Bahamas’ Brighter Days are just ahead of us!
By Arinthia Komolafe
The advent of a new year is often characterized by resolutions containing set goals and objectives for individuals. History has proven however that the achievement of goals is dependent upon the preparation and implementation of realistic plans. The Bahamas just like individuals with New Year resolutions is ripe for the setting of appropriate targets, goals, standards and strategic direction for the modern 21st century Bahamas.
The current administration inherited a sluggish economy, record deficit, high unemployment, a depressed housing market and unparalleled national debt upon assuming office in May 2012. The Bahamas like many other countries in the region and around the world had found itself in the midst of the worst economic and financial crisis since the Great Depression of the early 20th Century. The government was greeted with a zero margin for error, enormous challenges, threats of further downgrades by credit rating agencies and an anxious electorate.
Across the globe, the magnifying glass remains focused on governments’ fiscal policies as well as the governance of government agencies. The Bahamas has not been exempted from this wave. At the height of concerns, the world watches developments surrounding a possible U.S. fiscal cliff, the Eurozone crisis and sluggish growth in China. In just over seven months since assuming office and without the luxury of a honeymoon amidst tough economic conditions, the level of scrutiny of the actions of public officials and government agencies in The Bahamas as expected has increased. This increased demand for prudence, accountability and transparency is imperative for our maturity as a nation and is a welcome development.
It is no news that The Bahamas government is faced with a reality in which public spending/expenditure exceeds and continues to overtake revenue, hence the current high fiscal deficit and rising unsustainable national debt. However, the entire country seems to either not be sensitized to the severity of the current challenges we face or we as a people are in denial. We cannot bury our heads in the proverbial sand and hope that the deficit will miraculously disappear and the escalating national debt will vanish. It was therefore fitting for the Minister of State for Finance to state that the country’s fiscal matters need to be addressed now due to the “seriousness of the situation”. The government could however do a better job in communicating the state of the country’s financial affairs with the populace and emphasize that everyone has a role to play if we are to overcome these challenges. In the words of British Prime Minister David Cameron following a discussion of the Autumn Statement in 2012, “everyone must make a contribution” towards paying down the deficit.
Confronted with the urgency of now and in preparation for the 2013/14 budget communication, the government must also implement and communicate its strategic plan to grow the economy, reduce the deficit and contain the national debt by setting specific targets over the coming years in the national interest. The targets within such a plan must however be realistic and achievable without further worsening the country’s current fiscal position or further slowing the economy. For example, the United Kingdom’s Office for Budget Responsibility (OBR) forecasts the UK’s deficit will fall from 6.9% in 2012 to 6.1% in 2013, 5.2% in 2014, 4.2% in 2015, 2.6% in 2016 and 1.6% in 2017. The OBR has also provided forecasts for economic growth, net debt reduction and debt interest payments. The OBR forecasts that the UK government is on course to eliminate structural deficit in five years.
As our deficit is seen as structural in nature as well, the government must devise a plan through necessary reforms to eliminate this deficit within a specified timeframe. The impact of a turnaround or rebound of the U.S. economy on the Bahamian economy will be minimal unless the requisite structural economic and fiscal reforms are made by The Bahamas government through decreased public spending and an increased revenue base. It must be emphasized that any proposed plan must be realistic and achievable.
The general consensus that we must focus on reducing deficits and debt levels in the midst of decreased revenue and slow economic growth should also flow into the governance of public corporations and government agencies; they must follow suit in line with the overall fiscal and economic objectives of the government. Public corporations like their private sector counter-parts are faced with balancing low revenues with rising costs. Public corporations and government departments or agencies must be proactive in reducing their costs through structural changes. A blanket reduction in staff levels and mandating of random percentage cuts in allocations may not get the job done if implemented in isolation without a plan; they may actually prove to be counterproductive. The responsibility should be placed on the boards and management teams of these entities with prudence as the mantra in spending, budgeting and project approvals.
Public corporations and government departments/agencies must prioritize the allocation of funds without compromising the goals of their respective organization and/or impeding the delivery of services to their customers. Good and effective corporate governance of these entities is especially vital in order for the government to achieve its goal of addressing the fiscal problems in which the nation finds itself. Considering the fact that public sector wages and benefits account for just under 50% of the annual government budget, we must continue to demand good boardroom practices and proper management of taxpayers’ funds.
More importantly, we – the Bahamian people must unite to confront the crisis that we face and be willing to make sacrifices in the interest of generations yet unborn. Diverse interest groups and trade unions must be mindful of the aforementioned realities in their negotiations. While the government may feel constrained to deliver on certain promises made to provide relief to struggling homeowners and businesses impacted by the New Providence Improvement Project by allocating funds that in reality it cannot afford to spend, government officials must not lose sight of the bigger picture. Entities such as the Bahamas Mortgage Corporation, Bahamas Broadcasting Corporation, Bahamas Development Bank, Bahamasair, Bahamas Electricity Corporation, Water & Sewerage Corporation and regulatory bodies etc. that rely upon government subvention to survive should be extremely prudent in their apportionment of funds for their operations and develop viable plans to reduce their dependence on the government as well as strain on the public purse.
Reduction in government spending is never an easy task; however, individuals that oppose such a measure must rationalize whether they are in favor of increased taxes or higher costs of borrowing in a sluggish economy or both. A comprehensive plan to address our financial woes must be developed, communicated to the Bahamian people and supported by a commitment by the government. The Bahamas must position itself for regional and global participation and competition. There is considerable ground to cover but our leaders today must be reminded that if we refuse to make tough decisions today, future generations of Bahamians will have to make even more tough decisions tomorrow. In this sense, we have truly entered the age of prudence.
Arinthia S. Komolafe is an Attorney-at-Law. Comments can be directed at email@example.com.