The Tribune

My first article encompassed an assessment of the opening Budget communication by the Prime Minister, arguing that the numbers are positive but necessarily rest on confirmation of the 2022-2023 fiscal year's last quarter performance. It also went beyond the numbers to look at the issues which hold significance for the fiscal year ahead. This article continues with a consideration of emerging themes.

Progress and Security

Against the back drop of the Budget's theme, 'Progress and Security', the Prime Minister laid out a number of important initiatives that should serve to advance The Bahamas and its citizens economically and socially. The focus on national security, and the fight against crime, is fundamental as it not only impacts domestically but plays a major role in how the country is seen as a destination for investment and tourism.

Taxation – The stated policy focus on collection and enforcement of taxes, and the rationalisation of the tax apparatus to inject greater fairness and equity, is important. Given the 'no increased taxes' route taken by the Government, it is fundamental. A failure in collection will seriously undermine the numbers projected. Such an outcome would inevitably lead to a reversal of that stance, and taxes will necessarily have to be increased. This process should be positively impacted by the creation of a Large Taxpayer Unit, the improvement in tax collection in the Family Islands, and updated fee schedules for government services (read a quasi tax increase).

State Owned Enterprises (SOEs) - The reduction in subsidies allocated to SOEs is a big positive. The requirement for alignment with national priorities is fundamental, but also indicative of weaknesses in the governance processes of SOEs. It should be unnecessary to indicate a requirement for alignment. SOEs, by their very nature, are supposed to be designed to advance national priorities. The administration must be commended for its decision to buck the trend of increasing subsidies. It must, however, go much further and announce a suite or programme of serious institutional reforms for these entities. Failure in these organisations is linked to weak management and corporate governance oversight, effective strategic planning and execution.

The imposition of spending guidelines could arguably have an adverse effect, and lead to an incursion into day-to-day operations by the Ministry of Finance. It would be preferable to insist on the alignment, and then ensure - with the requisite reforms - that accountability is enforced at the appropriate levels. Discussions regarding profitability and securing dividends will be challenging without the necessary reforms. Committees and Boards are valuable and necessary, and can help to move development and solve problems, but that turns on the quality of the decisions that they make and the extent to which they are held accountable for managing national resources.

Agriculture – The pronouncements by the Prime Minister on agriculture were, without being ground breaking, very positive. Agriculture, in my view, holds significant importance in that it is one of the best avenues for leveraging linkages to extract greater domestic economic value from tourism. The announcements around land development; a cadet programme; the use of hydroponics; and greenhouse investments are oft-repeated initiatives which have not been given sufficient attention in the past. Strategically linking the number of visitors; number of tourism operations; the expected growth in cruise business; and the increasing proliferation of fast food franchises to the need for greater development in agriculture is the path forward. With a significant food import bill of around $1bn, success in this regard holds exponential benefits for the country.

The nature of tourism investments, which dominate the economy, is such that you could have significant activity without major changes in the country's development largely because of how output earnings become domiciled. This can be very tricky, as you end up with many developments and activities, plus jobs, but not the normal or anticipated economic impact despite these projects using Bahamian assets.

Tourism, seen as a catalyst, then begs for policy and strategies designed to maximise the Bahamian share of its profits and output. More dollars spent locally, even if they ultimately end up elsewhere, fuel local industries and locally-owned businesses more. The Bahamas is missing some of the ability to leverage its tourism product in this way. Jamaica, with its more diversified inputs, has been able to do a much better job by forging linkages with the tourism and agriculture industry. Agriculture is the medium through which this might be achieved for The Bahamas.

Social Focus – The focus on social matters, such as feeding school children though a food assistance programme and expanding concessions for first-time home buyers, is significant. The effort to expand and upgrade the health infrastructure across the Family Islands and Grand Bahama is significant. These initiatives together are fundamental to the administration getting back to one of its core tenets announced at the start of its term – economic dignity. While it is imperative to work hard and diligently to right the macroeconomic realities, the circumstance of individual citizens must remain paramount. Growth that leaves large positions of the country behind is antithetical to true national development, and will eventually result in a burden and drain on government resources.

The Missing Pieces

Regardless of how much we may wish to do otherwise, a Budget must address the country's economic realities. This Budget presentation, building on the Fiscal Strategy Report 2022, attempts to do just that while balancing some important challenges, both economic and political. In this regard, but subject to the final determination of the numbers, the Budget scores highly in my opinion.

The country needs revenue to address the expanding demands on government, and to more effectively manage debt and the risks imposed by the recent rapid increases to more than $11bn. However, none of this will be effective without real reform. This, I believe, was an opportune moment for the Prime Minister to lay out more diligently how the Government plans to address serious structural deficiencies in the Bahamian economy and the way the public sector works.

The corporate income tax consultation also merited some mention in the Budget. An analysis of the revenue lines shows no pronounced change,and it is therefore to be assumed that corporate income tax is not a priority item at this point. Given the discussion around opportunity cost and 2024, this might constitute an important missing piece. At any rate, the matter in my view is of sufficient importance that even a brief discourse would have been appropriate.

Conclusion

The 2023-2024 Budget lays out an ambitious, optimistic and, in my view, realistic path forward in terms of the revenue needs. Again, the administration should be commended for facing up to the realities. Linking it with the Fiscal Strategy Report (FSR), there is great congruency between the two. The Prime Minister’s presentation can therefore be viewed as indicative of a hardening of prior policy positions rather than a reaction to immediate circumstances. It is important in assessing this Budget that a deeper understanding is brought to bear in determining where we are, what is needed, and what it will take to maintain the current projected momentum, together with the implications of not achieving these planned goals.

Based on the forgoing, I take the view that there is cause for looking ahead positively. I believe doing otherwise is not in the best interests of The Bahamas. As a country we must seek to move ahead strategically, pragmatically and positively together. We must not, however, ignore the warnings and signals or dismiss dissenting arguments. Nor must we shy away from making the hard decisions with a view to maximising the country’s future successes.

NB: Hubert Edwards is the principal of Next Level Solutions (NLS), a management consultancy firm. He is currently a student at the Eugene Dupuch Law School. He can be reached at info@nlsolustionsbahamas.com. Hubert specialises in governance, risk and compliance (GRC), accounting and finance. NLS provides services in the areas of enterprise risk management, internal audit and policy and procedures development, regulatory consulting, anti-money laundering, accounting and strategic planning. He also chairs the Organisation for Responsible Governance’s (ORG) economic development committee. This and other articles are available at www.nlsolutionsbahamas.com