The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Cabinet minister yesterday admitted successive administrations have used taxpayer funds as “band aids” to cover up their failure to grow the Bahamian economy and create sufficient jobs.

Senator Kwasi Thompson, minister of state for finance, told a post-budget press conference that The Bahamas had “for too long” relied upon the government to be the main employment generator through expanding the size of a now-bloated civil service.

Using language more typically employed by corporate Bahamas than a politician, he argued that the country can no longer afford to place the government at the centre of its economic model and must do everything it can to position the private sector as the key growth and employment driver.

Justifying the budget’s focus on growth as opposed to fiscal austerity, Mr Thompson also admitted that The Bahamas “cannot tax its way out” of its near-$10bn national debt - more than $3bn of which will have been added in the three years to end-June 2022 as a result of Hurricane Dorian and COVID-19 - and instead must grow the economy to restore fiscal health.

He admitted that achieving accelerated gross domestic product (GDP) expansion will require The Bahamas to shake off the “anemic” growth rates it has endured since the 2008-2009 global recession, and this will require the country to “shift the fundamentals of our economy in a major way”.

Confirming what many in the private sector have known for years, Mr Thompson said: “For too long we have relied on the government to be the primary source of employment, using public funds as a bandaid for long-standing, acute structural deterioration..... For too long, the government has placed itself at the centre of national economic life.”

Affirming that the Budget, and its so-called Accelerate Bahamas Recovery Plan, are designed to place the private sector at the forefront of rescuing the Bahamian economy from the twin ravages of Hurricane Dorian and COVID-19, the senator also acknowledged that a full rebound was “still in the distance”.

“Even as we can see an end to the global pandemic, thanks in large part to the roll-out of vaccines around the world, we are still on the road to full recovery,” Mr Thompson said. “Our immediate response was successful at staving off and buffering the very worst effects of the pandemic while continuing to support post-Dorian reconstruction efforts in Abaco and Grand Bahama...

“Today, the end of the pandemic is in view, but the full economic recovery to pre-crisis levels is still in the distance, not to mention our true growth ambitions for the medium and long-term. Today, the Government still has a significant revenue problem. Because of this, we are forced to run high, crisis-time deficits which are adding to unsustainable debt levels.

“The country is still facing persistent unemployment, and the private sector is contending with business closures. For decades, we have been stuck with anemic growth as key economic sectors have seen declining output. 

“These long-standing and persistent problems can only be solved if we shift the fundamentals of our economy in a major way. I do not believe that we can tax our way out of our current circumstances. We must grow our way out.”

Marlon Johnson, the Ministry of Finance’s acting financial secretary, described the years since the 2008-2009 global recession as “the lost decade” for The Bahamas and its economy due to the minimal less than 2 percent GDP growth rates it enjoyed in every subsequent year prior to Hurricane Dorian.

“It’s important that economic growth is robust and sustained,” he said, adding that this will be critical to placing the Government’s finances back on a path to achieve a 50 percent debt-to-GDP ratio by the 2030-2031 fiscal year.

“Notwithstanding the current dislocation, that has to be something to take the country back to the fiscal consolidation track and a balanced Budget,” Mr Johnson said. “Our fiscal deficit remains higher than desirable because the Government has been dealing with the twin crises.

He produced data, markedly different from the 24 percent-plus and 14.5 percent GDP contractions unveiled by the Department of Statistics for 2020, which was explained on the basis that it was measure by the fiscal year as opposed to the calendar year employed by the Department.

Following a 5.8 percent contraction in the 2020-2021 fiscal year, Mr Johnson unveiled GDP growth data predicting that the Bahamian economy will expand by 3.9 percent in the upcoming 2021-2022 fiscal year, followed by 6.2 percent and 3.7 percent expansions in the two subsequent fiscal years respectively. 

While many observers are likely to dispute such figures, Mr Thompson yesterday admitted that the Government “want to be better facilitators of private sector growth....... We believe that our country does well when we create a dynamic environment for the private sector to grow and innovate.

“The Accelerate Bahamas Recovery Plan seeks to leverage limited public resources, gathered through the productivity of hard-working Bahamians, in a more strategic way. We will deploy these resources to address the immediate needs of our ongoing recovery and our more fundamental challenges, like revenue shortfalls and anemic growth,” he added.

“Our plan recognises that by expanding and motivating private sector participation, instead of solely relying on direct government payouts, we can create more robust pathways to increase employment, stimulate economic activity and therefore increase revenue into the public purse.”

Mr Thompson pledged to “streamline the rules for investors” and attract “high quality” foreign and domestic investment by creating InvestBahamas, which will be established as a promotional agency designed to secure and facilitate foreign capital rather than operating in the reactive manner of the present Bahamas Investment Authority (BIA).