The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The deputy prime minister says “every Bahamian should be worried” that the PLP will take the country “back to the future” by overturning recently-enacted fiscal disciplinary measures.

KP Turnquest, pictured, told Tribune Business that recent “rhetoric” from the opposition’s leading members suggested that “the future stability of the country” could be threatened if they were returned to office at the next general election.

In particular, he expressed concern that a PLP government would instantly seek to reform, and weaken, the Fiscal Responsibility Act’s safeguards against uncontrolled spending, and soaring deficits and debt, to enable it to fulfill costly campaign promises.

“That is one of the concerns that we should all have as citizens because when you listen to the rhetoric from the other side it appears they do not recognise the need for fiscal conservancy and responsible, realistic targets is important to the future of the country and future stability of the country,” Mr Turnquest told Tribune Business.

“The statements with respect to spending, every Bahamian should be concerned. We’re not in a period where we have the liberty of spending and worrying about the future later. We have to be creative and consider not only domestic circumstances but the international realities we face and where the global economy is.

“There are risks out there to be concerned about,” the deputy prime minister added. “It’s fair to say every Bahamian should be concerned about the rhetoric from the other side. That’s basically taking us back to the future. That’s what they did for their last five years in office and have few results to show for it.”

It is unclear what “rhetoric” Mr Turnquest was referring to. But Obie Roberts, the PLP’s vice-chairman, recently described Opposition leader, Philip Davis, as referring to “mega public projects” as part of an economic growth strategy during a recent party meeting.

No details were provided on these projects, but senior party members, such as chairman Fred Mitchell, have recently suggested that incurring some debt is acceptable for the Government - even though this is now at more than $8bn and counting.

The Fiscal Responsibility Act, which aims to bring accountability and transparency to management of the Government’s financial affairs, sets annual deficit targets and spending limits, while also laying out a path to reduce The Bahamas’ debt-to-GDP ratio to 50 percent.

The Act requires the Government to slash the fiscal deficit to 0.5 per cent from 2020-2021 onwards, slashing it from a sum equivalent to 5.8 per cent of GDP in the 2016-2017 Budget year. This means reducing it from near $700 million to around $54 million.

Its ‘first schedule’ sets out a ‘glide path’ or ‘road map’ for achieving this, acknowledging - as the IMF stated - 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 1 per cent of GDP, respectively.

The Bill also sets out a “long-term” target of reducing the Government’s direct debt-to-GDP ratio from the current 58 per cent to “no more than 50 per cent”. The year by which this target is to be achieved has to be set out in the Government’s ‘fiscal strategy report’, which must be submitted to Parliament no later than the third week of November each year.

Mr Turnquest spoke out as he described as “entirely premature” concerns that the Government will not hit its 2018-2019 fiscal targets, given that it had used up almost three-quarters of its full-year deficit in the first six months of the year and collected just 38.1 percent of its $2.651bn revenue target.

While it now has to collect more than $1.6bn in revenue during the second half of the year to hit its full-year goal, the first-half collection percentage goal is not wildly out of line with previous years. Research by Tribune Business, using official government data, shows that first half revenue collections equalled 39.3 percent and 40.9 percent of the full-year targets for 2016-2017 and 2017-2018, respectively. And it was ahead of the 36.7 percent at the half-way point for 2014-2015.

Describing the January to March quarter as the “revenue rich” portion of the Government’s financial year, Mr Turnquest said this period coincided with the peak winter tourism season, business license fee collection, the bulk of real property tax payments, and commercial vehicle licensing month.

“It is entirely premature for anyone to take the first half as an indicator of where we will end up,” he told Tribune Business. “I know we’re up in VAT receipts. Obviously we are cautious but, by the same token, not concerned at this point.”

Mr Turnquest, though, admitted that the Government was “slightly behind where we want to be” on 2018-2019 revenue collections when measured against projections, “but nothing that causes us any great concern at the moment”.

He added that the inability to realise $25m in projected revenues from the new web shop industry taxation structure was “holding us back from our spending plans a little bit”, but the Government had managed to pay down some $65m in previously unfunded arrears and “anticipated a favourable outcome” in talks with the gaming sector.

“I think we are down on our spending; we are holding more or less where we want to be and, when we take out the arrears, we’re doing OK,” Mr Turnquest said. “But we still have to continue to be cautious, again, having regard to the revenue and traditional ramp in expenditure that happens in the second half of the year, particularly on capital works.

“You always have some pent-up expenditure that happens in the second half so you have to be prepared for that. I’m still very optimistic that we’re going to make our targets and, managing our expenditure and cash flow, that we’ll come in within that target or as close as possible without incurring additional arrears.”