Minister of Finance Peter Turnquest has failed miserably in trying to put a happy face on what was one of the bleakest statements on the government’s fiscal position that we have ever heard
Turnquest, himself one of the harshest critics of deficits due to hurricanes, has now apparently found religion.
All the lofty projections now mean nothing.
The painful VAT hike that punished Bahamians who voted for this adrift government, seems to have been all for naught.
More borrowing, likely more cutbacks, more unemployment and a BPL tax as the cherry on top.
There is no denying that Hurricane Dorian, the most devastating storm The Bahamas has ever seen, was bound to have an adverse impact on government revenues and expenditure.
But based on the prime minister’s own characterization, what we see is a lazy government lacking innovation that once again retreats to the pure madness of borrowing and taxation. We will have more to say on the BPL rate reduction bond in due course.
Having borrowed well over $2 billion to date, the government now plans on borrowing another $500 million; not to mention the $650 million Bahamas Power and Light bill this administration plans to stick on the Bahamian people.
This is a record level of borrowing.
It is all as a result of this administration being too focused on managing deficits rather than improving the cost of living and fostering economic growth.
Had the government focused on fostering a stronger economy the impact of this shock would not have been so sharply felt on the economy.
The Bahamian people cannot bear much more.
As I asked with the BPL rate reduction bond: What exactly is the use of funds of the $500 million being borrowed?
This administration tends to use the tactic of throwing huge numbers out to shock the public into stunned silence.
But these questions must be asked.
Is this money solely being used to mitigate the fallout from Dorian or are we seeing an opportunity being seized to cover for the government’s own poor planning and lofty, unmet revenue projections of the past?
What is the state of refunds and vendor arrears given this administration’s boast of achieving its prior year deficit targets?
Can vendors and creditors expect further delays that will further slow the economy by cutting off the tap?
This Fiscal Strategy Report is the first major test for the credibility of the Fiscal Responsibility Council.
We note that there appear to be two major omissions:
Firstly, there is no mention of the fiscal or economic impact of the pending electricity rate reduction bond.
The impact of a electricity increase would likely reduce local consumption, which would reduce revenue while increasing what the government itself spends on electricity.
This is a recipe for a recessionary impact on the economy, despite the minister’s protestations.
Secondly, where does the report speak to the costs of this new potential borrowing given that it intends to raise $500 million to bolster government coffers and another $650 million to bail out BPL; from the market at the same time?
From whom will this money be borrowed and at what rate?
We suspect the government does not yet know.
How is proper budgeting possible without this information?
This is symptomatic of a government bereft of ideas.
The international markets are likely to be concerned given the very public turmoil in BPL over the past two years.
Hopefully, the government will seriously take advantage of local liquidity, while not raiding our National Insurance fund.
We also don’t believe this report includes a credible estimate of revenue collection, even with the Dorian adjustment.
Last year, revenue was over $230 million below target without any hurricane impacting The Bahamas.
In the first quarter of this fiscal year, revenue performance was not significantly different from last year.
So, conservatively revenue might be $400 million below target this year.
So, this means that the borrowing estimate is perhaps $230 million below what it needs to be for the government to function.
We also note that the majority of the Inter-American Development Bank contingency loan is still not drawn down.
As a result, there is no potable water in Grand Bahama, hurricane debris remains uncollected in Grand Bahama and the Abacos, and contractors who worked in the immediate aftermath of the storm remain unpaid.
Government must stay focused on speeding the recovery and restoration efforts as doing otherwise will have a continued dampening impact on the economy.
The Progressive Liberal Party looks forward to the review and report of these matters by the Fiscal Responsibility Council as the government has completely lost credibility and does not inspire confidence.
Collectively, this government’s policies and mismanagement are more likely than not to inflict even more pain on the Bahamian people.