The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A well-known fiscal hawk yesterday said it was “beyond the pale” for the Bahamian political and business elite to brush off the Government’s financial woes as a joke.

Rick Lowe, an executive with the Nassau Institute think-tank, said attempts to portray the controversial ‘Where the VAT money gone’ speech by Michael Halkitis as mere entertainment for PLP supporters “makes a mockery” of how serious the situation is.

He added that this was “bound to cause concern” among the credit rating agencies that have downgraded the Bahamas’ creditworthiness to ‘junk’ status, as well as this nation’s external creditors and potential investors.

“It’s time for some level-headed discussion,” Mr Lowe told Tribune Business. “To continue to make a mockery of it all... Bahamian taxpayers didn’t ask to be in this mess.

“It’s disappointing when people so far above my pay grade say we’re just joking about this. It’s beyond the pale. When do we grab this bull by the horns and say enough is enough?”

Mr Lowe did not state who he was referring to, but his remarks were likely aimed at Sir Franklyn Wilson, after the businessman on Monday told Tribune Business that Mr Halkitis’s VAT address should be treated like all other convention speeches - as “entertainment”, rather than a serious discussion of national affairs.

“I don’t listen to convention speeches to try and understand what is going on,” Sir Franklyn told Tribune Business.

“I go to a convention to be entertained, not to get information about what is really happening. You get all the dancing, music and singing....You don’t go to a convention to get serious information.”

Mr Lowe, though, said that treating the Bahamas’ continuing fiscal crisis as a joke was “kind of depressing”.

And he criticised former minister of state for finance, James Smith, for “dismissing out of hand” the concerns expressed by Royal Bank of Canada’s (RBC) top regional economist, Marla Dukharan, that the Bahamas is squandering its VAT revenues.

Mr Lowe added: “It’s got to cause concern for our creditors. How long do we defend the indefensible before we reach desperate straits, and something has to be done? Do we want to reach the point of desperation?

“That’s my concern. It’s frustrating when serious matters like this are brushed off as just another day at the office. Meanwhile, the Government keeps on jacking up taxes and fees that people can ill-afford to pay these days.

“It’s not a good business environment, it’s not a good personal environment. There are too many indicators headed in the wrong direction to cast this in the light that we don’t have to be serious about it.”

Mr Lowe and the Nassau Institute were sounding the alarm bells over the Bahamas’ national debt some 15 years ago when it breached the $3 billion mark, due to persistent fiscal deficits that remain unchecked to this day.

The problem was only exacerbated as a result of the 2008-2009 recession, when the Bahamian economy and government finances hit a wall they were ill-prepared to climb, resulting in higher deficits that peaked at more than $500 million in 2012-2013 and 2013-2014.

Currently, the Bahamas’ debt-to-GDP ratio stands at 76 per cent, above the IMF’s 70 per cent ‘danger ratio’, with fiscal deficits double the Government’s Budget projections and the national debt creeping ever closer to the $7 billion mark - albeit at a slower rate than previously.

In an online posting entitled ‘This is no joking matter’, Mr Lowe wrote: “Taxpayers in the Bahamas did not place the country in this predicament, governments did, and it’s time the Bahamas government got a handle on fiscal matters...

“In spite of the ruling party’s recent entertainment show (convention), and their weak assurances that all is well, along comes the Central Bank of the Bahamas’ Monthly Economic and Financial Developments report for December 2016, published January 30, 2017, that, shall we say, puts a damper on their rhetoric.”

Tribune Business revealed that the Central Bank’s report showed the Government’s fiscal deficit for the first four months of 2016-2017 increased by 75.3 per cent to $157.5 million, blowing past the full-year target of $100 million with two-thirds of the Budget period still to go.

It disclosed that the fiscal deficit was up $67.7 million year-over-year due to a combination of reduced revenues and spending increases.

And Value-Added Tax (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”.

“Even long-time PLP supporter, Sir Franklyn Wilson, suggested to Tribune Business yesterday that we should not take the Minister of State for Finance [Mr Halkitis] seriously with his pronouncements about VAT spending,” Mr Lowe wrote.

“He was making a feeble attempt to support the junior minister as a result of a landslide of negative responses to his convention speech claiming the VAT money went toward projects that the Government borrowed money for or has budgeted for them for future spending.”