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The rubber and the road

FNM fails to produce economic growth plan
  • Dr. Hubert Minnis.

  • Peter Turnquest.

  • Philip Brave Davis.

Managing Editor

Published: Jul 12, 2017

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Unparalleled boldness and shamelessness dipped in rank amnesia clearly prompted opposition leader Philip Brave Davis to lay the new downgrade threat from international credit ratings agency Moody’s fully at the feet of the Minnis administration, but the new government certainly has yet to demonstrate that it has a clear plan to bail The Bahamas’ economy out of the doldrums and set our fiscal house in order.

The Progressive Liberal Party (PLP) is responsible for any near-term action taken against us from any ratings agency.

And it is starting to feel like another downgrade is on the horizon.

Late last week, Moody’s placed The Bahamas’ Baa3 credit rating on review for downgrade.

It said the review was prompted by statements from the Minnis administration “that The Bahamas’ fiscal position was weaker than previously estimated and that the government’s debt ratios will continue to worsen over the coming years”.

Moody’s advised that the review will focus on evaluating the credit risks posed by ongoing economic and fiscal challenges, taking into consideration the recent revelations of fiscal deterioration as well as the new government’s proposals to arrest this deterioration”.

Davis suggested that the new administration has prompted the review by overblowing the state of public finances.

The former deputy prime minister found it “troubling” that Moody’s has decided to put our rating under review.

“It is rather troubling, because I look at the reasons proffered by them when they downgraded us last year,” Davis said.

“The reasons seem to be grounded on two issues: One was the opening of Baha Mar, which they had little confidence would happen, and then, secondly, they recognized that Hurricane Matthew had interrupted the economy in such a way that our recovery efforts, plus the loss of revenue, inspired them to downgrade us.

“It is troubling that all of the issues raised for the downgrade last year have been, in my view, resolved and they are still foreshadowing a further downgrade.”

Apart from seeking to distance the recent administration from any culpability eight weeks after it left office, Davis’ recollection of issues connected to downgrades in the last year was fuzzy.

He confused Moody’s with Standard & Poor’s (S&P), which downgraded our sovereign credit rating to junk status last December, pointing to “subdued” activity during most of 2016 and “economic disruption” caused by Hurricane Matthew.

Standard & Poor’s gave a stable outlook for The Bahamas’ economy, saying that it hinges chiefly on the potential success of the newly restarted Baha Mar project, as well as smaller tourism developments, and the country’s steady stream of tourists.

At the time of Moody’s last downgrade of The Bahamas in August 2016, there had not yet been a Hurricane Matthew.

Moody’s pointed to dismal economic growth, ballooning debt in recent years and the Christie administration’s inability to meet its own projections. Davis is either being disingenuous, or he just does not remember the details of these matters.

But his suggestion that the Christie administration left office with the concerns of the ratings agencies being addressed could not be more far off. Those issues were not addressed.

The Christie administration is for sure responsible for our lingering fiscal crisis.

Recent revelations on its wild spending spree in the weeks before the recent general election demonstrate that the former government was far from responsible, disciplined and cautious, especially as the times demanded even greater controls on how public funds were being administered.

Two months after the election, the Progressive Liberal Party (PLP) ought not point a critical finger at the new administration while failing to see that its own action, or inaction, led to the current state of affairs.

That it acts in this manner is insulting to intelligent Bahamians.

PLP leaders would be silly to continue to take this ongoing posture. We do not see how they or the party would benefit.


Admittedly, the new minister of finance, Peter Turnquest, and the entire Minnis administration have had to deal with demands from the public for full disclosure, and balance those demands against the knowledge that revelations about the depth of the fiscal crisis — telling the true story when others have disingenuously painted a picture of progress and order — could trigger action from ratings agencies.

It would be wrong for the new administration to mislead on the state of our finances.

But it should exercise good judgment in dealing with these issues we face.

While Davis and others of the former administration could not absolve themselves of culpability, should Moody’s downgrade The Bahamas in the near term, there is a need for the new government to lay out clearly its plan to jump-start the national economy, which has not grown in years.

The Minnis administration did ring dire alarm bells and immediately brought resolutions to borrow $722 million.

A slow start to Baha Mar, a high debt-to-GDP ratio, low savings in the economy and an absence of a strategic economic growth plan will likely continue to pique the interest of ratings agencies like Moody’s and S&P.

During the budget debate last month, various ministers as well as the prime minister made stunning revelations about the Christie administration’s wastage of public funds and poor decisions that worsened an already bad fiscal situation.

The revelations fed the public’s appetite for someone to go to jail for corruption or someone to be found guilty of misfeasance.

The public has been told that certain campaign promises by the FNM have been shelved because things are much worse than the Free National Movement realized while it was in opposition.

The Minnis administration has put off a plan to eliminate value-added tax (VAT) on breadbasket items, children’s and babies’ clothing, healthcare, insurance, electricity and water bills.

It has also said it will not provide tax relief for Over-the-Hill communities at this time — a key pledge in its campaign.

Things are just so bad that those things are not priority items, according to the finance minister.

Moody’s noted in its new statement “the new government now expects the deficit in fiscal 2017 to reach $500 million (5.5 percent of GDP). This contrasts with the PLP’s mid-year performance report presented in March, which estimated a deficit of $350 million (3.8 percent of GDP), and an estimated deficit of $100 million (1.1 percent of GDP) in the original fiscal 2017 budget”.

Turnquest reported during his budget communication three weeks after the general election that the revenue shortfalls and accelerated spending of the former government contributed to a backlog of payments and commitments in excess of $300 million.

Davis tried to defend the former administration, but delivered a feeble defense.

Although he was minister of works, he could not explain decisions on various projects that became the highlights of the budget debate in that they demonstrated very strongly egregious actions that led to tens of millions of dollars being wasted.

Turnquest has said the FNM administration will facilitate more “expeditious reduction and elimination of the GFS deficit”.

He promised more transparency and accountability relative to the government’s fiscal operations.

Moody’s observed, “A positive note is that the FNM decided to delay the implementation of some tax breaks, a campaign promise, until after 2017/2018. That said, the weakness of the economy is likely to weigh on revenue growth over the coming years.”

The government’s number one priority right now ought to be trying to figure out how to attract investments and grow the economy.

In opposition, Prime Minister Dr. Hubert Minnis promised to appoint a council of economic advisors. We are not aware that any such council has yet been appointed.

If it has, there is no indication of the work it has started.

While the government will certainly continue to face criticisms from the opposition, led by Davis, the realities of governance call for a clear path out of this mess we are presently in.

Opposition politics is easy business.

In opposition, the field is wide open in terms of what a party or a politician can promise.

Back in January, not long after Standard & Poor’s downgraded our sovereign credit rating in that grim economic report on The Bahamas’ fiscal health and future, Minnis declared the FNM is the only party that can “save The Bahamas” and change its course toward a future where Bahamians are empowered.

He promised Bahamians that if they elect the FNM to office, “we will get our credit rating back to investment grade in short order”.

Minnis said that’s a promise Bahamians “can take to the bank”.

But Bahamians cannot bank on promises in the absence of a plan.

Now in government, it is doubtful, under the circumstances, that the Minnis administration will cause the investment grade rating to be restored “in short order”, as he pledged.

At the very least, the new government needs to demonstrate that it really does have a plan in this regard.

If it fails to in the near term, our prospects for a turnaround may be further off than anyone casting a vote on May 10 could have ever imagined.

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Last Updated on Friday, 14 July 2017 15:56


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