The Tribune

By NEIL HARTNELL

Tribune Business Editor

THE Christie administration's failure to "hold the line" on projected recurrent spending for the 2012-2013 Budget year shows it is "not committed to fiscal prudence", a leading fiscal hawk charged yesterday.

Rick Lowe, an executive with the Nassau Institute think-tank, told Tribune Business his "biggest fear" was "how much more stress" the Government would seek to pile on the Bahamian private sector and individuals through increased taxation, given that it appeared to be entirely ignoring spending cutbacks as a means to address a fiscal deficit projected to hit $550 million in 2012-2013.

The Christie administration has forecast that recurrent expenditure, which covers the Government's fixed costs such as salaries and rents, will hit $1.821 billion in the 2012-2013 fiscal year.

That is an 8.3 per cent increase on the 2011-2012 Budget's $1.682 billion estimate for the current fiscal year and, given that the Prime Minister indicated recurrent spending was set to exceed projections by $27 million, it represents a 6.6 per cent rise on 2011-2012's likely $1.709 billion outturn.

Suggesting that the Government could have sought to hold recurrent spending flat against this year's $1.709 billion total, in a bid to show it was serious about tackling its deficit woes, Mr Lowe told Tribune Business: "It doesn't show a commitment to fiscal responsibility, does it?

"It's plain and simple. At least they could talk the game, but they don't even talk it. If they pretend all is well and it's business as usual, we'll probably get more of the same."

Given that the Christie administration appeared not to be deviating from the course set by its predecessor, Mr Lowe questioned whether this meant the 'borrowing and spending' approach set by the former FNM government was the correct one.

"They don't even hold the line, at a minimum, to show they're concerned," he added. "It's the typical double speak that goes on in political circles, and now as the deficit and national debt increase, sooner or later the piper has to be paid.

"My biggest fear is where this is going to end up. How much more stress can we put on the business community and individuals with taxation? They've [the Government] got to figure out a way to cut back on the size of the Government and spending. They shouldn't be looking at ways to increase the size of government. This is not a good time to do it."

In fairness to the Christie administration, is has only been in office for one month, and its 2012-2013 Budget was largely inherited from its predecessor, especially the ongoing capital commitments and salary/benefit increases already increased.

Still, Mr Lowe urged than when it came to the size of the Government, "sooner or later it has to be brought under control". He pointed to the difficulties the Bahamas has faced in achieving a balanced Budget during the 39 years it has been independent, noting that there had only been "one or two years" in which the Government had achieved a modest surplus on its recurrent account.

"I don't see any commitment to reducing spending," Mr Lowe re-emphasised to Tribune Business. "I just don't have any confidence. They're [politicians] not accountable to anyone. They just sign off on all the borrowing and spending resolutions when in Opposition, and when elected to office they don't know anything about that.

"We can only hope the realisation they don't have money to burn will bring them to the table to revise this in the mid-term Budget, and they'll get serious. We can only hope. The present is clearly unsustainable."

And Mr Lowe added: "I get the sense they [politicians] don't trust Bahamians to be able to grow themselves and develop industries. They somehow feel they have to plan everything for us, and we all know what central planning does. It destroys everything."

Tribune Business reported yesterday how the Government was borrowing $669.205 million to cover its fiscal needs for the 2012-2013 fiscal year, $512.205 million of that sum being required by the Treasury to cover the holes in the recurrent and capital accounts.

The latter represents a 132 per cent, or $291.569 million, increase on the Treasury's 2011-2012 borrowings, with the balance of the $669 million borrowings coming from infrastructure projects already on the go - most funded by the Inter-American Development Bank (IDB).

The Budget showed the Bahamas' national debt will breach the $5 billion mark before the end of the upcoming 2012-2013 fiscal year, with the debt-to-gross domestic product (GDP) ratio also surpassing the 60 per cent threshold.

The projected $550 million GFS deficit for the 2012-2013 fiscal year is equivalent to 6.5 per cent of Bahamian GDP. Together with the projected $504 million deficit for the 2011-2012 fiscal year, which is set to close on June 30, this means the Government will have to borrow more than $1 billion in just two years to cover both its recurrent and capital deficits.