The Tribune

• PM: ‘$1bn difference’ between fiscal reality

• Minnis slams successor’s ‘reckless’ attack

• Fears row will ‘deepen mistrust’ in Gov’t

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Prime Minister’s assertion of “a $1bn difference” between the pre-election fiscal report and “the truth” was yesterday branded “reckless and dangerous” by his predecessor.

Dr Hubert Minnis called on Philip Davis QC to “produce the facts” to support his House of Assembly allegations after the latter revealed that an accounting firm’s review of Ministry of Finance data suggested the end-August report - mandated by the Fiscal Responsibility Act - “gave an incomplete presentation” of the Government’s total liabilities.

“As the minister of finance, I requested upon coming to office a full accounting of the Government’s fiscal position. To this end, a renowned accounting firm has been reviewing information provided by the Ministry of Finance with respect to liabilities of the Government as of September 30, 2021, which is approximately one month following the issuance of the pre-election report,” Mr Davis said.

“The numbers provided by the Ministry of Finance for the period ending September 30, 2021 reveal a $1bn difference from the numbers provided by the previous Government in their pre-election report....... I want to repeat that to be sure everyone hears it – there is a $1bn difference between the numbers provided by the previous Government prior to the election and the truth.

“It is painfully clear that the pre-election report was an incomplete presentation of the Government’s contingent and real liabilities.” Citing examples of what the accounting firm, understood to be Deloitte & Touche, has uncovered, Mr Davis said the report excluded $100m in executed Ministry of Works contracts for which no funding had been provided in the 2021-2022 Budget.

“It omits under-funding of pension and gratuity payments for public officers, which is now being addressed in this supplementary Budget,” he added. However, according to the supplemental Budget’s data, just $19.62m is being allocated to address this under-funding.

“The pre-election report omitted a loan assumed by the Government for which the only source of payment is BPL (Bahamas Power & Light), an entity with significant financial challenges,” the Prime Minister added.

“It excludes amounts owing for taxes for a star witness in a criminal case of a former Cabinet Minister. This very unusual arrangement is supported by a promissory note signed by a senior official of the Ministry of Finance.

“It excludes court judgements made against the Government, for which funding now has to be provided in this supplemental Budget. It makes no mention of potential liabilities emanating from contract breaches committed by the former administration.”

The “star witness” was not named Mr Davis, although there is seemingly only one candidate given that he was likely referring to the trial of Shane Gibson, who was comprehensively found not guilty. The $237m BPL loan, meanwhile, was due to be paid out by BPL’s $535m bond refinancing, which the Prime Minister also took issue with yesterday (see article on Page 3B).

Mr Davis, meanwhile, warned that the cash-strapped government’s dire fiscal position meant it will be unable to deal with all these obligations “within the existing fiscal framework” during 2021-2022 while promising that the Deloitte report will be made public when completed.

“The Fiscal Responsibility Act requires the pre-election report to be signed by both the minister of finance and the financial secretary [then-Marlon Johnson],” he added. “I will leave it to the Bahamian people to judge whether a $1bn difference between the report and the reality reflected an honest and true commitment to fiscal transparency.”

However, Dr Minnis hit back immediately, telling Tribune Business the Prime Minister’s assertion of a $1bn gap was both “reckless and dangerous” - especially since it threatened to send negative messages to international capital markets, including the rating agencies and lenders/creditors, that The Bahamas’ financial position is much worse than feared and it has not been forthcoming.

“That is a reckless and dangerous statement, and he has to produce the facts,” Dr Minnis demanded. “He can’t make statements without the evidence. I am very concerned that what he said was a reckless and dangerous statement for a Prime Minister to make, and the Prime Minister has to back up what he said.

“You cannot make statements in a silo without the evidence to back that up. It’s reckless and dangerous.” The former prime minister also told this newspaper he was unaware who Mr Davis was referring to when he accused his government of helping a major New Providence-based developer avoid paying $6.4m in outstanding Business Licence fees.

Referring to the adjustment in public service pensions that his administration is enacting, the Prime Minister said: “The annual cost of this adjustment is $6.4m, which is less than the amount owed in business licence fees by one developer in New Providence, who received the assistance of the former administration to avoid paying what was legally owed to the Government.

“The previous government chose to help one wealthy developer. We choose instead to help thousands of Bahamians who have served our country well, Bahamians who deserve economic dignity in their senior years.” Asked about the developer’s identity, Dr Minnis replied: “I would like to know who that is myself.”

Meanwhile, well-placed sources in the former Minnis administration yesterday voiced bewilderment over the $1bn “difference” identified by Mr Davis. Pointing out that the pre-election report, published at end-August, was designed to highlight any significant fiscal changes that emerged since the June Budget, they said: “I don’t know what they’re talking about.

“As far as the former administration was concerned, it provided all the information required. There was nothing left off willfully and deliberately. I thought they might have been including the state-owned enterprises (SOEs) contingent liabilities, but those were included in the report. However, it only included central government arrears because they did not have access to SOE invoices.

“But nothing was hidden, and there is no idea where there are getting the $1bn from. It has implications for the credit rating because it looks like the Government is hiding its liabilities. The former administration is at a loss.”

Gowon Bowe, Fidelity Bank (Bahamas) chief executive, told Tribune Business the reason for the discrepancy could lie in the difference “between commitments that have not yet crystallised into liabilities that exist and liabilities that exist that have not been accounted for”.

Acknowledging that in “the theatre of the House of Assembly, there’s always going to be some sensationalism”, he added that there is “a big difference” between spending commitments that have not been actioned, and which the Government “can reverse or change course” on because there is insufficient funding, or “financial obligations that you have to settle” and thus become liabilities.

He called for the publication of Deloitte’s report, as promised by the Prime Minister, adding that “it begs very specific disclosure” to clarify precisely what Mr Davis meant.

Matt Aubry, the Organisation for Responsible Governance’s (ORG) principal, told this newspaper that the back-and-forth between Mr Davis and his predecessor highlighted the need for greater fiscal transparency otherwise the situation threatened to deepen “public mistrust in government”.

“The citizenry needs more comprehensive information on the financial state, and fiscal and debt management of The Bahamas, and this needs to be more than reports shared sporadically on the government website,” he argued.

“Fuller and more regular disclosure of fiscal information, paired with public education on how to understand and use this information, can avoid the ‘big reveal’ that has happened in the last two administrations, which leads to political rhetoric and contributes to public mistrust in government.

“Open budgeting and more timely and independent reports from the Fiscal Responsibility Committee can help to bring this somewhat murky area of governance into the light.”