The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s plan to spend more than $1.2 billion over the next three fiscal years on servicing the Bahamas’ national debt was yesterday backed by a top private sector executive, who warned: “There’s no free ride.”

Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, told Tribune Business it was actually a “positive sign” that so much money will be allocated to debt servicing (interest) and principal repayment.

Tribune Business can reveal that for each of the next three years until 2017-2018, the Government will be spending more than $400 million in taxpayer funds to meet the Bahamas’ obligations to local and international creditors.

Some $418.5 million has been allocated for this purpose in 2015-2016, with $404.442 million and $438.061 million earmarked to deal with the $6.2 billion national debt over the two successive fiscal periods.

Tribune Business calculations show that $776.397 million will go towards just meeting interest payments over that time, while the remaining $484.654 million will return due principal payments to investors as bond issues and the like mature.

All told, the Bahamas will spend a total $1.26 billion on debt-related payments in the next three fiscal years, illustrating both the size of the ‘hole’ that the Government is trying to dig itself out of, and what that money could otherwise finance in terms of public services for Bahamians.

Mr Bowe, though, emphasised that accelerated debt payments now would reduce the Bahamas’ interest costs over the long-term, ultimately benefiting taxpayers.

“They’ve earmarked money from the VAT to ensure they’re bringing that down,” he told Tribune Business of the Government’s debt. “The long-term impact is bringing down interest costs.

“We’re not like the US; we have to pay it back. There is no free ride here.”

Tribune Business’s calculations show that, if its $182.39 million projection for 2015-2016 holds true, the Christie administration will have borrowed $1.729 billion during its first four years in office.

This puts it in the same category as the borrowings by the former Ingraham administration, yet the forecast for the next fiscal period does represent a major improvement - even it is more ‘red ink’.

The 2015-2016 projected borrowing is a 70 per cent improvement on the $620.945 million borrowed in 2012-2013, the high point of government debt financing. It is also considerably better than the $582.543 million borrowed in 2013-2014.

The Bahamas’ debt payments would normally be the largest spending category in the Government’s annual Budget. However, the 2015-2016 version has been reconfigured so that these are no longer broken out, but instead included within the Treasury Department’s spending.

The reclassification of $154 million in previous capital spending into the recurrent category also means that the subsidies granted to the likes of Bahamasair are harder to find.

However, while the national flag carrier’s 2015-2016 subsidy is being held flat at $14.85 million, the taxpayer monies going to the Water & Sewerage Corporation are increasing from $20 million to $24 million.

And with the Broadcasting Corporation of the Bahamas (ZNS) subsidy relatively flat, too, at $6.93 million, between them the three loss-makers are set to again cost hard-pressed Bahamian taxpayers close to a combined $47 million.

Elsewhere, the $264 million that the Government is allocating National Health Insurance (NHI) seems to consist of the $60 million extra granted to the Ministry of Health to prepare for its implementation, plus the normal Public Hospitals Authority (PHA).

Mr Bowe, meanwhile, said he wanted to assess whether the Budget numbers “bear out the strategic objectives” announced in the Prime Minister’s speech.

He added that the Budget numbers were relatively “meaningless” until the Government switched from cash-based to accrual accounting, as it was impossible to tell whether all bills received during the fiscal period had been paid or deferred to another Budget.

“It’s more important to see where the reductions came from, and where they will come from going forward,” Mr Bowe said, adding that the $110 million collected by the Government from Value-Added Tax’s (VAT) first three months was a solid achievement and slightly ahead of his own expectations.

“There are a lot of positive elements that were communicated, and if it comes to fruition a lot of people will feel the recovery,” Mr Bowe said of the 2015-2016 Budget. “But, in reality, we have to make sure we don’t get ahead of ourselves.”

He queried whether the revenue improvements, and those projected, had come from economic growth or better administration.

“Ultimately, we need both of those to get back on the right track and get out of the hole we’re in,” Mr Bowe told Tribune Business, as he called on the Government to ensure its spending restraint withstands “the test of time”.