Chamber chief: Beware campaign pledges impact


Tribune Business Editor

WALL Street's fears of a negative fiscal impact from the new government's $250 million mortgage relief plan shows just how careful Bahamian politicians have to be about "the international implications" of their promises, the Bahamas Chamber of Commerce and Employers Confederation's (BCCEC) chief executive said yesterday.

Expressing surprise that Moody's, the international credit rating agency, had "taken such a strong position" on a central Progressive Liberal Party (PLP) campaign pledge, Winston Rolle said the main lesson for the Bahamas was in the wider ramifications of such promises for an international community that provided this nation's key economic driver - foreign direct investment (FDI).

The BCCEC chief executive, though, disagreed that the Government had "got off on the wrong foot" in terms of the message it was trying to send to international capital markets on the fiscal/economic policies it intended to pursue, adding that it had plenty of time to "adjust" course.

Mr Rolle, though, said he thought that the PLP's mortgage relief plan, as initially proposed, was unworkable from a banking industry perspective as it effectively forced financial institutions to write-off all their loan loss provisions and abandon any hope of recovery.

Acknowledging that Bahamian commercial banks would have to agree to adopt the new government's plan, the BCCEC chief said: "I personally did not see the banks agreeing to subsidise that in any manner, especially in the manner in which it was being proposed.

" Any business will have provisions in their accounts for losses or write-offs. To think they would take those provisions and discard the opportunity to recover them does not make good business sense."

"I'm actually surprised they took such a strong position on it," Mr Rolle told Tribune Business on Moody's comments. "My thing is that when there are a number of commitments made on the campaign trail by both parties, all of these have international implications.

"We cannot make local commitments without consideration for the impact on the international community, the same international community we expect to invest in our country."

Tribune Business exclusively revealed on Wednesday how Moody's had expressed fears the mortgage relief plan would "undermine" efforts to rein in a national debt standing at $4.356 billion at year-end 2011, and that it showed "a lack of commitment" on the Christie administration's part to tackle annual fiscal deficits running at over 4 per cent of gross domestic product (GDP).

And Moody's described the proposed mortgage relief plan as "a credit negative", implying that its implementation could lead to it further cutting (downgrading) this nation's sovereign credit rating, something that could scare away foreign investors and increase the Bahamas' borrowing/debt servicing costs in the international capital markets.

While not believing the implications of Moody's comments were "as severe" as threatening a downgrade to the Bahamas' sovereign credit rating, Mr Rolle said the rating agency seemed to be "putting its hat in the ring", and letting the Government know its fiscal and economic policies were under scrutiny.

Telling Tribune Business that "the ball is squarely in our court" when it comes to maintaining the Bahamas' sovereign credit rating, Mr Rolle acknowledged its significance when it came to attracting FDI and borrowing/debt servicing costs on the international markets.

"If we want to attract international investment, if we want to get external funding for the various projects the Government wants to do, we need to borrow at an attractive rate, so this rating will be significant as we go forward," the BCCEC chief executive told this newspaper.

"It's very clear what we need to do to maintain the rating. It's very clear we'll be downgraded if we don't pay attention to the markets and don't do the things we need to do to maintain a good rating, so the ball is squarely in our court."

He disagreed, though, with the notion that the new government had sent the wrong message to international capital markets. "I don't think they've got off on the wrong foot, as nothing has been done yet," Mr Rolle said.

"The time is now to give understanding to all those projects, and be very mindful that whatever we do, be aware of the implications locally and internationally.

"With the current administration it's still very early in their term, and they have the opportunity to right the ship. I'm sure, being a prudent administration, they'll make the necessary adjustments.


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