IS the country’s level of debt and its deficit something to worry about, or not?
Well, it depends who you talk to, it would seem. Financial Secretary Marlon Johnson was yesterday playing down the worries, saying that while they are a cause for concern, they are not a cause for alarm – though that’s a distinction that’s hardly comforting.
Ask Finance Minister Kwasi Thompson, though, and he says the increased deficit is “the elephant in the room” – which we would hope no one is actually ignoring.
Both men point, however, to the idea that a resurgence in the economy, particularly through tourism, will ease those worries. In other words, the problem is temporary, not because of a long-term structural problem.
Is it, though? Because the Budget has us on some precarious ground as we try to work our way out of that debt.
Let’s take a look at how we’re planning to balance the books. There’s the plan to finally implement a tax on patron winnings at web shops. The government had thought that would bring in $17.9m, but that forecast has jumped to $41m in large part because of the long wait. That’s been challenged in court, however, so it’s betting on a legal victory for a government that has lost its fair share of those.
Another means of revenue raising is the increase in real property tax revenues – expected to increase by more than $54m because of greater enforcement and better administration. That sounds hopeful given that other areas of revenue collection have been suffering. If people can’t afford their water or their light bills, they’re not likelier to have any spare dollars when the taxman comes to call.
Then there’s the extra taxation on Airbnb rooms. That’s a new line of revenue, but again it depends on the build-up of tourism and when that will get back up to full speed.
Even a former FNM finance guru, former Minister of State for Finance Zhivargo Laing, described the projections as “optimistic”.
And if the government doesn’t hit its $2.244bn revenue target? Well, that means it doesn’t have the money for the incentives it put on the table in the Budget or the deficit gets even wider.
It’s putting a lot of weight on getting absolutely everything right, with not a lot of leeway for error – or for people coming up short on what they owe.
Kwasi Thompson, meanwhile, also cautioned about successive administrations having used taxpayer funds as “band aids” to cover up their failure to grow the economy and create sufficient jobs. He pointed to a reliance “for too long” on the government as the main employment generator through a bloated civil service – but if the civil service is bloated, why is the government hiring a whole new swathe of new graduates in its Budget plan?
It seems a whole lot has to go right to ensure that our economy doesn’t go horribly wrong – without much room for a safety net.
The key as ever is to get the economy back open – and to give people a reason to trust that it’s safe to come to The Bahamas on holiday or for business. The biggest part of that is controlling the virus, and that means getting shots in arms, and ensuring we have enough vaccines for everyone. We’re not there yet either.
So yes, we would say there’s plenty to worry about – and plenty of incentive to make sure everything goes right.
More like this story
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- $10bn national debt ‘elephant in the room’
- Where’s the ‘modern governance’ pledged in return for VAT hike?
- Real Property tax reforms can ‘double’ revenues to $200m
- Gov’t on deficit track even if 2024 ‘slides’
Comments
Biminibrad 3 years, 5 months ago
Ok, history always repeats itself, when was last time “ everything” went right. I do not believe eever.
Bigrocks 3 years, 5 months ago
Every Government since 1967 finds an excuse to run up the debt and borrow money. This time around they are dumber than ever. Devaluation coming regardless what these political hacks try to preach. If they are religious enough, maybe they pray the Bahamas does not get a good hurricane hit this year. Will be t 12 Billion then in debt..
sheeprunner12 3 years, 5 months ago
The civil service is not bloated ......... there is just a poor use of human resources, no succession planning and excessive hiring of unskilled workers ........... It needs serious overhaul & reform
There is the need to hire (or train) more skilled workers ..... Why have thousands of clerks and janitresses, when there are no middle managers and technical persons?
Then, there is the problem of having 40-year career (old) bosses that frustrate and discourage the millennials from making meaningful careers in the civil service.
tribanon 3 years, 5 months ago
You must be an over-paid civil servant in order to be able to say "the civil service is not bloated".
tribanon 3 years, 5 months ago
The Tribune's editorial staff describing Zhivargo Laing as a "financial guru" has to be the joke of the month. LMAO
ohdrap4 3 years, 5 months ago
The man with one eye is king now.
Clamshell 3 years, 5 months ago
Bloated or not, here’s the fundamental problem: The Bahamas, with about 400K people — roughly the size of a middling U.S. city — has to provide all the services of an independent nation: defense, health, education, police, licensing, infrastructure, customs, immigration, all that.
In addition, the gov’t has taken on the massive responsibility of services that are run by private, free-market entities in many nations: power, water, phones, hospitals, airports, an airline, etc., etc.
Little wonder if the government seems “bloated.”
tribanon 3 years, 5 months ago
I disagree. Decades of unchecked and rampant political corruption, fraud, waste and mismanagement have been the primary drivers of the very costly, grossly over-bloated and most unproductive civil workforce we have today.
Every Bahamian would be enjoying a standard of living and quality of life that would be the envy of the world were it not for the system of corrupt political capitalism and cronyism that has become the main stay of our economy. It's a horribly corrupt system designed to keep most Bahamians dumbed-down and oppressed as it goes about greatly enriching the political elite, their financial backers, their favoured local business cronies, their family members, their select few friends and, of course, their equally corrupt and unscrupulous foreign corporate friends and foreign business partners.
tribanon 3 years, 5 months ago
P.S.: The ratio of our public sector headcount (including the headcount of all of our government controlled enterprises) to our nation's total population has been ridiculously and unsustainably high for decades as a result of successive failed political leaders like Minnis using government employment as the means of masking their incompetence and failed social and economic policies.
sheeprunner12 3 years, 5 months ago
Take away the 25,000 civil servants (out of a 200,000 labour force) ........ and see how well the country will work ............ You criticize, but have NO solutions.
tribanon 3 years, 5 months ago
ZZZZZzzzzzz.......
birdiestrachan 3 years, 5 months ago
Thompson and the atheist are just talking the cheap talk. cream pie in the sky talk it means nothing ZERO.
John 3 years, 5 months ago
A cute term they like to use is ‘refinancing.’ This under normal circumstances refers to when an individual or a company or country ‘cleans’ up its loan portfolio by either paying off older loans or several small loans and combining them into one or paying off loans at a high interest rate and replacing them with loans that bear lower interest. Today governments are borrowing money to pay off loans they cannot service and they are usually doing this at a higher interest rate. So they must then go back to the taxpayer to raise these additional funds to service these debts. So this results in an increase in the cost of living for the taxpayers. Many may own businesses, so they in turn increase the cost of their goods and services. This may, in turn, cause a reduction in consumer confidence which will eventually lead to reduction in consumption. This is known as ‘stagflation.’ Consumption is decreasing but prices are still increasing because of increases in taxes, so because of reduced consumption, government may still not be able to realize its revenue forecasts despite increased taxes. So what does the government do. Can it cut spending? That depends on how leveraged it is. Can it increase taxes again? Well to do so will only start the cycle repeating itself again, But this time the results will be more crucial and devastating . Firstly, there will be those individuals and businesses who can’t afford additional tax increases or any increases, for that matter and so they will just disappear off the grid. Businesses will close and individuals will either drop out of society or move to a less taxed jurisdictions. In any event government will realize less tax revenue. Then there will be individuals and businesses who will refuse to allow government to place any additional tax burden on them. Again these people will close down their businesses, move to a less taxed jurisdiction or just simply refuse to pay taxes. So now government has placed itself in a situation where it’s creditors and knocking down its doors and it cannot collect one additional dollar in taxes from its citizens. In fact it is collecting less tax dollars now than before the crisis started. So not only can it not service it’s debt but it can no longer provide many of its essential services does the economy collapse?
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