The Tribune

• Gov’t: No tax rise, civil service cut promises to lenders

• Brave, Sir Franklyn allege this why election called early

• Latter argues ‘most consequential’ vote since 1972 

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A senior Ministry of Finance official yesterday branded as “absolutely incorrect” assertions that the Government cut a secret austerity deal with its lenders in return for last year’s $825m foreign currency bonds.

Marlon Johnson, the acting financial secretary, told Tribune Business that “no such undertakings were given” to international investors that the Minnis administration would raise taxes, cut back on spending and reduce the civil service payroll in return for their money.

He spoke out after Sir Franklyn Wilson, the Arawak Homes and Sunshine Finance chairman, alleged he had been informed by both local and international financiers that such assurances were given when The Bahamas placed its two foreign currency bonds - worth $600m and $225m respectively - on the global markets late last year.

Sir Franklyn asserted this was why Dr Hubert Minnis had chosen to call an early, snap general election so that Bahamians would decide on the new government before such painful austerity measures were implemented. 

This theme has also been picked up by Philip Davis, the Opposition’s leader, who told a party rally on Tuesday: “We have been told by credible sources that the Government called a snap election because their back is against the wall with the country’s creditors; they’re ready to raise your taxes, but they ain’t planning to tell you that until after you vote.

“And they are going to raise your taxes because they are too afraid of their wealthy donors to raise theirs, and because they have no new ideas and no clue how to create economic growth.” Dr Hubert Minnis, though, has always denied that the Free National Movement (FNM) has plans for new and/or increased taxes if re-elected to office.

And Mr Johnson also refuted the allegations from Mr Davis and Sir Franklyn yesterday. “That’s absolutely incorrect. No such undertakings were given,” he told this newspaper in denying a secret ‘austerity deal’ with The Bahamas’ creditors and lenders.

“In any sort of formal public offering or capital raising, whether it’s a deal with a multilateral institution or a bond offering, all covenants, terms and conditions are put in the offering document,” Mr Johnson added. “There will be no circumstances where a written undertaking would transpire and not be in the formal document.”

The acting financial secretary thus asserted that it would be impossible to keep any secret austerity deal, as alleged by Mr Davis and Sir Franklyn, secret. However, the latter yesterday said he had received credible reports from local and international bankers that such assurances had been given, although he did not name his sources.

“I believe whoever wins will make a ton of difference,” Sir Franklyn told Tribune Business of today’s general election. “If the FNM wins I believe the biggest problem would be the continuation of keeping from the public information that would have serious consequences.

“I have been asked why the Prime Minister would call an early election at this time. My premise is, assuming the Prime Minister loves The Bahamas, and as a medical doctor he had to anticipate calling the election now would have an increased possibility - if not probability - of causing increased challenges to the healthcare system, the pressure on him to call the election had to be strong.

“It was strong because I have been told by local and international bankers that the Government of The Bahamas has entered agreements with certain clauses that, if they became known to the public before a general election, would seriously and adversely affect their prospects of success,” Sir Franklyn continued.

“My understanding is that the Government of The Bahamas has given certain assurances that the deficit will come down at a pretty rapid pace through a combination of increased taxes and reduced operating expenses, including a reduction in the Government’s principal expense, which is payroll.

“The fact of the matter is that, if this is true, and from what I am being advised has been committed to, that would have very serious implications for the re-election of the Government of the day, and that’s the main driver of why the election has been called now.”

Whoever wins today’s election will likely have to consider such measures at some point given the extent of the debt and deficit blow-out produced by Hurricane Dorian and COVID-19, which has driven the national debt to $10.356bn and resulted in a projected $951m deficit for this fiscal year. However, the Government’s Fiscal Strategy Report also sets out a glide path for reducing the fiscal deficit in coming years.

Sir Franklyn, though, argued it was “poppycock” to assert that the general election was called early because the Prime Minister needs a fresh political mandate to set The Bahamas back on a sustainable path post-COVID.

“The people who have conveyed to me this information, it’s not obvious to me why they would seek to mislead me. The standing of these people in global finance, it’s not apparent why they would mislead,” Sir Franklyn said. 

“Every election that comes up, people say it’s the most consequential, but this particular one I believe to be the most consequential election since 1972 when the issue on the ballot was whether the country became independent or not.”

Sir Franklyn, who said he was not allowing “my personal political preferences” to taint his analysis, argued that the election of a Progressive Liberal Party (PLP) government would “at least open the door for a conversation” with The Bahamas’ lenders and creditors if such austerity-related assurances have been given.

He also asserted that the present general election has parallels with the one in 1992, when the 25-year Pindling administration was voted out of office and replaced by the Hubert Ingraham-led FNM. Acknowledging that the five-year period between 1992 and 1997 generated significant economic growth and jobs for The Bahamas, Sir Franklyn admitted this may not have happened had the PLP been re-elected.

“The country in a lot of ways is where we were in 1992,” he told Tribune Business. “The change of government in 1992 was a pre-condition for what happened in the first Ingraham administration, which most people concede was a period of significant economic growth.

“There is a lot to suggest that if the PLP were elected in 1992, the same level of economic growth may not have happened. The question for the Bahamian public today is whether the reality of today bears some comparability with what existed in 1992, where the change in government played a role in the economic growth the country enjoyed during the first Ingraham term in office.

“What I’’m saying to you is a change in government offered a fresh perspective, and that’s the parallel with 1992. People saw change, they saw difference. Staggeringly enough, they saw a new day.”