The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday urged to “take off the blinders” and curb its spending, with Opposition politicians describing the fiscal deficit’s 75 per cent expansion as “eerily similar” to the prior year’s performance.

K P Turnquest told Tribune Business that the Government appeared to be oblivious to the implications of the Bahamas’ ‘junk’ credit rating, given that it seemed to be introducing new social programmes “almost every day”.

He added that the continued year-over-year increases in the fiscal deficit threaten “to saddle the Bahamian people with an unsustainable debt” burden, and proved Value-Added Tax (VAT) was merely allowing the Government to “ratchet up” its spending.

Mr Turnquest spoke out after Tribune Business revealed the contents of the Central Bank’s December 2016 economic developments report, which showed the fiscal deficit for the first four months of the 2016-2017 Budget year had grown by 75.3 per cent or $67.7 million compared to the prior year.

The $157.5 million deficit at end-October 2016 was over 50 per cent higher than the Christie administration’s full-year forecast of $100 million, meaning the Government has blown past its Budget projection with just one-third of the current fiscal year gone.

“This is eerily similar to last year, when we were faced with the same situation, the deficit having blown past the full-year projection,” Mr Turnquest told Tribune Business.

The 2015-2016 mid-year Budget showed that the fiscal deficit for the first six months, of around $157 million, was higher than the full-year forecast of $141 million - a situation that has been repeated this time around, but in four rather than six months.

Mr Turnquest recalled how the Christie administration dismissed Opposition and private sector concerns then, arguing that the bulk of its revenue inflows - via Business Licenses and real property tax - would be collected in the fiscal year’s second half, enabling it to run a ‘balanced Budget’ for those six months.

However, subsequent International Monetary Fund (IMF) estimates have suggested the 2015-2016 deficit came in between $250-$300 million, potentially double what the Government projected.

Final figures for 2015-2016 have yet to be revealed, but Mr Turnquest recalled: “The Government was telling us we didn’t know what we were talking about then, but the end of year results proved we were on target in terms of government being behind on revenues and over in expenditure.

“Now, here we are again, finding the same situation with expenditure out of control and revenue flagging. While some of that may be due to the hurricane, I don’t believe all of it is due to that.

“The economy is sluggish, has not been growing and is on pace for another year of negative growth. Meantime, the Government, to use their words, have been spending like drunken sailors. Every day they seem to be starting a new social programme and hiring new staff.”

The Central Bank publication could not have come at a worse time for the Christie administration, and especially Michael Halkitis, minister of state for finance, who is already under intense scrutiny and pressure as a result of his ‘Where the VAT money gone’ address at last week’s PLP convention.

The data provides further evidence that the $1 billion-plus VAT revenues are financing increased spending, borrowing and debt for the Christie administration, rather than denting the annual fiscal deficit and rising national debt as promised.

“I think we have to be very, very concerned,” Mr Turnquest told Tribune Business of the latest fiscal figures. “We’ve been downgraded to ‘junk’ status, but it appears as if everyone in government has blinders on as to what that means.

“If we carry on the path we’re going on.... Every day there seems to be a new social programme, and they keep on spending and borrowing all over the place like nothing’s wrong. It’s unacceptable.

“The Government has their blinders on, and seem incapable of understanding how serious the situation is that we’re in, and they’ve failed to rein in this expenditure and programmes such that the Bahamian people are not saddled with unsustainable debt. It’s just amazing.”

As for what the Central Bank report says about ‘Where the VAT money gone’, Mr Turnquest added: “It’s telling is that it went to pay recurrent expenditure rather than fulfill the purpose it was implemented for. All they’ve done is ratchet up their expenditure and continue to overspend.”

While some of the projects identified by Mr Halkitis in his convention speech, such as the $232 million Royal Bahamas Defence Force re-equipping, and investment in education and healthy, are potentially worthy and justifiable, moves such as the net 4,500 increase in the public service’s size show the size of government has continued to increase.

Branville McCartney, the Democratic National Alliance’s leader, yesterday told Tribune Business that the Central Bank data exposed the Minister’s ‘Where the VAT money gone’ address as “a big sham”.

Arguing that Mr Halkitis and the Government would have already known the statistics in advance, Mr McCartney said: “It’s really again a slap in the face of Bahamians.

“I think it tells us that certainly what was said by this government as to reducing the deficit by way of VAT has not happened.

“If the monies from VAT were applied they way they ought to have been, we would not be in this position. The funds from VAT have been more than expected, and the deficit hasn’t come down while the national debt has increased,” the DNA leader continued.

“We might as well have not had VAT. What was the use in taxing the Bahamian people more?”

Tribune Business previously calculated that the Christie administration has already added more to the national debt, around $1.7-$18 billion, than its FNM predecessor did in five years.

Mr McCartney said the next government would have to “grab the bull by the horns” when it came to the Bahamas’s fiscal position, which he branded as “the worst financial state the country has been in”.

“This tells us the new administration is going to have a lot of work on its hands,” the DNA leader added. “This government is going to leave the country in the worst financial state it has been in in recent years.

“That tells us the next administration must grab the bull by the horns to reduce debt, get people back to work and ensure our credit rating improves. This government cannot be allowed to get back in to cause us to go back down this road.”