Now May Be a Good Time to Ease the Tight Credit Controls on Commercial Banks In The Bahamas

The restrictions on domestic banks in The Bahamas were put in place to protect the country’s foreign reserves from being depleted, according to the governor

Governor Hints That Lending Controls Will Soon Be Lifted

By Candia Dames

Journal Staff Writer

candiadames@hotmail.com

Nassau, The Bahamas

06/07/04

The restrictions on lending imposed by the Central Bank more than two and a half years ago are likely to be lifted some time this year, Governor Julian Francis hinted Sunday.

Mr. Francis, who appeared on the Radio Love 97 programme “Jones and Company”, was asked to respond to a suggestion made by the Prime Minister in his recent budget communication that now may be a good time to ease the tight credit controls.

“These controls were meant to avoid the economy from overheating at a time when the conditions around us on the outside have not been strong,” he said.  “That’s been the whole purpose of these controls and I personally believe…we’re very close to that period being over.”

The restrictions prevent commercial banks from lending more money than they are collecting in loan repayments.  As a result, some bank executives say there is a whole lot of money that they are being restricted from lending and their profits are suffering.

The restrictions were put in place to protect the country’s foreign reserves from being depleted, according to the governor.

Mr. Francis also pointed out that the controls were imposed at a time when the United States economy was going into a recession, but he said there have been clear signs that the U.S. economy is on its way to full recovery.

“We haven’t in all respects began to feel the full effects of that,” he said.  “The Bahamas economy is absolutely on the way back and generally speaking we expect, for example, that during the course of this year that the economy will experience growth of something like two and a half to three percent on average.”

Mr. Francis said this level of growth has not been felt in any great way during the first half of 2003, but it is expected to become evident during the latter half of the year.

“We’ve said for the last three or four months that as soon as it is clear and we are satisfied that the recovery is on the way and on track, we will be looking at how to lessen the restrictions which have been put on the banking system or removing them altogether,” he said.

“We’ve said that on a number of different occasions and we have monitored this on a monthly basis.”

He recognized that the government would like to see the controls lifted as soon as possible because it has implications for the expansion of the economy as well as for government revenue.

“The Central Bank is entirely sensitive to that issue and I can tell you that our position has been that within our meetings deliberating on this, that we would not delay more than is absolutely necessary once we are satisfied that the conditions are right for removing the restrictions,” Mr. Francis said.

But he cautioned that lifting the restrictions will not result in an automatic economic boom.

“The economic activity which is internally generated is limited and it’s not entirely true to think that by expanding credit you’re going to create any particular level of economic activity,” the governor said.  “The stimulus from our economy comes from the outside.”

Mr. Francis said the economy is about to enter a period of “very strong” growth that is being generated by various foreign investment projects.

“I firmly believe that the next five years in The Bahamas for this reason are going to be years of pretty strong growth and development,” he said.

The show’s host, Wendall Jones, then asked, “So, we’re entering a period of boom?”

Mr. Francis said, “I think in many ways, quite possibly, we are.  I don’t yet know if boom is the way to describe it, but I think we’re talking about a period of fairly strong growth.  I think it’s a good opportunity to do some of the things that we want to do.”

For example, he suggested that now may be a good time to downsize the public service and make it more efficient, given that many jobs will soon become available in the private sector.

“We have an opportunity to make these kinds of hard decisions,” Mr. Francis said.  “You can do these things when times are good.  It’s when times are difficult and bad and jobs are hard to come by that it’s difficult to make these kinds of reforms.”

The Bahamas Central Bank Governor, Julian Francis Contradicts Prime Minister Perry Christie on the Amount of the Nation's National Debt

The Central Bank Governor said that The Bahamas national debt is now around $2.4 billion, which is 42 percent of GDP.  But last week, the Prime Minister said the debt was just under 40 percent of GDP

The Governor of the Central Bank of The Bahamas Warns Also that The Bahamian Government Must Prevent A Fiscal Crisis Later - By The Containment  of The Country's National Debt Now

Bahamas Debt Warning Issued

By Candia Dames

Journal Staff Writer

candiadames@hotmail.com

Nassau, The Bahamas

06/07/04

Governor of the Central Bank Julian Francis on Sunday contradicted Prime Minister Perry Christie by revealing a level of debt that is higher than what the nation’s leader pointed to during the budget debate last week.

Mr. Francis also warned that the government must move now to contain the national debt to prevent a fiscal crisis in the future.

“We can’t continue to add to the national debt indefinitely,” said Mr. Francis, who was a guest on the Radio Love 97 Programme “Jones and Company”.

