By Jerry Roker
for Bahamas Press
Faced with a national debt of roughly $7 billion, the equivalent of about 85 percent of the country’s gross domestic product (GDP), huge debt-servicing cost, and an anemic growth rate, the government must act swiftly to prevent any erosion of the economy.
This has predictably set off an intense public debate in which the Government and Opposition have taken starkly differing positions. The Opposition have indicated that they would, for starters, reduce government revenue by eliminating VAT on certain items and reign in government expenditures.
Based on the size of our current deficit, to reduce expenditures to the level where we eliminate the deficit, we are talking about an amount in the vicinity of $300 million. If the Opposition is indeed serious, they only could be talking about public sector job cuts.
The Bahamas’ debt is large; there is no getting around that, and the cost of servicing it, particularly in an economy that is not growing, is stifling.
We must give the government’s debt-management strategy for growing the economy, using FDIs, time to unfold. Direct Foreign Investments and Tourism is what created wealth in our country even before Independence. Now we have an Opposition, who invited the Chinese here, and granted them major concessions to encourage them to invest in our country, now dissing them in the name of politics. This is not only shameful, but it puts at risk the livelihood of thousands of Bahamians, ordinary workers and entrepreneurs.
A lower debt-to-GDP ratio will, indeed, result in a better credit rating for the country and the opportunity to secure lower interest rates on any new debt. The increase of the public debt has been as a result of excessive borrowings, by successive governments, that was driven in part by the expectations of our people.
We always considered ourselves the ‘bid shots’ of the region and even in our personal lives, we have spent more than we made to maintain that image.
The government has to take prudent measures to make sure that the debt-to-GDP ratio does not increase further. If this is not done urgently and the debt-to-GDP ratio and the cost of servicing the debt increases, it could spell more trouble for the country in that the debt could turn out to be more of a suppressant than a stimulant.
It is a fact that any increase in the cost of servicing the debt would take funds away from the treasury which in turn would deprive the economy of much needed funds for its growth and development. It would also take funds away from the social programmes, education and health care.
There are ways to reduce the debt or the cost of servicing it, but the decision rests squarely with the government, which is usually influenced by its advisers. Their advice, while probably well meaning, often reflects partisan or personal interest. For this reason, it is the responsibility of the powers that be to examine the advice through the prism of the interests of the people.
I am certain that the government is aware that because of the debt and the cost to service it, the country’s productive efforts will be denied valuable investment capital, its social systems will not improve, roads and bridges will not be repaired as well as other infrastructure. In addition, increase in production capacity will not continue and jobs will not be created. In the end, the people’s interests would not be best served.
This is no time to play politics. Our future depends on the execution of sound public policy and not irrational xenophobic, hateful, rhetoric as practiced by those oppose by to the government.