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Bahamas' 'credibility' hangs on projection revision explanation

As of Friday, June 9, 2017

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas' fiscal "credibility" depends on it providing a convincing explanation for why the 2016-2017 fiscal estimates changed so drastically in just two months, the Chamber of Commerce's chairman said yesterday.

Gowon Bowe told Tribune Business that while the original $100 million deficit projection had been long blown by Hurricane Matthew, international credit rating agencies and investors would want to understand why the estimate had now had increased to $500 million when March's mid-year Budget pegged it at $350 million.

Underscoring that greater economic growth was the solution to the Bahamas' fiscal and other problems, Mr Bowe said it was "incumbent" on the Minnis administration to demonstrate it has a sound recovery plan and the ability to execute it.

"When they come, they won't be distinguishing between one administration and the next," he told Tribune Business of Moody's and Standard & Poor's (S&P) summer visits to the Bahamas. "It will be incumbent on this government to develop policies and initiatives to meet these new Budget projections.

"As a country, we always have to put our best foot forward and give an accurate and complete picture" of the Bahamas' current and short-term fiscal position based on empirical data and statistics.

Mr Bowe said the real analysis needed to determine why 2016-2017's projected fiscal deficit had increased to $500 million, compared to the $350 million forecast given by the Christie administration in its mid-year Budget presentation at end-March.

Pointing out that the Ministry of Finance officials working on the Budget had not changed from the previous administration, he added: "For the sake of our credibility, and that of the technical staff, there has to be a reconciliation between what was presented in March and what was presented as the outturn now."

The Government has blamed the expanded deficit, and need to put in place an emergency $400 million borrowing facility, on a combination of the former administration's pre-election spending and a payments "backlog" stemming from this and Hurricane Matthew.

The Minnis administration's total $722 million borrowing requirement for this and the 2017-2018 fiscal year, and the massive revisions to the Bahamas' fiscal consolidation path, stunned Moody's.

As revealed by Tribune Business on Monday, it warned the international capital markets that the Bahamas' fiscal position was "much weaker" than expected as a result of the "wider, serial deficits" the Government was forecast to continue incurring.

However, Moody's has held off from following Standard & Poor's(S&P) in downgrading the Bahamas' sovereign creditworthiness to 'junk', indicating it is seeking more data on this nation's projected GDP growth and an explanation for the fiscal changes.

Moody's reaction was yesterday cited by Chester Cooper, the PLP MP for Exuma, to argue that the Budget communication by K P Turnquest, minister of finance, was the "wrong speech, at the wrong time, at the wrong place".

He suggested that its contents, especially the $722 million borrowing projection, would only serve to frighten the rating agencies, private sector and investors "at home and abroad" - thereby further harming the Bahamas' prospects for securing the GDP growth and jobs that it so desperately needs.

"I wonder whether this is the speech we will take with us when we go to defend the international rating of the Bahamas," Mr Cooper, a former Chamber of Commerce chairman, asked. "Is this the one that we will take to the debt market? You don't tell me you broke, you busted, you unemployed and that the 'cupboard is bare', then ask me to borrow $722 million."

Mr Turnquest said that besides covering next year's projected $322 million deficit, the Government also required an extra $400 million to cover a payments "backlog" and unfunded spending commitments left behind by the previous Christie administration.

He added that the Bahamas' "financial reputation" would be in peril should the Government fail to act, given that lenders were demanding it provide $70 million in extra collateral by the first week of July due to the earlier S&P downgrade placing the country on the wrong side of a derivatives transaction related to its borrowing.

But with deficits of $228 million and $106 million projected for the 2018-2019 and 2019-2020 fiscal years, respectively, the Minnis administration - if it stays true to forecasts - will end up adding $1.056 billion to the Bahamas' national debt within its first three years in office.

Mr Bowe, meanwhile, urged the Government to focus on creating an enabling environment that will foster higher GDP growth than the 1-2 per cent forecast for the Bahamas.

"We know that we have to turn economic growth around, and once we do that a rising tide will float all boats," he told Tribune Business. "A lot of challenges relate to depressed economic performance.

"A lot of government policies have to be geared to the economic spurring of activity, money circulating and that becoming a self-fulfilling cycle."

Comments

killemwitdakno 7 years, 6 months ago

Damn straight.