Mr. Francis said that the national debt is now around $2.4 billion, which is 42 percent of GDP.  But last week, the Prime Minister said the debt was just under 40 percent of GDP.

Countries that go beyond the 40 percent mark are considered to be entering the danger zone in terms of fiscal management.

Mr. Francis said, “So you can see, we’re already marginally above that number at 42 percent.  That doesn’t mean that all of a sudden we are bankrupt over night or anything like that, but it does mean that you don’t want to go much further than this.”

He pointed out that since 1984, the national debt has increased from 25 percent of GDP to the present figure of 42 percent.  This increase spanned three different administrations, he reminded.

“There is a tendency on the part of our country to accumulate debt in order to balance the budget of the government and what I am saying as the spokesperson for the Central Bank of The Bahamas is that this is getting to the point where we should not see this as a continuing option,” said the governor, who stressed that he was not attempting to create alarm over the situation.

He agreed with the Prime Minister that the national debt is less of a concern because most of the debt is domestic.

“I accept that idea,” Mr. Francis said.  “It would be of a much more important concern if it were substantially in foreign currency.”

With the budget debate ongoing, there has been much talk about the national debt and the projected deficit of $164 million.

“The fact that there is a deficit means that the government has to borrow to fund that deficit and any borrowings by the government have to be paid back at some point,” Mr. Francis said.

“What I am saying is that there is a point where we need as a people to recognize the fact that we’ve probably reached a level of borrowing that should not be too easily exceeded, except during very, very important emergencies,” he added.

While on the Sunday programme, Mr. Francis again highlighted the need for Bahamians to pay higher taxes.

It prompted the show’s host, Wendall Jones, to ask, “Do you think that it is proper for the Governor of the Central Bank to be making statements about the need to have an increase in taxes at a time when the Prime Minister and Minister of Finance has introduced a budget and has said that he is not going to increase taxes?  Isn’t that walking out of step with the Government of The Bahamas?”

Mr. Francis responded, “Well, no.  I don’t think so and I am sure that the government would agree with me on this.  The role of the Central Bank, which is an entirely professional institute, is to be a kind of monitor, in a way, almost a police on these kinds of issues.”

He added, “I have not sought and I don’t think that it is appropriate in fact to put myself at odds with the government on these kinds of issues, but it certainly does not prevent me – and I think that we have to be extremely careful about that.  If we get to the point where there can only be one view expressed, then I think it changes a bit the character of our country.”

Mr. Francis said his intension is not to criticize the government, but to sensitise Bahamians to the fact that there is no such thing as “a free lunch.”

“If we would like to have additional roads, hospital and schools,” he said, “we have got to be ready to pay for that.”

While expressing the need for a higher level of taxation, Mr. Francis also applauded the government’s efforts to improve its system of tax collection.

“You’ve got to collect what you can,” he said. “Don’t misunderstand me all.  I have absolutely nothing at all to say [against] the idea of being more effective in collecting taxes.  I think that is absolutely correct, but I don’t think that will cover the deficit.”

The Plight of Bahamian Consumers in The Bahamas

Bahamian consumers are demanding that quality, honestly and integrity become the hallmarks of any administration in The Bahamas

Bahamian Consumers are demanding medical, financial and privacy protection, better safeguards in managed care and responsible standards on global issues like trade, food safety and the environment

Consumers Corner, The Bahamas

An open letter to the Minister of Consumer Affairs- The Hon., Leslie Miller- The Bahamas

By Charles Fawkes

Nassau, The Bahamas

05/04

HOUSE OF LABOUR:  Dear Sir: Almost two years into your first term as Consumer Minister- on behalf of the Bahamian Consumer Movement and as one of its leading spokesmen, I thought we would send you this open letter to express some consumer concerns.  At the beginning of your government’s term we sent a similar letter to your Prime Minister.  However, two years and thousands of words later your Prime Minister has not seen fit to mention the word consumer in any of his long eclectically speeches.  Our remarks to him was reasonable and balanced, therefore, its with some regret we have to report to consumers that he has not seen fit to positively address in any meaningful way the concerns raised in the open letter to him.

You however are a different kettle of fish.  You are directly charged with consumer affairs.  Perhaps, we will have better luck with you.

