The Tribune

The Government’s lack of investment in infrastructure will be “a bubble that pops” on the next administration, the Opposition’s finance spokesman warned yesterday, adding that this was contrary to the International Monetary Fund’s (IMF) advice.

K P Turnquest said the Christie administration’s decision to cut capital spending by 21.5 per cent, or $52 million, from 2015-2016 Budgetary estimates threatened to create “pent-up demand” for much needed investment in the Bahamas’ crumbling infrastructure.

And he warned that the move ran counter to the IMF’s advice in its recently-completed Article IV consultation, which was for the Government to restrain recurrent spending - especially public sector wage growth - and instead focus on “growth-enhancing infrastructure projects”.

“The lack of investment in infrastructure is going to cause a pent-up demand that’s going to be a bubble that pops on whoever the next government ends up being,” Mr Turnquest told Tribune Business.

The cut in 2015-2016 capital spending, from $242 million to $190 million, appears designed to keep the Government in line with its GFS deficit targets.

It came as the Christie administration is projecting to ‘overshoot’ its recurrent deficit (fixed costs) by $94 million, coming in at $145 million as opposed to the $51 million forecast in the Budget.

Arguing that roads, docks government buildings and “any number of areas” throughout the Bahamian archipelago were in need of overhaul, maintenance and repair, Mr Turnquest said Bahamas Power & Light (BPL) was a prime example of the Government’s failure to allocate sufficient capital investment.

“The IMF is saying they ought to be looking at projects that generate economic activity, but the reality is that they’ve not been investing in infrastructure,” he added of the Government.

“Just BPL is an issue by itself, and we’re going to have a serious problem if we don’t get that fixed. What they’ve been doing instead is throwing a lot of contingencies into the recurrent Budget.

“If you go to any agency, department, you’ll see contingencies ranging from $1 million to $2 million. Presumably they’re going to use this money to move around for emergencies.”

Mr Turnquest added yesterday that the Opposition was prevented during the closing of the Budget debate from examining the Government’s various revenue estimates and ‘line items’, which he said had consistently been “overstated” in past years.

“In the Budget ‘head-to-head’ questioning, we were not given the opportunity to scrutinise the revenue estimates of the Government under the guise that it has not been done before and is unusual,” he said.

“Despite requests from our side, they insisted on proceeding to the expenditure side. As a result, we were never given the opportunity to test the assumptions on the revenue side. This is particularly important, as expenditure estimates must be supported by adequate revenue and borrowing to cover them.

“In your article today you noted that the IDB has stated what we have always known to be true, that the Bahamas has consistently overstated its budgeted revenues and understated its expenditures, which has led to the ballooning deficit,” Mr Turnquest added.

“Against that backdrop, I specifically wanted to question the revenue estimates to determine their reasonableness against announced import duty cuts, debt forgiveness in Stamp taxes and real property taxes, and increased taxes from VAT and others.”

Mr Turnquest also questioned whether the definition of ‘turnover’ under the Business Licence Act included VAT, and if the Licence fee was being calculated on revenue and the 7.5 per cent levy - something that would amount to double taxation.