The Tribune

The pendulum has swung the other way. The people of The Bahamas have spoken and there are some important lessons to learn, based on the results and extent of voter participation.

Congratulations are in order for Prime Minister Philip Davis and his deputy prime minister, I. Chester Cooper, on leading their party to victory. There will be great demands on their leadership and significant expectations given their own pronouncements on the campaign trail and during the swearing-in ceremonies. The declarations are important, as over the next five years, the fate of The Bahamas will lie largely in the hands of these two individuals and their policy successes.

Both men are members of Toastmasters. Both have achieved the highest award possible in this programme, a Distinguished Toastmaster (DTM), with Mr Cooper at the time being the youngest person in The Bahamas to do so. I and many others will be actively looking to see the values of Toastmasters International - integrity, respect, service and excellence - being the hallmark of their leadership. As a country, we must wish them well and be prepared to work alongside the willing to make The Bahamas better. I commit to continue my contribution, through objective writing and commentary, to draw attention to what is good, what may not be good and potential solutions for problems observed.

Moody’s has downgraded The Bahamas’ sovereign creditworthiness as a result of the high national debt. To say this is most awkward in its timing would be an understatement, but it potentially explains recent developments. Elections are about ideas and choices, and the recently-elected PLP administration has outlined some very important initiatives - including one that directly contradicts this downgrade, namely the plan to reduce the VAT rate to 10 percent. A very different view must be taken on this due to Moody’s action. This development is significant in that it has direct implications for a largely unfinanced budget. This may be indicative of the space between the administration’s platform and reality, based on deep budgetary constraints

This downgrade is a big and urgent issue to contend with, given there is $1.6bn on the table that is not yet financed. Most importantly, about half of this amount is earmarked for debt repayment. The Bahamas cannot afford to default on its debt. It is not likely to do so, but Moody’s actions create a reality of borrowing more expensively, and potentially having some measure of difficulty in doing so. The Bahamas may need to reschedule or reorganise large portions of debt, attracting greater costs than previously budgeted. It is worth recalling that total current debt servicing (interest) costs for 2021-2022 are pegged at $512m, or about one-sixth of projected revenue. This downgrade sets the stage for additional costs, increased deficit sand greater difficulties in refinancing.

This is not a good development for The Bahamas and the new administration. My recent article in Tribune Business looked at a number of challenges the election winner will face. While it did not anticipate this development, there was extensive focus on how the current debt stock would impact decision-making. Every decision, new initiative and new idea must pass through the crucible of a constraining debt burden. This new twist from Moody’s is an important extra wrinkle in that formula when one considers not only the actual extent of the downgrade, but also the stated justification of significant erosion in the economic strength of The Bahamas and the expectation of slow recovery up to 2024.

That article, Time to Face the Brutal Facts, generally sought to address this very type of occurrence. The fact is that The Bahamas has huge economic challenges. The reality is that up to now the discussions from policymakers have not fully elaborated on the depth of these challenges. While the understanding gleaned from publicly available information provides a reasonable appreciation, in my analyses, as a rule of thumb, I always conclude that such pronouncements are never as good as stated. It calls for us to face up to the facts, refuse to tiptoe around the issues, and take them on. These issues are not limited to raw economics but matters cutting across all segments of the country’s economic arrangements, together with social challenges. A downgrade on day one in office. The timing has to be uncomfortable. However, as former governor of the Central Bank, James Smith, alluded to in a recent interview, there are some things which the Government must now have frank conversations with the public about.

It is time to get down to the essentials of economic recovery in new and bold ways. Business as usual long went out the window with Hurricane Dorian, the arrival of COVID-19 and back-to-back record deficits and a national debt approaching $11bn. I think it is obvious that this new PLP administration will have no honeymoon. The issues are simply too large, concentrated and urgent for anything other than the moments of celebration on election night. Plans are quickly meeting the dynamism of a highly disrupted and disruptive reality, and careful but bold nimbleness will be the order of the day. We must also hope that there is no spike in COVID-19 cases due to recent election campaigning that leads to any further disruption in national commerce.

Maybe the greatest threat is the often-repeated need to enter into some arrangement with the International Monetary Fund (IMF). It is my view that this should be avoided at all costs but, as the downgrade is signalling, this cannot be done on the cheap. Therefore, the matter of the IMF will linger on the periphery of all discussions - and very uncomfortably so. There is a price to be paid for the increase in our national debt. There must be concerns about the future state of our external reserves. Far-thinking persons must be considering the efficacy of our tax regime. The new administration will no doubt be mindful of the potential impact this and other developments will have on its platform, Blueprint for Change.

It is time for all to join hands. The Bahamas should be uneasy about where it stands now. However, this is where the impact of clear, capable and competent leadership will make a difference. The new administration no doubt has significant resources in the form of advisors to call on, and will do so. My only admonishment would be that they must plan for the long haul and be as inclusive as possible. Make decisions that are designed to secure long-term value. Strategise, implement and execute for the long-term as part of the price that must be paid for recovery, and accept the obvious near-term sacrifice and pain. Engage the collective intellectual power and brawn that The Bahamas has available to it.

It was said that the country needed a small miracle to get out of the challenging circumstances in which it currently finds itself. My response to that statement was that there are no miracles likely to emerge in this challenging global environment. I also said then that small miracles have in the past taken our eyes off the areas of focus, leading ultimately to problems not being fixed. In a perverse sort of a way, then, this downgrade could be such a small miracle. Not an ideal one, but if it creates greater impetus to direct focus from day one on what truly matters then maybe, just maybe, in the end we may come out the better for it.

• NB: Hubert Edwards is the principal of Next Level Solutions (NLS), a management consultancy firm. He can be reached at info@nlsolustionsbahamas.com. He specialises in governance, risk and compliance (GRC), accounting and finance. NLS provides services in the areas of enterprise risk management; internal audit and policy and procedures development; regulatory consulting; anti-money laundering; accounting and strategic planning.