The Tribune

By LAMECH JOHNSON

Tribune Staff Reporter

ljohnson@tribunemedia.net

FISCAL discipline is a key pillar of the Free National Movement’s “Economic Action Plan” to rescue the country’s economy if it regains the government in the upcoming general election.

As part of its fiscal initiatives, the party also promises a reduction in real property tax to pensioners who have owned their homes for at least 25 years and grant value added tax “credits” to businesses who acquire certain locally sourced goods and services.

The political party published its 2017 Manifesto over the weekend on its website, ourfnm.org, in which it stressed that the country’s current economic state could not continue to solely rely on tourism, banking and foreign direct investment to sustain the nation and its economy, notwithstanding decades of prior success in those areas.

The party, led by Dr Hubert Minnis, has assured that it will, if elected, “uncap our human resources as growers and stabilisers of the economy,” and “unleash the potential ingenuity of the Bahamian entrepreneur” to stimulate, expand and sustain both themselves and the economy.

“Underpinning our economic goals will be the need to increase and sustain economic growth,” the document notes. “Therefore, your FNM government’s Economic Action Plan will employ a multi-pronged approach to achieve the following goal: promote fiscal discipline, stimulate Bahamian ownership, create jobs and reduce poverty, and progress public sector reform to create an efficient public service committed to improving the ease of doing business with the government.

“The fiscal management of the Bahamas has been less than desirable as evidenced by an unsustainable ballooning national debt and multiple sovereign credit rating downgrades, despite rising taxes,” the document states, adding that “if left unchecked, this situation could doom future generations to standard of living well below what is currently enjoyed in our Bahamas.”

Royal Bank of Canada’s (RBC) Chief Regional Economist Marla Dukharan last week accused the Bahamas of squandering the Caribbean’s “most successful value added tax” implementation by failing to act in a fiscally prudent manner.

Addressing the Royal Fidelity’s Economic Business Outlook (EBO) conference, she called for the Bahamas to implement “fiscal rules” to cap government spending and establish a debt ceiling and also warned that the government’s fiscal profligacy could ultimately impose pressure on the Bahamian dollar, and its one:one peg with its US counterpart.

There have been repeated calls for a Fiscal Responsibility Act to force the government to be more accountable and transparent in the management of the public finances.

This would require it to return to Parliament for approval to raise more money if it has to exceed the limits approved in the annual budget.

However, “fiscal rules” would impose even more stringent discipline on the government, as they would set spending and debt-to-GDP ratio limits that it cannot breach.

While many believe that the Bahamas requires such a strong dose of fiscal medicine, some observers believe that ‘hard and fast’ rules could create difficulties in an emergency - such as the need for urgent response in the aftermath of storms such as Hurricane Matthew.

The government is projecting that the GFS fiscal deficit will be eliminated by the 2018-2019 budget year, but in the meantime, notwithstanding VAT’s implementation, which has brought in almost $ 1 billion, the national debt has continued to grow - albeit at a slower pace in recent years.

At end-June 2016, Central Bank data pegged it at $6.695 billion or 74.9 per cent of GDP - a ratio in excess of the so-called 70 per cent debt-to-GDP ‘danger threshold’ established by the International Monetary Fund (IMF).

The Central Bank of the Bahamas’ report on December’s monthly economic developments, released last Monday, disclosed that the fiscal deficit was up $67.7 million year-over-year due to a combination of reduced revenues and spending increases.

It added that VAT revenues for the four months to end-October 2016 were off 6.7 per cent, or $15.4 million, at $214.1 million due to tough prior year comparatives, which had been boosted by “ significant early payments”.

The FNM’s 2017 Manifesto says the party will: “Review/improve the budgeting process, provide incentives to encourage efficient revenue collection of all taxes, reduce real property tax to pensioners who would have attained the age of 65 plus and have owned and occupied their homes for a minimum of 25 years.”

The party also said it would “outsource the maintenance and repair of government office furniture, especially in schools to reduce annual recurrent expenditure,” create employee public private sector partnerships to finance capital projects that are economic in nature and amend the Business Licence Act to ensure that businesses are not unduly disinsentivised by a burdensome tax on gross revenue.

The FNM said it would also place emphasis on growing the country’s middle class, and small and medium sized businesses through legislation and amend relevant financial legislation to “streamline and standardize the procedure for opening domestic bank accounts.”

In addition to strengthening the Fresh Start/Jump Start Initiative, the FNM said it will grant “VAT credits to companies acquiring locally produced goods and services in the arts, entertainment, culture, agriculture, fisheries and manufacturing industries.”

“A sound infrastructure is critical to synergizing all aspects of society into a well-function economy. A government’s investment in infrastructural upgrades can create, drive and sustain employment by generating jobs in many sectors, including construction and manufacturing, while also addressing socio-economic deficiencies in our Bahamas.

“Your next FNM government, in collaboration with public/private partnerships, will invest in both new as well as in the upgrade of existing infrastructure throughout the country to bring quality infrastructure to under-served communities to prepare them for development and expansion.

The prospective government further proposes to promote renewable energy and energy conservation, inter-island transportation and the upgrading and modernizing of Family Island airports, docks and marinas and information and communications based technology infrastructure “to create an enhanced knowledge-based economy,” the document notes.