BP SUNDAY SPECIAL – PM said he increased VAT to avoid devaluation – but the Central Bank has more than $1.6 Billion in US dollars, which is more than double the international benchmark on securing our parity with the dollar….
Nassau – An argument has ensued following Prime Minister’s reasons for the 12% VAT increases come July 1st. He suggested that the VAT increase was done to avoid devaluation of the Bahamian dollar. Now clearly this statement proves that Peter Turnquest and the Prime Minister do not know what the hell they are doing.
It further suggests that both men do not understand how the Bahamian economy works. PM Minnis should not spread rumours about devaluation of the Bahamian dollar unless he can first get proper advice on how our fiscal parity works.
Opposition Leader Philip Brave Davis drove home the point when he noted, “The Prime Minister blamed the threat of devaluation of the Bahamian dollar, a monetary and credit policy issue, for raising taxes to defray the government’s day to day operational expenses, a purely fiscal policy issue. Monetary policies are in the purview of the independent regulatory agency, the Central Bank of The Bahamas”
The PM should stop the fear mongering and give us the real reasons why he has decided to tax the Bahamian people to hell! It was the PM himself who promised the Bahamian people to remove VAT if he got elected. But now he is doing the reverse! And let us help him understand this economy first.
1) Devaluation is a monetary decision, which is charged by the independence of the Central Bank of the Bahamas. The bank maintains the controls of US Reserves against the Bahamian dollar.
2) If we followed the Minister of Finance’s Budget Communication, he confirmed that US Reserves in the Central Bank “…. increased by a notable $513 Million to $1.4 Billion by the end of 2017.” According to the Minister, this is almost double the international benchmark.
3) Readers should also note that under our current FX regime…The Bahamas cannot devalue its Bahamian Dollar because we are pegged to the US$ …pegs have a range. The idea of devaluing the B$ would mean we would break the peg and open up the capital account and a free FX exchange. The Prime Minister and Minister of Finance should note that our economy is not built on that model.
And so let’s conclude this article. If our reserves are, according to the Minister for Finance, near double US benchmarks and the fact that our regime is based on the FX regime, how did the Prime Minister come to his absolutely nonsensical conclusion as to increasing VAT? There is more than enough money to maintain reserves. We have increased reserves up to the first quarter of 2018 being $1.6 BILLION USD sitting in the Central Bank. The Bank would tell us the currency is more than safe and secure, so how did the Prime Minister come to his conclusions?
We ga say it like this: Minnis dem don’t know what they doing and BP is not even an economist!
We report yinner decide!