The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former state minister for finance yesterday blasted the Government’s plan to increase its short-term debt limit three-fold as “alarming” and “too much”, suggesting to Tribune Business the move had resulted from this administration’s spending excesses.

Zhivargo Laing, who held this post during the 2007-2012 Ingraham administration, said major commitment initiated by the former government - such as the New Providence Road Improvement Project and Airport Gateway project - had been funded via long-term loans, meaning that short-term borrowings were unnecessary.

Suggesting that, as a result, the debt limit increase could not have been sparked by that, Mr Laing questioned the message it would send to the likes of the International Monetary Fund (IMF) and Wall Street credit rating agencies - all of whom have been urging the Bahamas to get a handle on its debt/deficit woes.

And, while agreeing that an increase in the short-term debt limit might be warranted, Mr Laing queried why it was not a “one-fold or two-fold increase”, pointing out that the Ingraham administration had avoided doing this despite having to contend with the recession’s peak.

The Government, via the Financial Administration and Audit Act amendments that have been tabled in Parliament, is moving to increase the short-term debt limit from 20 per cent of ordinary revenues - an average of several previous years’ incomes - to 60 per cent.

Rejecting the explanation that this was necessary to meet previous spending commitments, Mr Laing told Tribune Business: “What are these commitments impacting upon the Government’s cash flow that make the short-term circumstances so dire that it makes such a big increase necessary?”

With all major projects fully funded, he asked: “How does the Government’s short-term cash flow get impacted by that?

“Is it not being impacted by taking the whole Cabinet to Abaco, flying two ministers to California to award a plaque, having a very large Cabinet and two new Ministries?”

Adding that funding Urban Renewal and hiring consultants “here, there and everywhere” might also be factors, Mr Laing said: “These are the decisions impacting the Government’s cash flow.

“These are not commitments we made, which are funded for the most part. Where commitments are unnecessary or incorrect, they could cancel them, as we did.

“More questions need to be asked about this three-fold increase. Why not one-fold? Why not two-fold? Why so drastic?

“Before this year and last, when they [the PLP] said we ran a $504 million deficit, we never came to Parliament to get a three-fold increase. Why is it now so necessary? We went an entire term without an increase in the most dire of times,” Mr Laing added.

“Yes, maybe an increase is justified, but not that much. What does that short-term increase say to the IMF, Moody’s, Standard & Poor’s? If short-term borrowings are so drastic, are we saying the country’s fiscal health is in a bad way? What are we doing about it?”

To bring the Bahamas’ $4.5 billion national debt and deficit back into line, Mr Laing said tax/revenue increases and spending cuts, or a combination of both, were essentially unavoidable.

Addressing the Government, he said: “Your solution to a bad situation is to increase the short-term borrowing three-fold. That’s alarming, I’m sorry.”