The Bahamian economy: A work in progress
ARINTHIA S. KOMOLAFE
Published: Sep 17, 2013
The term work in progress, or work in process, (WIP) is often used to refer to an unfinished piece of work. In manufacturing, it denotes material that has entered the production process but is
not yet a finished product. The implementation of the much-anticipated budget communication for 2013/14, which was described by Moody’s as having “hit a lot of the right notes”, is now underway. There is no doubt, however, that the ongoing successful implementation and effective execution of the government’s plan to address the economy will be pivotal in the days ahead.
There are indications that the worst of the crisis is now behind the global economy and an apparent albeit sluggish recovery is in effect. On the home front, the government’s fortitude to implement measures to address the country’s fiscal imbalances while still implementing policies geared towards economic growth will continue to be tested.
Addressing economic challenges
There have been similar responses to the financial crisis by countries across the globe with combinations of reductions in government expenditure and boosts in government revenue. The imposition of mandatory and self-imposed austere measures became the norm as countries struggled to control their recurrent fiscal deficits and rising national debt.
The Bahamas’ response in the immediate aftermath was geared towards minimizing the shock to the local economy by public spending on capital projects and welfare programs. In essence, the initial approach focused on damage control with the hope of sustaining economic growth at the expense of deterioration of the nation’s finances. This created a time lag between us and other nations; particularly in Europe and North America in relation to the timeline for confronting the fiscal imbalance created by the structure of our economy over the years and worsened by the economic downturn.
The impact and duration of austerity
In the years following the financial crisis, and as the era of austerity took hold of nations the world over, the IMF provided cautionary words in recognition of the trade-off associated with the imposition of austerity measure. IMF Managing Director Christine Lagarde noted that countries must be careful not to sacrifice economic growth for austerity.
In recognition of the failure of sustained harsh austerity measures to lift the European Union out of its economic slumber, the U.S. earlier in 2013 pressed European countries to ease up on their budget cuts. This was in the aftermath of France and Spain falling short of their budget deficit goals in 2012 and an increase in debt levels across the euro zone. The European Commission President Jose Manuel Barroso, in April 2013, told a conference: “While I think this policy is fundamentally right, I think it has reached its limits. A policy to be successful not only has to be properly designed; it has to have the minimum of political and social support.”
The right mix of policies
The Bahamas, on its part, appears to be at the early stages of its rebalancing effort, as the government announced earlier this year its intention to reduce subventions to public corporations and statutory bodies. This goal was also accompanied with a mandate to these organizations to seek savings and appropriate reductions in their budgets.
There is no doubt that budget cuts have been and should be at the center of any strategy to overcome a national fiscal crisis. Additionally, revenue enhancing initiatives should be implemented to ensure that the government is able to continue its delivery of vital services to the public. However, all of these policies should be administered in the right doses and should not stifle economic growth. In particular, the contribution of small and medium-sized enterprises and the private sector as a whole to economic growth should not be underestimated. It is imperative that we mix the essential adjustment in public finances in addressing the recurrent structural deficits and national debt with appropriate policies for sustainable economic growth and development.
The National Training Agency has now opened its doors to address the oft referenced skills gap that exists within The Bahamas’ workforce. This initiative when considered in conjunction with the commitment of the private sector and the partnership between private entities and the government promises to put a dent in the unemployment figures and provide many young Bahamians with a real opportunity toward establishing a career. An improvement in unemployment data will undoubtedly impact various sectors of the economy and stimulate demand for goods and services.
The recent announcements and subsequent reinforcement of existing programs aimed at fighting crime evidenced by an increase in saturation patrols have been well received by the populace. The importance of national security and the creation of a safe environment for businesses and individuals to thrive is a pre-requisite for economic growth. This is especially true for a nation like ours that relies heavily on tourism and foreign direct investment.
Meanwhile, there are obvious reasons for optimism. Prime Minister Perry Christie has communicated that there are several projects in the pipeline intended to create jobs in the near future, most notably in Bimini and Grand Bahama among others. Baha Mar, although a year away, provides a great light at the end of the tunnel with its promise of approximately 8,000 jobs. Additionally, the government is also proposing new initiatives focused on small and medium-sized enterprises which undoubtedly are the engines of any economy and major creators of job opportunities.
It seems fair to say that 2014 will provide a ray of hope. Added to this excitement is the recent announcement of the public-private partnership between the Bahamas Consulate Office in Atlanta and Baha Mar to initiate a program that will be geared toward encouraging qualified Bahamians to return home to contribute to the betterment of the Bahamian economy. This is a welcomed initiative that should be embraced with open arms.
The work in progress
In order for the government to achieve its goals and meet desired targets, the proper balance must be struck to foster economic growth, effectively collect government revenue and curtail expenditure. As statutory bodies and government-owned corporations embark on their budget preparation exercises for 2014, they must consider the bigger picture in an age of prudence. The government on its part should also provide ample information on proposed plans to enable the private sector and individuals to prepare accordingly.
The plans of the government like that of other countries have evoked and should evoke differing reactions and commentary from various local stakeholders and groups as these discussions are necessary for nation building. The journey to full recovery and sustainable economic growth in The Bahamas will not be an easy one; in fact, it may be painful sometimes as it is a WIP. However, all stakeholders must work together towards the desired destination of economic prosperity.
• Arinthia S. Komolafe is an attorney-at-law. Comments can be directed at email@example.com.