The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday urged to "get past looking in the mirror", as it again blamed the Christie administration's "overhang" for exceeding the prior year's fixed-cost spending.

Gowon Bowe, the Bahamas Institute of Chartered Accountants (BICA) president, told Tribune Business that the Government needed to focus on whether its policies are "bearing fruit" and hitting their fiscal targets rather than worrying about the past.

He called on the Minnis administration to conduct a "liquidity" analysis of the Bahamas' $7.5 billion debt, and determine "how much we've mortgaged the future", as part of wider debt management strategy.

Mr Bowe argued that such a plan could be implemented before the Government's planned switch to accrual-based accounting in 2021-2022, adding that "more clarity" was required to enable the Bahamian people to judge an administration's "stewardship and governance" of the public finances.

The BICA president spoke out after K P Turnquest, deputy prime minister and minister of finance, blamed recently-discovered spending commitments inherited from the Christie administration for the Government's non-debt recurrent spending exceeding that of its predecessor.

Stripping out debt principal repayments, Mr Turnquest said fixed-cost spending for the six months to end-December 2017 was slightly ahead of the prior year's $994 million, coming in at $1.003 billion.

Unveiling the mid-year Budget in the House of Assembly, he said: "The outturn this year was negatively impacted by the overhang commitments of the previous administration that have had to be met during the current fiscal year.

"To date, Mr Speaker, we have had to make provisions to settle more than $30 million in verified payment arrears over and above what was known during the Budget exercise last May. There are tens of millions of dollars in remaining commitments from prior years."

Mr Turnquest promised to detail these outstanding spending obligations once the mid-year Budget debate begins next week, but Mr Bowe indicated that the Government's focus on blaming the Christie administration for all the Bahamas' fiscal woes was starting to wear thin. Describing the country's mood as one of "impatience and anticipation", Mr Bowe said: "Ultimately, what we would like to see is evidence that their policies are starting to take fruit.

"We need to get past looking in the mirror. We need to look at where we are against projections that tells us where we are as a country. There are three elements as it relates to our debt that are critical and don't need that kind of gamesmanship involved in it.

"There was a discussion around the hole that needed to be filled, and debt raising that needed to take place. If we've done that, we need to make sure all debt resolutions are a part of the original Budget that was presented in 2017-2018, or are they supplemental obligations. That means they're projecting higher levels than forecast."

Mr Bowe called for the Government to implement a "clearly articulated" debt management strategy, which tracked progress on debt reduction on an annual basis. "The Government needs to get into that practice before accrual accounting as they have the information to do so," he told Tribune Business.

"There needs to be a clearly articulated debt management strategy; how we manage the currency, US versus Bahamian; how we manage the tenor, when it becomes due; and make sure we only increase the debt for long-term projects as opposed to short-term.

"The principle is a debt management strategy. I'm not going to say one doesn't exist already, but in the years I've been observing one has not been articulated."

Mr Bowe said Mr Turnquest, in an address to the Chamber of Commerce's 'State of the Nation' forum yesterday morning, had spoken about the Government "doing better" in laying out the assumptions underpinning its Budget forecasts such as expected real GDP growth.

Government revenues and spending are directly tied to economic growth, and the Deputy Prime Minister also suggested the Government would start providing a "detailed analysis" of why its fiscal performance was beating/missing targets and the reasons for this.

Backing these intentions, Mr Bowe said the Government would ultimately enable Bahamians to judge the credibility of its every Budget - and governance of the public finances - should it move in this direction.

"It would give the ability to be critical around the actual performance versus what's budgeted," the BICA president added of such reforms. "There is a need to look through this half-year Budget.

"If you ask what the political mood is in the country, it's one of impatience and anticipation. If the Government says it's $25 million ahead in revenues, but acknowledges that last year they had a period when revenues were affected because of the hurricane that took place, it's not a good barometer by which to be judged."

The 2017-2018 first half was up against 'weak' comparatives from the prior year due to the devastation inflicted by Hurricane Matthew in October 2016, which cost the then-government significant revenues due to the disruption in economic activity while forcing it to undertake $150 million in emergency borrowing and unplanned restoration expenditures.

Mr Bowe suggested the Government's fiscal performance against its May 2017 Budget projections, rather than year-over-year comparisons, were a better indicator of its stewardship. "Are we seeing signs of the policies they've put in place bearing fruit?" the BICA president asked.

"It would be beneficial in the full debate on the half-year Budget that they give a clear reason for failing to meet Budget or exceeding Budget. What I would want to see in the half-year Budget is a complete analysis of the debt situation.

"We've had a tremendous amount of debt raised last year [$750 million] in terms of the US market, so how were those funds deployed? Net new money was not a lot. The Government needs to have a liquidity analysis that puts debt in various buckets; when it's coming due - one year, three years, five years, 10 years - and how much is coming due," Mr Bowe continued.

"This is so we have an idea of how much we have mortgaged the future relating to the current debt, and what type of financing we might need in future to meet these current obligations."

Calling on the Government to focus on the present rather than the past, Mr Bowe added: "The debate has to mature to the point of speaking about what the current administration has achieved, and if it highlights the underperformance of previous administrations, so be it.

"The focus should be on what you have done for me lately. The focus should not be the past and setting the bar low. We have to set the bar high in terms of what you want us to live up to."