The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government must “sell our story” correctly to avoid the Bahamas being downgraded to ‘junk’ status, the Chamber’s chairman warning yesterday that the fiscal numbers were not enough to prevent this by themselves.

Gowon Bowe told Tribune Business that the Christie administration needed to conclusively show Standard & Poor’s (S&P) that the Bahamian economy had “not gone into a tailspin” as a result of Baha Mar, and was stable enough to warrant this nation maintaining its current investment grade rating.

Tribune Business previously revealed how the Government plans to meet with S&P in the wake of its upcoming mid-year Budget, in a bid to stave off a further downgrade of the Bahamas’ creditworthiness.

The Christie administration will focus on the achievement of its initial fiscal consolidation targets to make the case, but Mr Bowe said it needed to make a much broader argument to succeed.

Asked whether the mid-year Budget numbers would be sufficient to give S&P pause for thought, Mr Bowe told Tribune Business: “Whilst persons may be surprised to see may said this, I say ‘no’.

“In and of itself, it’s not enough and never would have been. Those numbers are already known by S&P and the others [rating agencies and IMF].”

While the Government was clearly hitting its Value-Added Tax (VAT) and wider revenue goals, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman said S&P was likely to also be interested in whether the other elements of its medium-term fiscal consolidation plan were on course.

“They’ll say: ‘You’ve achieved a revenue increase, but have you achieved the other elements, spending controls and deficit reduction?” Mr Bowe explained.

“It will also be important to demonstrate that this is not an aberration, a one-time effort, but that it’s going to be a very solid and sustained process.”

The Government’s fiscal consolidation plan has four elements which, apart from increased revenues generated by the VAT reform, include spending restraint; better administration of existing taxes; and economic growth.

The latter three remain ‘a work in progress’, particularly with economic growth rates stuck between 1-2 per cent, while Central Bank figures released last week show that government spending for the first five months of the 2015-2016 fiscal year rose by $65 million or 8.1 per cent to $869.6 million.

“It is one piece of the puzzle,” Mr Bowe said of VAT and revenue reform, “and we have to make sure we demonstrate to outside parties rating us that this is one element achieved, and all the others are in tow.”

Michael Halkitis, minister of state for finance, previously told Tribune Business that the Government intends “to convince” S&P that its fiscal consolidation achievements to-date more than offset the Baha Mar fallout.

“Our view is that the bottom line should be the stabilisation of the public finances. Even with the delay at Baha Mar, if we manage the finances, that should go a long way,” Mr Halkitis told Tribune Business.

“At the mid-year Budget we will meet with them, and make a presentation indicating that we are on target. We think that should be sufficient. We have to convince them: Look, man, even with that [Baha Mar] we’re still on target.”

The Government’s forthcoming meeting with S&P is another indication of its concern over a further rating downgrade that cost the Bahamas its ‘investment grade’ status.

S&P downgraded the Bahamas last August, and subsequently warned there had been no change to its position that “there is a greater than one-in-three likelihood” that it will downgrade the Bahamas’ again within the next six months to two years - a period that begins next month.

Mr Bowe, though, said the Bahamian economy’s resilience over the Baha Mar debacle should provide enough justification for S&P maintaining its current rating, despite the 2,000 lay-offs and multi-million dollar sum owed to local creditors.

But he warned that much depended on the Government’s “sales pitch” to S&P, and whether it could make a satisfactory case to the rating agency that went beyond the pure fiscal numbers.

“My personal view is ‘no’,” Mr Bowe told Tribune Business, when asked whether a downgrade to ‘junk’ status was warranted. “I believe our economy is stable enough at this time to continue holding us where they’ve put us.”

While agreeing that the Bahamas needed to tackle structural problems such as its high long-term unemployment rate, and deficit and national debt problems, he added: “We’ve been able to weather some of the storms.

“We’ve continued to survive some of the resort projects that haven’t panned out, we haven’t gone into a tailspin, and we’re a strong economy, although we’ve not recovered to the point we’d like.

“In reality, the rest of the Bahamian economy is doing it’s part to ensure we protect the rating as best we can,” Mr Bowe continued.

“We certainly don’t want any anxious moves by the rating agencies, but we are relying on Government officials to demonstrate the case for our rating to stabilise over a period of time.

“It’s what I call the sales pitch, and making sure we put our best foot forward, and best characters, to sell our story.”