The finance minister was there all last term, he should have had a clue. They should have had foresight on what they'd have to do.

I can se them over borrowing early since they probably expect borrowing restricting but why make the outlook grim?

ThisIsOurs 7 years, 6 months ago

"Gowon Bowe told Tribune Business that while the original $100 million deficit projection had been long blown by Hurricane Matthew"

STOP BLAMING MATTHEW FOR THIS ISH MR BOWE. YOU OF ALL PEOPLE KNOW BETTER.

OUR ECONOMY WAS IN THE TOILETS WAAAAAAYYY BEFORE OCTOBER 2016. WE HAD A WARNING FROM MOODYS I BELIEVE IN SEPTEMBER WHEN MATTHEW WAS STILL TRYING TO FIGURE OUT IF HE WANTED TO MAKE THE TRIP.

YOU WANT US TO BELIEVE THAT THE GOVERNMENT BLEW 500 MILLION "AFTER" MATTHEW. AND THEY WERE FISCALLY PRUDENT THE 4.5 YEARS BEFORE THAT???

I HAD GREAT HOPES YOU WOULD BE PM ONE DAY, YOU HAVE SORELY DISAPPOINTED ME BY ALIGNING YOURSELF WITH THAT CORRUPT LICENTIOUS TIEFIN VISIONLESS CREW

Porcupine 7 years, 6 months ago

Let's face it. Mr. Bowe, along with all the other financial gurus, have been trained and educated to think a particular way. They are heralded and rewarded for thinking this way. However, even if you read the papers poorly, you would begin to understand that these people are the very ones who have had the reins in the business world globally. There is a play book. The Bahamas is already fiscally a basket case, as they say. We are screwed as a nation. The interest alone on our debt is unpayable, unsustainable. Do you hear that? We are already above the 70% debt to GDP ratio that is said to be the threshold for a countries ability to pay back. That is if the country acts prudently from here on out. See that happening here? I don't. Mr. Bowe acts surprised that our politicians were not straight up with the truth about our finances. Have they ever been? The budget is straight forward simple math. It doesn't require a genius to work out. If, and only if, you have the real numbers. We have a culture of corruption in this country, from the top to the bottom. That is the reality. Until we are able to inject some honesty into the equation, nothing can change. Nothing.

Porcupine 7 years, 6 months ago

There are a few things that could be done that would help the situation Here in The Bahamas if it truly is The People's Time. 1. Follow the results of the democratic referendum on web shops. Make it illegal for a web shop in The Bahamas to accept one dollar starting tomorrow. If the web shop owners persist, throw them in jail. Period. This will allow hundreds of millions of dollars a year for the real economy, instead of into the pockets of the sleazeballs. Yes, hundreds of millions of dollars. Do not underestimate the damage to the real economy by these web shops. It is not just the loss of hard dollars. It is the loss of taxes. It is the empowering of the web shop owners, the last people we should be empowering. They are already unjustly wealthy. It is the damage to our democracy, as this money is funneled into politics. And, do not underestimate the damage it does to our legitimate banking sector. I am tired of listening to this idea that Bahamians should have a choice in this matter. We already spoke. 2. Make taking kick backs for contracts by MPs punishable by capital punishment. We are quite willing to hang someone for taking one life. Why not the killing of an entire country? 3. Present the names of all those who owe Bank of Bahamas for their crony unpaid loans. Take their assets, even if it leaves them penniless, and start getting back some of OUR money. 4. Begin investigations of all the money missing from the various government departments. Let the chips fall where they may. Call in Scotland Yard, or any other competent crime investigators. Prosecute. Jail. And claw back every dollar we can. Start with the former Prime Minister, and then every single MP. 5. Allow Sarkis Izmirilian to recoup every dollar he put into Baha Mar. If it means he now takes back over, so be it. Not only will this be economically prudent, it will let the world know that we are reversing course from the prior illegal and sleazy Christie government and will now treat foreign investors fairly in the future. Make the Attorney General accountable to the people, not a political party. 6. Never ever hire people and allow them to do absolutely nothing, as in the 52 week program. It is terribly wasteful and sends a horrible message to our youth. 7. Eliminate Duty and every Customs officer from the government payroll. This is a corrupt system. Everyone knows it. Everyone knows it.

