The Tribune

By KHRISNA RUSSELL

Tribune Chief Reporter

krussell@tribunemedia.net

DESPITE nearly $1bn in liabilities and unfunded obligations left behind by the previous Minnis administration, Prime Minister Philip “Brave” Davis said the government is headed in the right direction away from a “fiscal cliff”.

In his mid-year budget communication, Mr Davis said these liabilities were not disclosed despite totalling $821.5m. However, he again pledged not to increase taxes or fees in the short term as the government deals with its liabilities and inflation.

Unfunded obligations include $255.3m in debt and interest payments related to the government taking over Bahamas Power and Light’s legacy debt and $155.5m in unpaid bills and other obligations for state-owned enterprises.

Other debts include $25.7m for the Ministry of the Public Service, which largely represents outstanding payments for insurance services, along with $17.7m for the Office of the Attorney General to settle outstanding legal claims.

Mr Davis told Members of Parliament that $14.2m in VAT refunds for the Department of Inland Revenue; $15.8m for the Ministry of Health, including payments owed to Doctors Hospital for critical care COVID-19 patient support; and $129.5m in unfunded contract obligations for the Ministry of Public Works were also outstanding.

More debts include $23m in bills for water purchased by the Water and Sewerage Corporation; $56m for the Public Hospital Authority, which includes over $25m in potential liabilities for the 2018 union agreement; and $34.2m for the Ministry of Tourism, including a significant number of unpaid bills for Bahamasair.

“Are we to assume that all these invoices and unfunded obligations magically appeared in less than two months after the election?” Mr Davis asked.

“Unfortunately, Madam Speaker, in trying to determine the most accurate picture of the public finances, many vendors have chosen not to cooperate in providing even the most basic information, or continue to stall and attempt to frustrate efforts to determine who received public funds, in what amounts, for what purpose and under what terms.

“This is extremely unwise, and I advise those vendors who are called on to provide any information to their dealings with public funds to cooperate. Failing which, anxious consideration will be given to the options available to compel cooperation.”

Regarding steering the country in the right direction, Mr Davis said there had been marked improvement within just six months of taking office.

“I wish our creditors, investors, members of the business community and most importantly, the Bahamian people, to all take note of the fact that, based on all accounts at the six-month mark of the current fiscal year, The Bahamas has already begun to take steps back from what I characterised in recent years as ‘a fiscal cliff’.

“While this is cause for momentary celebration, it is not a cause for us to rest on our laurels. We must remain steadfast in carefully monitoring our fiscal position, and remain firmly committed to our guiding principles, thereby avoiding the mistakes of the past.”

He also said the rate of economic growth was forecast by the IMF in October 2021 to increase by two percent and eight percent in 2021 and 2022 respectively.

“While the IMF has not yet revised this forecast to account for its latest global outlook, we remain confident that the upward momentum that we have witnessed to date will largely be sustained.

“That said, as I stated earlier, we will need to maintain a cautious and prudent policy stance, and adjust policies as necessary to sustain both economic momentum and the health of the public finances. Labour market conditions in our country have also continued to improve, with the number of persons relying on the COVID-19 unemployment assistance programme administered by the National Insurance Board, decreasing to fewer than 8,000 people at the end of December 2021, from more than 22,000 at the peak of the programme.

“On the prices front, increasing global inflationary pressure has translated into domestic inflation peaking at 4.12 percent in September 2021. In the short-term, we expect inflationary pressures to continue throughout this fiscal year.

“The government and its agencies are the largest providers of goods and services in this economy. This means that the government feels the impact of inflation immediately. Despite this, we are committed to not increasing taxes or fees in the short term as we believe that this surge in inflation is not structural in nature.”

Mr Davis went on to defend his administration’s decision to reduce value added tax to 10 percent from 12 percent. He said as a result, most goods and services were less expensive.

“The lowering of VAT across-the-board is helping to reduce the impact of inflation on Bahamian households, although we recognise that the effect of the reduction is harder to appreciate in a time of rising prices. Nonetheless, 95 percent of goods and services are less expensive than they would otherwise have been because of the reduction in the tax burden.”

He said there was also favourable improvement in the tourism market, saying while still below pre-pandemic levels, the industry has continued to improve with year-over-year increases in stopover and cruise ship visitors.

“The strengthening of the tourism sector ensued from the reopening of international borders and relaxed travel restrictions as compared to the previous year. Visitor arrivals in the last quarter of 2021 totalled 1.2 million, a significant improvement over the 55,000 arrivals in the same period of the year prior. However, comparative tourism indicators remain far below pre-Dorian and pre-pandemic levels, accounting for only 64.1 percent of 2019 fourth quarter visitor totals. The uptick in domestic market conditions supported an increase in Bahamian dollar deposits in December 2021 to $324.5m, compared with $128.1m in the previous year.”