The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas can only have “limited confidence” in the accuracy of the Government’s Budget numbers, the Chamber chairman is warning, because they remain ‘provisional’ for so long.

Gowon Bowe told Tribune Business that it typically took two to three years before any fiscal year’s performance was finalised, with the figures subject to considerable gyrations during that period.

A prime example is the 2014-2015 fiscal year, whose GFS deficit has undergone a considerable $184 million ‘negative’ revision during the space of 12 months (see other article on Page 1B).

The Government in its May 2015 Budget address, which occurred one month before fiscal year-end, that it was on track to achieve a $197 million deficit for the 12-month period - a sum equivalent to 2.3 per cent of gross domestic product (GDP).

But, in his 2016-2017 Budget communication, Prime Minister Perry Christie disclosed that the GFS deficit for 2014-2015 had been subject to a major upward revision.

The Government is now projecting it will come in at $381 million, equivalent to 4.4 per cent of GDP, and almost $100 million higher than the 2014-2015 target of $286 million or 3.2 per cent of GDP.

Such major swings threaten to undermine confidence in the accuracy of the Government’s fiscal projections and outcomes, and suggest that fiscal consolidation progress is not happening as quickly as it would like.

“One of the elements we typically see, and one which is always concerning, is that the prior year numbers remain provisional for an extended period of time,” Mr Bowe told Tribune Business in response.

“There’s constant movement in those numbers, which limits confidence in the numbers being presented.”

Mr Bowe acknowledged that figures related to fiscal/Budget performance were likely to remain preliminary, or provisional, for several months while they were checked, but added that the process should not take two-three years.

He constrasted the Government’s finances with those of businesses and households, who knew what their estimated budgets were and then verified them “in a short period” of time.

“We should not be in a situation where we are consistently running provisional numbers for two to three years,” Mr Bowe told Tribune Business of the Government’s finances.

He suggested this could be tied to the Government’s inability to obtain an unqualified audit of its accounts from the Auditor-General, whose reports frequently complain that the financial information presented cannot be relied upon.

“From that perspective, there needs to be hard and fast numbers, like any business and investment,” the Chamber chairman said, calling on the Government to better explain changes to its fiscal numbers.

“There has to be detailed analysis of what changed, why it changed it, and the presentation of complete numbers, so that people know if there were errors or omissions, not acts of misrepresentation or fraud,” he said.

“The point you raise [with the 2014-2015 numbers] is not so much the $184 million swing, but when are we ever able to make conclusive statements on the Budget numbers?”

The Chamber chairman added that the “most worrisome” part was not knowing what had caused substantial revisions to Budget forecasts and estimates.

Mr Bowe said successive administrations had tended to “beat their chest” whenever they exceeded Budget projections, but went “quiet and coy” when the news was more negative.

“The positive and negative numbers are not something we can rely on,” he emphasised. “The Budget is just an indication of trajectory. It’s not an elegant presentation of performance to shareholders.

“I’m not sure I’ve ever seen a Budget presented in the last 10 years where the numbers have not been changed. The previous years have always been subject to some modification.

“When you ask how much confidence I have, if anyone asked: ‘Are those numbers you can make decisions on’, you’d be a bit optimistic in that regard,” Mr Bowe continued.

“We have to be careful about making bold predictions based on Budget figures that, in a year or two’s time, might not be reality.”

The Chamber chief added that Budget communications were typically presented when there was still a month left in the current fiscal year, meaning that projections regarding performance were based on estimates and assumptions - not finalised figures.

Given the consistent revisions to the Government’s financial figures, Mr Bowe said the Bahamas needed to focus on the absolute level of national debt and deficits, rather than ratios such as debt-to-GDP.

And he also warned the Government against “praying for GDP growth” to keep its fiscal ratios in check, noting that none of the growth projections since the 2008-2009 recession had ever materialised.

Mr Bowe added that GDP growth estimates were also not a reliable predictor of Government revenues, suggesting that better determinants were an increase in the number of tax-paying businesses or new and increased taxes.