The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas must avoid setting "stretch" fiscal targets, a top accountant warned yesterday, branding the 0.5 per cent deficit goal as "aggressive but achievable".

Gowon Bowe, the Bahamas Institute of Chartered Accountants (BICA) president, told Tribune Business that the Government needed to set a "realistic and credible" timeframe for achieving the 50 per cent debt-to-GDP ratio required by the Fiscal Responsibility Bill.

The draft legislation, unveiled yesterday, calls for the Government to state the year when this long-term objective will be achieved, and Mr Bowe warned that setting an overly-ambitious target that is not met will undermine confidence in legislation designed to overhaul The Bahamas' fiscal governance.

He described the draft Bill as "time to put the money where the mouth is" on improved fiscal transparency and accountability, adding that it represented an "iron clad commitment" to impose binding discipline on current and future governments.

"I think the main element now is the public consultation and working with them [the Government] to say: 'Let's make it as realistic and achievable as possible to maintain its credibility'," Mr Bowe told Tribune Business.

"Setting stretch targets is not the appropriate position at this point in time, and what needs to be very clear is the transition plan, the strategic plan to get to these benchmarks over the transition period. Embedded in that needs to be an accompanying road map of where we expect to next year, the year after, and the timeline of targets set.

"Ultimately, what we want in passing this is it becomes the road map and iron clad commitment made to the people. This is one instance where I would say to Government: Let us be realistic in our projections; this isn't one of those times when we need to be optimistic. If a longer period is needed, let's be honest and candid now."

While cutting the Government's direct debt-to-GDP ratio from the present 58 per cent to 50 per cent is the long-term goal, the Fiscal Responsibility Bill also sets out the goal of achieving a fiscal deficit equal to 0.5 per cent of GDP - around $53-$54m - within three years.

The Government has to slash the fiscal deficit from a sum equivalent to 5.8 per cent of GDP in the 2016-2017 fiscal year, with the Bill setting out a "glide path" or "road map" for achieving this. It acknowledges that "significant fiscal adjustments" are needed over the next two budget years to hit this objective.

To enable the public sector and wider Bahamian economy "to achieve the fiscal objective in an orderly manner", and avoid unnecessary shocks, the Bill calls for 2018-2019 and 2019-2020 deficits that "shall not exceed" 1.8 per cent and one per cent of GDP, respectively.

Mr Bowe yesterday said there were multiple "variables" that impacted the debt-to-GDP ratio, with the rate of economic growth - as well as the Government's revenue and spending plans - all able to throw this off course.

While achieving a 50 per cent debt-to-GDP ratio within three years is "very aggressive", and would require the Government to produce Budget surpluses, Mr Bowe said the deficit reduction goal was more achievable.

"As it relates to the GFS deficit versus GDP, getting it to 0.5 per cent in three years is an aggressive target but more achievable than debt-to-GDP," the BICA president told Tribune Business. "We need to be in a position where, hand on heart, the targets set are achievable in the timeframe set out."

He warned that a failure to be realistic threatens to undermine the Fiscal Responsibility Bill's credibility, as "missed targets" would result in fiscal adjustments and political controversy that may prove disruptive to the Bahamian economy and wider society.

And, to achieve the growth necessary to bring the debt-to-GDP ratio into line with the Bill's target, Mr Bowe said the Bahamas needed to find "a big win" that was more than just one project. He suggested this required proper execution of several key initiatives, including 'ease of doing business' reforms and the Over-the-Hill revitalisation.

The Bill, as revealed by Tribune Business, provides for the creation of a five-member Fiscal Responsibility Council to oversee the Government's fiscal affairs and "assess its compliance" with its objectives.

The Bahamas Chamber of Commerce; Bahamas Bar Association; University of the Bahamas; BICA; and the Certified Financial Analysts' Society of the Bahamas will each nominate one Council member apiece, with Mr Bowe yesterday hailing the move as providing the diverse skill sets necessary to properly analyse the Government's fiscal management.

"This is effectively a SuperPAC, the Public Accounts Committee (PAC), as this is not people being drawn from Parliament but being drawn from greater skill sets in the country," Mr Bowe told Tribune Business.