By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Government must not “hold its cards close to its chest” if it knows it will miss this year’s $131m fiscal deficit target by a significant margin, a senior Bahamian banker warned yesterday.
Gowon Bowe, Fidelity Bank (Bahamas) chief executive, told Tribune Business it is “better for credibility’s sake” for the Government to be open and transparent over whether will meet its financial projections given that data for the 2023-2024 first half showed it is “highly unlikely” to hit its full-year deficit reduction target.
With the Davis administration due to unveil its Budget for the upcoming 2024-2025 fiscal year next Wednesday, he urged it to abandon “old-style politics” where successive administrations have adopted the attitude that Bahamians should only be told “what they need to know” and what is good for them as opposed to being frank about the country’s problems.
Mr Bowe told this newspaper that he is looking for “a proper debrief” on the Government’s fiscal performance for 2023-2024, and whether both revenues and spending have either met, exceeded or missed the targets and expectations set, and the reasons for this. He argued that this is “even more critical” this Budget than in past years given the “milestone” 75 percent deficit reduction target that was set for 2023-2024.
“What I would hope to, and need to, see - and we don’t often get it - is a proper debrief on what transpired this year,” the Fidelity Bank (Bahamas) chief said. “This year is even more critical than recent times because there was a projected significant decline in the deficit.
“There’s still significant uncertainty as to whether they [the Government] recognise the deficit will not be met. Why I say that is, listening to the utterances of the Government, there isn’t a definitive statement that the original Budget will be met. The language is that we will not revise the original Budget, and have seen positive trends, but that doesn’t mean they’ve given a forecast for what the actual outturn will be.”
The Government, in the original 2023-2024 Budget unveiled almost exactly a year ago, forecast the GFS deficit would be slashed by some $400m to $131m - a sum equivalent to 0.9 percent of Bahamian economic output or gross domestic product (GDP). Mr Bowe agreed it was “fair to say” this year’s deficit “will be significantly less than” in recent COVID-impacted years, but it “warrants a significant debrief”.
An April 2024 presentation to international investors, capital markets and The Bahamas’ creditors revealed that the Government is not shifting from that $131 target. But, when asked how confident he is that the 2023-2024 Budget will meet the administration’s goals, Mr Bowe replied that it is “highly unlikely” to meet its deficit targets based on the first-half outcome and long-established trends.
While the fiscal year’s third quarter, representing the three months to end-March 2024, traditionally generates a small Budget surplus as it coincides with the revenue-rich period encompassing peak winter tourism, Business Licence fees, the bulk of real property tax payments and commercial vehicle licensing, the Fidelity chief acknowledged it is “not a drastic surplus”.
The Government produced a small $30m-plus Budget surplus during the first four months of 2023, which fell in the prior fiscal year. While the Ministry of Finance has provided no update on the current fiscal period since the mid-year Budget and end-December 2023 figures, there are some signs that - instead of a small surplus - the Government may have run a small deficit for the early months of 2024.
The Central Bank’s latest quarterly statistical digest, published earlier this week, revealed that the total national debt grew by $70m quarter-over-quarter between the second and third quarters of the current 2023-2024 fiscal year to hit $11.849bn at end-March 2024. And the Government’s direct charge, or debt, rose by almost $87m over the same period.
Mr Bowe, meanwhile, added that the final three months of the fiscal year typically represent “a difficult quarter” because this is when the tourism peak has passed and ministries, departments and agencies “rush to pay all the bills” before the June 30 year-end. The April-June period typically sees the Government incur $200m-plus deficits, which will add to the $259m in ‘red ink’ incurred during the first half.
The International Monetary Fund (IMF) previously forecast that the 2023-2024 deficit will be almost triple, or three times’ greater, than the Government’s forecast at around $378m. And, based on what is known to-date, Mr Bowe told Tribune Business: “I think it’s highly unlikely that the $131m will be met.”
And, although the Davis administration has remained wedded to this forecast, he added: “I think, for credibility’s sake, it’s better to forecast what you are projecting than holding on to the original Budget. If you have information that is not going to be met, this is not one of the times to hold the cards close to your chest.”
Comparing the situation to the disclosures that Fidelity Bank (Bahamas), as a publicly-traded and listed company, has to give shareholders on its financial performance, Mr Bowe argued that the Government should adopt the same mindset and approach to its fiscal performance.
“I think the Government needs to look at themselves in the same way,” he added, “as reporting to its shareholders where it sees the fiscal performance actually turning out, and there will be no loss of credibility if it’s not meeting its targets provided it’s done the proper analysis and knows the reasons why.
“It’s old-style politics: Tell the people what they need to know as opposed to new-style politics. People have access to information, so it’s best to prepare and forewarn them so you show knowledge about what’s happening and be transparent.
“For the last 20 years, the last two quarters of the fiscal year have never been a surplus from living memory. The third quarter is, because that’s a major revenue bump but, in the absence of a BTC share sale and government selling an asset, the fourth quarter deficit remains the same,” Mr Bowe continued.
“What I demand from the Budget is a proper debrief of where we are fiscally because this is a milestone year. This is one where we’re projecting record tourism visitors, and we did that in 2023. It’s one where we’re projecting a significant decrease in the deficit. We need to have an understanding have an understanding of whether that has been achieved rather than a last-minute refinement.”
Noting that the 2023-2024 half-year deficit represented a near-$20m year-over-year decline, compared to the prior Budget year’s $279m, the Government’s investor presentation last month said: “The fiscal deficit narrowed by 7.2 percent on a year-on-year basis even as one-off capital expenditures materialised, which are expected to normalise during the second half of the year and lead to a deficit of 0.9 percent of GDP versus 3.8 percent in fiscal year 2022-2023.”
It is impossible to judge how close the Government is to achieving that GFS deficit goal, which measures by how much its spending exceeds its revenue income. This benchmark does not include debt principal repayment, meaning the $131m or 0.9 percent of GDP represents net new debt that will further add to the $12.748bn in total Bahamian public sector debt.
No fiscal figures have been released since those for the six months to end-December 2023 were unveiled with the mid-year Budget, and last month’s investor presentation similarly did not reveal any data beyond year-end. The Ministry of Finance has yet to unveil the monthly reports on fiscal performance for January, February and March 2024, along with the quarterly report covering those three months.
Comments
Porcupine 7 months ago
So Mr. Bowe, there's no difference between "holding your cards close to your chest" and deliberate deceit? You running for office?
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