are challenging times for even the most seasoned professionals as you can see with the wide fluctuations of all the stock markets. And when facing uncertainty the best people to have in place are ones who don’t mind the public looking over their shoulders and willingness to make adjustments. Then decisions are based on more than just one man’s judgement.
Well_mudda_take_sic 3 years, 12 months ago
There you go again.....always trying to play that tired 'ole race card. You clearly would be most surprised at my complexion. And you obviously do not appreciate the significance of the point I made in the last sentence of my post above.
sheeprunner12 3 years, 12 months ago
Mudda, suggest FIVE names who can advise KPT on macro and micro economics at this time. Or stay quiet
Well_mudda_take_sic 3 years, 12 months ago
Are you trying to goad me into revealing a few names that you can then bad mouth? KPT knows who he can go to for help and sound advice, but unfortunately Minnis won't allow the advisors to help steer the sinking ship to a safer place. For him (Minnis) it's all about having to have control of everything, to the point where nothing of any significance or import can ever be done both expeditiously and properly.
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