The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Chamber of Commerce’s chairman yesterday urged the next Government to “break the mindset of constant borrowing” and enable the Bahamas to finally get a grip on its recurring fiscal deficits.

Gowon Bowe told Tribune Business that whoever won the upcoming general election would “have to make the hard decisions” and live within its means to bring the $7 billion-plus national debt under control.

And he also warned that Bahamians would have to moderate their demands for expanded government, and ever-increasing public services, to ease the pressure on the Public Treasury.

Speaking after Tribune Business last week revealed that the Government had increased its full-year 2016-2017 spending estimates by a total $285 million in the mid-year Budget, Mr Bowe said the rise was one issue that MP’s “can certainly take to task”.

“They certainly can be critical of the spending of the Government, but what we should be looking for is how those opposing them will be better and different,” the Chamber chairman told Tribune Business.

“It’s a mindset to change. For a very long time we’ve had the mindset of borrowing and the flexibility to do so, and it really is for the next government to break that mindset of constant borrowing.

“We have to make the hard decisions, and say we can only spend what we can afford. That’s not an easy one with social parties always believing the Government should do things for them,” Mr Bowe continued.

“I don’t think there’s always a correlation by the general population that the more you demand, the more the Government will have to raise taxes to pay for that.”

Although the Government is blaming Hurricane Matthew for a $300 million hit that is projected to increase the 2016-2017 deficit by 250 per cent over initial projections to $350 million, Mr Bowe said greater expenditure also “comes from the demands of the population”.

“We have to be careful what we ask for, as we might just get it,” he warned. “It’s about education and accepting a moderate level of social services.

“For me, the political platform I’ll be interested in hearing is how they intend to do that, instead of all the pie in the sky-type promises coming out of every mouth as to what they’ll do.”

Mr Bowe said the Government will now be held accountable, not just locally but also by the International Monetary Fund (IMF) and credit rating agencies, for hitting its revised $350 million deficit target for the 2016-2017 full-year.

The new figure is just some $75 million higher than the half-year deficit of $275 million, and Mr Bowe warned against pre-election spending sprees that exacerbated - rather than contained - the ‘red ink’ on the Government’s income statement and balance sheet.

“That comes down to discipline,” he said of achieving the $350 million deficit target. “A large part of the increase was due to Hurricane Matthew, and they’re predicting to run a smaller deficit in the second half.

“To do so, it’s going to come down to keeping discipline on their [the Government’s] part to ensure that they do, and that they take it very seriously. While there’s an election going on, there’s a country going on after the election, so they have to take very prudent steps.”

Mr Bowe said the Prime Minister’s House of Assembly address on how Value-Added Tax (VAT) revenues were used had “candidly” identified where increased spending was incurred, such as the Royal Bahamas Defence Force’s (RBDF) re-equipping and on recruitment to expand the security services and border control personnel.

“It set out a very clear message,” Mr Bowe said. “It moved away from saying where the VAT money’s gone to how the VAT money has been allocated and spent.

“It was candidly saying this is where the expenditure increased.... The focus now is whether the monies were spent on what we want to see.”

Mr Christie last week said 40 per cent of the $1.14 billion in gross VAT revenues collected during the tax’s first two years had gone to narrowing the deficit, reducing the Government’s borrowing needs by $500 million over 2015-2016.

Of the remainder, he added that $344 million had replaced other taxes that had been abolished or decreased to make way for VAT’s arrival, and reduce the taxation burden on Bahamian.

The final $256 million, Mr Christie said, had financed additional spending deemed vital by the Government, such as upgrading the security services and financing social programmes.

Mr Bowe said the key figure was the net $756 million increase in the Government’s revenues over that two-year period as a result of VAT - gains that he now said needed to be consolidated by spending restraint.

“The main point is that we really need to contain expenditure, and be of the mindset that any additional revenue is surplus,” he told Tribune Business.

“The success of the revenue reforms and initiatives to ensure higher compliance are very visible in terms of what they’re collecting. I don’t think there’s any doubt as to the programme’s success.”

Mr Bowe added that the other two elements necessary for a successful fiscal consolidation programme - spending restraint and economic growth - “will take time to sort out”.

He urged the Government to focus on providing the enabling environment to facilitate growth by the private sector, rather than seeking to generate this itself.

“The Government should make sure it is not getting in the way of growth, as opposed to promoting growth,” he said.