The Tribune

By EARYEL BOWLEG

Tribune Staff Reporter

ebowleg@tribunemedia.net

A TOP financial expert has called for caution in political posturing over ways to ease the burden of inflation, explaining it is easy to “simply throw mud at a wall hoping something will stick”.

Gowon Bowe, Fidelity Bank’s CEO, was contacted after the Free National Movement said Prime Minister Phillip “Brave” Davis can do much more to help Bahamians deal with inflation, and offered suggestions.

The party was responding to Mr Davis urging Bahamians to be frugal with their spending habits due to rising inflation, saying it appears that the country is “in for a rough ride for another few months” based on the predictions of finance experts.

Mr Bowe thinks that “we have to be careful” when speaking about these matters because it is better to have an environment that allows a full briefing and discussion as opposed to “sound bites during ad hoc questions” in public events.

“As inflation started to take hold and we started to see escalation in gas prices, we started to see escalation in some of the consumer goods prices, the belief was okay this, like typical inflationary periods, may be short lived. And if we will now, the world events, are instructing us that the war in Ukraine does not appear to be an abbreviated war and it is actually continuing to rage on and from that perspective, they are ultimately likely to see continued interruptions to shipping costs, interruptions to the supply of inputs, like wheat, commodities, and the like, that we don’t always appreciate goes into the items that we consume.

“So when we look and we make the statement that ‘we are in for a rough ride’ for an extended period, I think that is taking off some of the narrative and communications that have come from various economic fronts. The Central Bank governor has indicated that you know, it is likely not peaked and the reason being is because no one has a crystal ball.”

He continued: “So is the inflation likely to, based on what we’re experiencing today, exponentially grow? The answer’s no. Is it likely to continue at elevated levels beyond what would have been hopeful? And the answer is yes. So I don’t think we are in a circumstance now where we’re expecting there to be, you know, 25 percent increases on prices that we are incurring. So from a bad perspective, it’s not going to be that, however, are we going to see a reversion to the prices we had, let’s say, you know, three years ago, are we going to see that within the next three months? The answer to that is no.”

Mr Bowe explained what it really means is that the expenditure control based on the price of goods is going to continue for at least the next 12 months - that is what people are projecting.

“So the rough ride is not okay we’re going to have these exponential price increases, exorbitant elements where we are further contracted on what we can purchase, but we are going to have these elevated price levels that we are now seeing creep in for a considerable period of time,” he said.

Michael Pintard, the FNM’s leader, argued that the government should cut the tax on gasoline at least until the end of the fiscal year; suspend the VAT charges on a broad range of food staples outside of the listed breadbasket items at least until the end of the year; and expand social welfare vouchers to qualifying Bahamian families that are targeted at support for food rent, cooking gas, and other essentials.

Asked about some of the suggestions, Mr Bowe made his comments about being careful about political posturing versus referencing empirically studied recommendations.

He stated: “And why I say that is, it is easy to simply throw mud at a wall hoping something will stick. When we look at that, and I only call again sound bites because there’s not been a position paper, there’s not been a detailed recommendation document that is laying out, given that they just only recently demitted office, to say well, based on our knowledge of what we left, these are, you know, empirically, the numbers that will bear out so we’ll be able to tell you, you know, what the government can forego, what the government can increase. So you know, when the public is now what I’m going to say evaluating the political parties, we’re looking at a proposal, not the sound bite when yourselves you know, push a microphone or tape recorder in front of them, and give them what I’m going to call an audience without a thoughtful sort of recommendation and thoughtful implementation plan,” he told The Tribune.

“That may sound critical and I say that from this perspective that when you say, I now remove value added tax, the question then comes, okay, what does that do to the government’s fiscal affairs? So if the government loses revenue, okay, that sounds good in terms of to the consumer, I’m not paying that. But if the government loses revenue on one aspect, how do they make that up? If they don’t make it up, then the deficit increases, if the deficit increases, the debt increases, and the debt is now at a more costly interest rate because of our credit rating.

“So the question you have is the poison you pick that - do I want to say to the population, we all need to, internally absorb this and look at how we redirect resources to those who are on the fringes or do we say we make cavalier statements that will ultimately deteriorate the financial circumstances of the country, and then all are left to bear it and, more importantly, the future generations, when we are borrowing against their livelihood in the future,” Mr Bowe said.