The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas must decide whether it believes in the Government’s fiscal consolidation plan and “stay the course”, the Chamber’s chairman warning against the ‘junk’ downgrade becoming a “political football”.

Comparing the country’s fiscal position to that of a cruise liner attempting to go in reverse for the first time in almost 50 years, Gowon Bowe told politicians from all parties: “This is no time for idle talk”.

He urged them not to use Standard & Poor’s (S&P) recent action to “sell pipe dreams” to the Bahamian people, instead calling on all parties to put forward specific policy recommendations for changing the country’s economic and fiscal course during the upcoming election campaigns.

And rather than blame S&P’s downgrade as unwarranted, Mr Bowe said the Bahamas needed to put “its best foot forward” and show why it ought to regain ‘investment grade’ status “in the shortest possible time”.

The Chamber chairman told Tribune Business that the Bahamas’ current fiscal predicament, with a near-$7 billion national debt, annual deficits still around $300 million and debt-to-GDP ratio of 76 per cent, did not occur overnight.

“Our debt and deficit accumulation are like a cruise ship that has been moving forward since independence,” Mr Bowe told this newspaper.

“The Government’s fiscal consolidation plan has thrown the thrusters into reverse, and while we’re still building debt, the debt and deficit’s progress has slowed, and at some point in time it will stop.

“When it comes to a stop, and at what point in time it goes into reverse, is the question.”

Mr Bowe said that in S&P’s eyes,the Government “has to demonstrate it has reined in spending, achieved fiscal consolidation and, ultimately, a fiscal surplus”.

He emphasised, though, that the Bahamas needed to “stay the course” with its fiscal consolidation plan, and not be deterred or thrown off course by events such as the pre-Christmas downgrade to ‘junk’ status.

Likening the S&P move to “an outsider questioning whether the plan will be brought to fruition”, Mr Bowe explained: “We as a country have to determine, as citizens, that if we believe in this plan we don’t react to the rating agencies and stay the course.”

While Moody’s decision to maintain the Bahamas’ ‘investment grade’ rating, and S&P’s ‘stable’ outlook on the Bahamian economy, were positives, Mr Bowe said this nation needed to focus on better presenting and ‘selling’ itself to the international credit rating agencies when they visited Nassau.

“When we go through these type of rating assessments, it’s really how the country presents its case, and it has to do with empirical data,” he added.

“We have relied on anecdotes and oral communications, and while these are positive means, this has to be supported by the quality of empirical data.

“We have to demonstrate where spending is contained, where revenue has been enhanced; where we’ve had success with VAT, real property tax, and where empirical evidence says this is what has been collected,” Mr Bowe added.

“The rating agencies are used to 21st century financial reporting, and statistics supplied in a very short period of time. We don’t get the benefit of the doubt.

“We really have to work harder at presenting our best foot. Some of this is perception, some of this is reality. We ought ultimately not to criticise and denigrate the rating agencies. We really have to control our own fate, present our own position, and support it with evidence to show what we’ve achieved.”

The absence of statistical data, and hard numbers, is a common feature of much Bahamian financial and economic reporting, making it difficult for this nation to plan and show the rating agencies it is achieving what has been promised.

“We have to ensure we don’t give S&P an option to leave us at this rating, and demonstrate why we ought to be elevated in the shortest possible time,” Mr Bowe told Tribune Business.

“We have to make sure we have a plan we buy into, make sure it’s as strong as it can be, and make sure we’re part of the solution, not just Monday morning quarterbacking.”

He called on the Opposition parties, in particular, not to exploit S&P’s ‘junk’ downgrade for political gain, and instead propose specific, detailed policy solutions for extracting the Bahamas from its economic and fiscal problems.

“This is becoming a football of the politicians,” Mr Bowe said of the downgrade. “What I would say to the political directorate, meaning all those vying for the Government, is that this is not a time for idle talk. It needs to be followed with an action plan as to what they would do differently.”

He warned the political parties against pushing policies that were deliberately vague, and had “no credibility”.

“These are specific issues, and be honest and candid as to how you would address them over a period of time,” Mr Bowe told the parties. “Anyone promising to solve this in six months will be selling pipe dreams.

“While everyone may be looking for silver bullets, our focus should be on the long-term; how we do this over 25 years, and not necessarily short-term initiatives.”