The Tribune

By KHRISNA VIRGIL

Tribune Staff Reporter

kvirgil@tribunemedia.net

PRIME Minister Perry Christie’s overly optimistic outlook of the economy is predicated on the upcoming 2017 general election said Free National Movement Deputy Leader Peter Turnquest, as he castigated the government for painting a “fairy tale” picture, which is in direct conflict with this country’s current state.

Responding to Wall Street rating agency Moody’s recent announcement that it was placing The Bahamas on review for a potential downgrade, Mr Turnquest said the government was facing a “significant problem”.

He slammed the government for making “trumped up” projections to gain momentum and give the appearance that it had boosted the economy as campaign season approaches.

The new downgrade could come within the next two months, the agency has said.

Mr Turnquest said Bahamians must understand that another credit rating downgrade would affect the Bahamas’ ability to borrow money and the costs associated with it.

“I hope that the government now understands that we have a significant problem and that the things that the opposition has been saying is not pure politics,” Mr Turnquest said yesterday when The Tribune contacted him. “We are trying to help them to understand that what we are facing is a very serious and tenuous position. We ought to be careful about the policy decisions we make along with the measures we take to raise revenue and how we spend the revenue.”

He added: “Of course they always say we are playing politics, but now it is evident that the chickens are coming home to roost.

“The Moody’s review suggestion that there may be a downgrade is a very ominous warning because as you know the rating standard gives an understanding of the ability to borrow and the cost of borrowing.

“The government has been making these rosy predictions for years and we hardly ever met them. As a result the spending plan based on that revenue has been on the negative side while we are spending more than we are collecting.”

The East Grand Bahama MP also criticised the government’s 2016/2017 budget and said the opposition did not have the proper forum to properly pick apart its contents. He said the budget contained too many instances for money to be wasted.

“On the spending side there are significant sums allotted to contingencies or market developments, which is just a catch all. There is plenty, plenty fat in that budget and I would have liked to see the government justify that a little more because it is nothing wrong with them projecting the costs but anything outside of this ought to be outside of that budget, they should have been made to come back to Parliament if it became necessary.

“We have to look at all these uncontrolled amounts for them to just spend. It all seems to be very fairytale and the risks to the country are very serious. We have to tighten the belt.”

Moody’s announcement appears to have been sparked by Mr Christie’s affirmation of official Department of Statistics data showing that the Bahamian economy contracted by 1.7 per cent in 2015, following a 0.5 per cent shrink in 2014, according to Tribune Business.

This contrasted sharply with previous positive growth estimates by the government and the International Monetary Fund (IMF), prompting Moody’s to determine that the Bahamas is “unlikely” to hit its 1.5 per cent GDP growth potential in the short-term.

Apart from its shock at the revised negative growth numbers, Moody’s “review” also appears to have been sparked by concerns that the Christie administration’s consolidation plan has yet to arrest the growth in the $6.6 billion national debt and related ratios.

It pointed out that “debt accumulation” has continued to increase, with the government’s direct debt-to-GDP ratio growing by five percentage points in two years to hit 65.2 per cent at the June 30 end to the 2015-2016 fiscal year.

And Moody’s also appears concerned that the Christie administration consistently fails to hit its budget projections, and the adequacy and effectiveness of its policy responses to the Bahamas’ problems.

“The decision to place the ratings on review was prompted by the continuing rise in risks to the country’s medium-term economic prospects and to its fiscal strength, notwithstanding the government’s ongoing fiscal consolidation programme,” Moody’s said on Friday.

“The review will allow Moody’s to assess the likelihood that economic growth prospects will improve, debt metrics will stabilise and government policy will effectively address its macroeconomic and fiscal challenges.”

Of particular concern to the Bahamas and its economy, Moody’s warned that any potential downgrade could be “by one notch or more.” It currently has a ‘Baa2’ rating on this nation, meaning the Bahamas is two notches away from being cut to so-called “junk” status - a position where it will lose its existing investment grade status.

Moody’s announcement on Friday brings it more into line with Standard & Poor’s (S&P), which presently has the Bahamas just one notch above “junk status.” This thus raises the possibility that the Bahamas could be downgraded to “junk” by both international credit rating agencies almost simultaneously.