Porcupine 7 years, 6 months ago

  2. Lower VAT to 5% and institute a seriously progressive increase in property taxes to fill the Duty void. Every truly Christian economist recognizes that VAT is an unfair type of taxation that places a disproportionate burden on the working class and poor. I hate VAT, however, it is here and if we make it a bit less onerous, eliminate Duty, cut our borrowing, and reduce our expenditures, it can serve as a tool to help pull us out of debt. We must remember who loves VAT, and why. Businesses don't pay VAT. Politicians get little resistance to VAT from their EDUCATED business sector, who are the ones who effectively run ALL governments now.
  3. Slash every governmental department expenditure by 20% effective immediately. This will more than compensate for the reduction of VAT revenue.
  4. Eliminate business license fees.
  5. Make the Department of Inland Revenue accountable to the people and make every one of their employees show a certificate proving they have graduated from high school and can do simple math. Allow the Department of Inland Revenue to be taken to court for inconveniencing a business owner by asking for a letter from another government agency. This is 2017. Find a competent computer programmer who can make all government agencies computers and information accessible to each other. Fire the head of the Department of Inland Revenue every month if necessary, until we get an efficient department that treats people with respect, is efficient, and understands that they WORK for US.
  6. Pass a workable Freedom of Information Act so that every 5 years we don't have the complete surprise that we are broke, that our government officials have made corrupt deals, and that we have been taken to the cleaners by those charged with our welfare.

Porcupine 7 years, 6 months ago

  1. Legislate a binding agreement that eliminates any more borrowing by the government of The Bahamas. The debt load alone is overwhelming us. We must come to understand the consequences of how much money is being spent on INTEREST alone. Not even on paying the loan back, just interest alone. Borrowing only serves to allow our politicians to betray us. They are making it easier for themselves to stay in power. They lie to us, saying everything is OK. While dooming each and every Bahamian, most importantly our youth, to the many, many problems associated with being so heavily in debt. We have already reached the threshold whereby we no longer have the opportunity to make sensible democratic decisions. We have already reached the point where TOO much money is going to pay interest, instead of investing in The Bahamas. We are already seeing a rise in the cost of living due to the need for the government to raise more and more TAXES to pay the interest due on these onerous loans. Just because someone is there to loan us the money doesn't mean they believe in us. Let's understand this. The banks, IMF and other institutions lend us money knowing that they will get it back. They will get it back by forcing us to sell our country, cut pensions, cut social services, privatize all of our public utilities, and on and on, in order to do so. Please look hard at Greece if you don't have the economics background to understand this concept. It is scripted. It is called a Structural Adjustment Program.
  2. I must re-emphasize. Borrowing more money for government spending is KILLING our country.
  3. Get the IMF, the World Bank, IDB, World Trade Organization and every other global financial institution out of The Bahamas. Listening to their advice only serves to enslave a country to the money masters. Read your history. Politicians are not smart enough to understand these people's mode of operating and their true intentions. People of The Bahamas---These things are easier to do now, than to commit to the inevitable suffering by the whole country which will undoubtedly occur on our present path, FNM or PLP, it doesn't matter. The writing is on the wall. Either we tighten our belts, and make some sensible decisions, or we kiss this country goodbye. Is it really The People's Time?

Porcupine A Family Island in The Bahamas

sheeprunner12 7 years, 6 months ago

Bravo!!!! ........... You are the man!!!! .......... Send these comments to KPT now ........... This is what The People want the FNM to do ...... not complain

OldFort2012 7 years, 6 months ago

The debt would not be a problem if there was economic growth. The fact that we have been unable to grow GDP for a decade shows the complete lack of vision of our entire political and business classes and the weaknesses of our overall system, which can be best described as crony socialism. Personally, I think there is no way out and that we will have to default at some stage in the near future. But that is just the optimist in me.

BahamaPundit 7 years, 6 months ago

I agree. There is no way out. A default is on its way. Unfortunately, I believe the government is already planning for a default. They know borrowing 700 million will lead to junk bond status. They may even planning to buy up the public companies when the government goes bankrupt.

Porcupine 7 years, 6 months ago

Debts that can't be paid, won't be paid. We should acknowledge this and move forward as best we can as a nation.

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