The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A prominent businessman is arguing that the present budget fails to properly detail the extent of the economic and fiscal crisis facing the Bahamian people following the COVID-19/Dorian debt blowout.

Sir Franklyn Wilson, the Arawak Homes and Sunshine Holdings chairman, told Tribune Business that the 2021-2022 budget was not sufficiently candid on the post-pandemic challenges facing this nation and the level of austerity pain  - via new and/or increased taxes, spending cuts or a combination of both - that may have to be endured by taxpayers in coming years.

In particular, he compared the present version to the 1993-1994 budget presented by then-prime minister Hubert Ingraham during the Free National Movement’s (FNM) first term in office, which he argued set out the party’s core fiscal philosophies.

Sir Franklyn implied that the 2021-2022 Budget represents a sharp departure from the foundations laid out by Mr Ingraham in that Budget almost 30 years ago, when the latter said: “Good governance is certainly not achievable if government misleads the people about the true state of the nation’s affairs; if public monies are used injudiciously, if expedient and popular choices are made which mortgage the nation’s future.

“Good governance is not achievable is unwarranted risks are taken with the public finances, by committing expenditure which cannot conceivably be supported by projected revenues, or if public monies are permitted to be squandered through weak or non-existent accounting systems, or through inefficiencies, extravagance or waste.” 

Sir Franklyn, who said “let’s just say I did not see any magic” in reference to his pre-Budget prediction that the exercise would produce either “a magician or Humpty Dumpty”, described the 1993-1994 Budget communication as “particularly significant in the history of the FNM” because - together with its 1992 predecessor - it set out the party’s core philosophy on good governance.

Suggesting that those documents had input from the party’s founders, including members of the so-called ‘dissident eight’, he added: “Based on that, it would appear appropriate for all residents to look objectively at this Budget 30 years later and whether it comes close to what the founders of this party said the FNM was all about.

“It is not just the relevance of the commitments in that communication to a balanced Budget, although that is one obvious focus. Another focus is the commitment to transparency. When you look at this Budget for 2021-2022, serious questions arise as to whether or not the circumstances in which the country finds itself do not justify a higher level of candor.

“If you read this Budget, it’s like we’re going through a little something,” Sir Franklyn told this newspaper. “The question is: Does it convey just how serious the problems are? I give you one specific example.

“The fact the foreign reserves are $2bn-something. Is it truly a matter to boast about when there are investors in the country who cannot get their money out of the country as they would wish precisely because of the challenges facing the country? That’s a rather fundamental point; they can’t repatriate their profits from foreign direct investment.

“How do you talk about the level of foreign reserves as a strength and do so in a way that is consistent with the philosophy reflected in the earlier Budget, especially by the founders of that party. To me, there sees to be a disconnect.”

Sir Franklyn would not be drawn on the investors having difficulty repatriating funds from The Bahamas. Some observers may argue that it is inappropriate for him to comment on the FNM’s philosophy given his own political leanings, while others may point out that the aftermath of COVID-19/Hurricane Dorian is a situation no Bahamian government has had to face before.

However, with a national debt that is projected to increase by more than $3bn in three years, and exceed the $10bn mark by end-June 2022, there is little doubt that Bahamians will soon have to start repaying what has been borrowed via a likely combination of new and/or increased taxes and spending cuts.

Accountants last week warned new and/or increased taxes “have to come” if The Bahamas is to slash its debt, as they branded the Budget “no game changer” for the nation’s economic crisis.

Craig A “Tony” Gomez, the Baker Tilly Gomez managing partner, told Tribune Business that while the government’s 2021-2022 fiscal plans “don’t set off any alarm bells” for Bahamian businesses and consumers it had merely postponed the inevitability of certain tax hikes in years.

While the Minnis administration was correct not to endanger the post-COVID recovery by avoiding any across-the-board increase in VAT or other taxes, he added that it was alarming that the national debt is forecast to increase by almost $4bn in just five years.

Warning that The Bahamas has “a history of falling short” with its revenue forecasts, resulting in greater-than-predicted deficits, Mr Gomez added that it was critical that taxpayers see value for every dollar spent by the government such as the planned $100m public health sector upgrades.

And, with the total civil service wage bill forecast to increase by some $11.5m to $670.935m in the upcoming 2021-2022 fiscal year, he argued that it was vital Bahamians see something in return via an “improvement in service across every sphere of the government”.

Some $938.5m - one third of government spending - in the 2021-2022 Budget will be taken up by debt and subsidy costs.

A deeper dive into the budget reveals that the $512.5m the government is due to pay in interest costs on its existing debt in the upcoming 2021-2022 fiscal year, together with $426m in taxpayer subsidies to state-owned enterprises (SOEs), will account for one-third - or $1 out of every $3 - of the $2.826bn spent on recurrent expenditure.

Adding in the $742m forecast spending on civil service wages, salaries and allowances, and some $1.68bn or 59.5 percent of the government’s 2021-2022 budget will be accounted for by just three line items - wages, debt servicing costs and subsidies to struggling SOEs.