The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A member of the original Fiscal Responsibility Council is warning that “every day we go without it is a day that retards our fiscal progress” amid signs the Government is moving to finally re-establish the watchdog.

Gowon Bowe, who was the Bahamas Institute of Chartered Accountants (BICA) representative on the inaugural Council created by the Minnis administration, told Tribune Business that “at least three persons” - who he declined to identify - have recently reached out to him to gain a better understanding of its purported independence and how it works.

And, while no formal appointments have been announced, at least one of this newspaper’s contacts has confirmed they have been approached by the Government to sit on a body that was formed to examine whether the Government’s annual Budget, Fiscal Strategy Report and other measures align with set fiscal responsibility targets and principles.

These developments signal that the Davis administration appears to be moving, albeit slowly, on the Prime Minister’s late-May pledge to re-establish a Fiscal Responsibility Council that has not properly functioned for more than a year. The International Monetary Fund (IMF), in its recent Article IV statement on The Bahamas, described the Council’s reformation as “welcome” but said members must be “independently selected”.

That references the fact that the new Public Finance Management Act, which came into effect in 2023, changed the process for selecting and appointing Council members. It switched this from recommendation by the House of Assembly speaker to being appointed by the minister of finance (currently the Prime Minister), who is responsible for the very ministry they are supposed to be scrutinising.

Mr Bowe, who confirmed that he discussed the fiscal watchdog’s importance with the visiting IMF team, told Tribune Business that while the minister of finance’s involvement represents a “watering down” of the Council’s perceived independence there are ways to mitigate this if the appointment process is fair and transparent. And the candidates put forward for selection must also be competent and objective.

“It’s the same message,” he said. “Every day we go without the Council is a day we retard our progress with regard to fiscal responsibility. The purpose behind the Council was for it to serve as an independent reviewer and assessor of the work done by the Ministry of Finance to give the public confidence it will stand up to scrutiny by the best and brightest minds in the country.”

Reiterating that the watchdog was never intended to be “a rubber stamp”, Mr Bowe said that while there have been no formal announcements regarding its reformation and membership several persons have contacted him to obtain an understanding of how the inaugural body operated.

“I have heard they were looking at various appointments, but I’m not aware of them making final appointments or reappointing those there previously,” he added. “I’ve had at least three people reach out to me for a perspective on its history and effective autonomy, and to find out the functions and how it operated. Those persons are certainly competent and I see them as independent.”

Philip Davis KC, in unveiling the 2024-2025 Budget, pledged: “In accordance with the Public Finance Management Act, and to ensure prudent fiscal management, this Budget year we are appointing both the Public Sector Audit Committee and the Fiscal Responsibility Council.

“The Fiscal Responsibility Council will assess compliance with the general principles, fiscal responsibility principles and fiscal objectives, and advise on fiscal and budgetary matters of the Government.” This was picked up by the IMF on its recent visit, and it said: “The reconstitutions of the Fiscal Responsibility Council and the Public Sector Audit Committee are welcome. Members of both should be independently selected.”

However, the minister of finance’s role in the appointments has led many to refer to the ‘fox guarding the hen house’ scenario, given that Council members will be responsible for scrutinising the work of the very person who selected them. Mr Bowe, though, argued that while it is possible to mitigate these concerns via a fair and transparent nomination process, “we want to see independence in fact and appearance”.

“I met with the IMF in my former capacity as a member of the Fiscal Responsibility Council,” he added. “I was the one that said to them it does need to be properly constituted and to be effective. They’ve always expressed the reservation in terms of how we achieve independence and objectivity.

“I think they’re looking to see what the new membership looks like and if they are appointed by a clear and transparent process that also demonstrates the individuals are competent and independent.... If it appears to be political appointments or friends of the administration then I think we’ll see criticism in terms of watering down the appointment process.

“I think the IMF certainly wants to see that body fully functional however it is done.” Mr Bowe said that, based on the identities of the persons who have contacted him regarding the Council, the Government “appears to be going down the path, but if they are not clear and transparent appointments it starts to leave itself open to scrutiny and questions”.

Acknowledging that “the minister [of finance] should not be the one choosing his judges”, he argued that the Council’s membership should be chosen from a nomination process where multiple qualified and competent persons are recommended. If the process was open and transparent, and the names of all candidates publicly known, Mr Bowe said this could lessen some of the conflicts created by the minister’s role.

“The purpose and role of the Council is to independently challenge the work of the Ministry of Finance,” he reiterated. “It has the responsibility for making recommendations for improvement in the fiscal management process, whether that’s systems, whether that’s the process for determining the debt management strategy, the process for determining the fiscal management strategy.”

While auditors scrutinise the Government’s finances at the back end, Mr Bowe said the Council’s role is to test and validate its forecasts and economic models plus the assumptions and data upon which they are based to determine fiscal predictions are sound. “I know we have so many things we as a country are seeking to address, but sometimes we need to pick the low hanging fruit,” he said of the Council.

The original Fiscal Responsibility Council released just two assessments - on the 2020 Fiscal Strategy Report and the 2021-2022 Budget. Besides Mr Bowe, its other members included Christel Sands-Feaste, the Higgs & Johnson attorney and partner, representing the Bahamas Chamber of Commerce and Employers Confederation (BCCEC); Khalil Parker KC, who holds the Bahamas Bar Association’s seat; and Dale McHardy from the University of The Bahamas (UoB).

Holland Grant, the Bahamas International Securities Exchange’s (BISX) chief operating officer, had previously replaced Kevin Burrows as the Chartered Financial Analyst (CFA) Society of The Bahamas representative, bringing the Council’s membership back up to the mandated five.

All were appointed under the statutory regime that was repealed in 2023 by the new Public Finance Management Act. The latter changed the process for selecting and appointing Council members, switching this from recommendation by the House of Assembly speaker to being appointed by the minister of finance (currently the Prime Minister), who is responsible for the very ministry they are supposed to be scrutinising.

As a result, the existing Council members no longer consider themselves appointed given the absence of formal notification or confirmation as to their standing by the Davis administration. This has resulted in the independent fiscal watchdog’s work grinding to a halt.