To be honest minister, we have shadowed you closely since your assumption of office.  When you attended the FTAA conferences we gave our input and pointed out areas we thought you were not sufficiently strong on.  We howled and protested when you signed away oil-drilling rights and gave away the shop to foreign companies to drill our sea and land beds while extracting only 18 percent for the Bahamian people.  Hopefully, you will seek better advice as you develop our National Energy Corporation.  Quite frankly sir, we see quite a contradiction between you wanting to lower the price of gas for consumers- but when faced with the possibility of finding oil in the Bahamas- offered 82 percent to the oil company and keeping 18 percent for the Bahamas.

And Sir while you promote the Natural Liquefied gas investment for the Bahamas, we wish to register cautions given the full ramification of this project.

In today’s Bahamas, consumers are becoming more assertive when expectations are not met.  It would be a mistake for your government to view our movement as a scrappy group of activist, whistleblowers and skeptics.  As you know Bahamian consumers are demanding that quality, honestly and integrity become the hallmarks of any administration in the Bahamas.  Consumers are demanding medical, financial and privacy protection, better safeguards in managed care and responsible standards on global issues like trade, food safety and the environment.  The numbers of conscious consumers are growing on a daily basis and these numbers are putting pressure on the providers of goods and services, through media outreach and socially responsible campaigns to improve the welfare of consumers generally.  Consumers therefore, wish your administration to address the following concerns:

Firstly, consumers are alarmed over the current situation of rising prices in the food stores and at the gas pumps, the high price of low cost housing, the poor delivery and the high cost of poor medical care, the high cost of low level education, mortgage companies robbing consumers of their dream homes, traffic congestion on our streets, police brutality, the rising crime and murder rate in our country, and the unfair practices of the insurance and banking industries.

Secondly, consumers are seeking legislation to provide privacy protection, E Commerce legislation and a savings and lending disclosure act, and an instant funds act.  In view of the add-on interest controversy, consumers insist the local banking institutions shouldn’t be permitted to engage in self-regulation where interest is involved.  A savings and lending disclosure act should also be instituted.  Further, consumers are interested in the following pieces of legislation that would allow them to deal more effectively with the areas of the economy that affect them most.  A real estate disclosure act, and a fair trade disclosure act, a flood insurance act, a home equity act and a home mortgage disclosure act just to name a few.

Your government has agreed to pay interests on security deposits at Batelco, BEC, and the Water Corporations.  After deciding your government arbitrarily said the deposits would be applied to consumer’s bill.  What happened to all of the consultations on this issue?  To date, there is an excess of $39,000,000 in principal alone owed to the consumers in The Bahamas by the Public Corporations and Cable Bahamas.  If we were to add this compound interest at 5% over an average of 20 years for the Public Corporations and 5 years in the case of Cable Bahamas, we would be looking at a cumulative amount of $121,258,000 or an average of $1,810 per household.

The position of the Consumer Movement is that government cannot decide what to do with consumer’s interests.  We would like to see the interests paid from the day the account opened and not as the government is suggesting as of this year.

Additionally, consumers expect a more active consumer protection department from your government than is being demonstrated.  There are too many breaches of consumer’s welfare that go un-addressed.  For example, in the area of product safety we need laws with teeth that stipulate that whatever the products; the providers should take responsibility for avoiding defects.  When they have evidence of defective products they should remove the unsafe products from the market as quick as they sold them in the market in the first place.  Consumers have a right to expect, an obligation to demand that government consumer protection agencies identify and take effective action where there is a major safety problem.  When your protection agencies fail, consumers pay the ultimate prices.

So far minister, we have presented the downside of what has happened to consumer to assist you in shaping consumer friendly policies.  One of the things consumers must fight for is the ending of predatory financial practices; this is one of the most important things we can do as a nation to show that we stand for basic economic fairness and decency.  Instead of driving low and moderate-income families out of the economic mainstream, and into the arms of the “merchants of misery”, let’s make changes that help bring them into the economic mainstream and keep them in.  Consumers in The Bahamas must also curb wasteful over consumption that threatens our environment before its too late.  Research has shown that another sensible way to encourage savings is to rein in wasteful over consumption.  In the current economic climate, consumers are constantly pressured to buy expensive, often unnecessary products and services, and live beyond their means.  We shouldn’t get overly prescriptive about what people should and shouldn’t buy, because individuals needs and tastes vary.  At the same time, if we are honest with ourselves, we will admit there are disturbing consumption practices and habits that have a serious long-term impact.  More broadly, we need to encourage more sustainable consumption practices:

1.  By encouraging manufacturers to design and sell products that are more durable, economical and sustainable.

2.  By promoting informed consumer choice and behavior that looks not just at what to buy, but at how many and how much, and how the product will be used, and whether it can be disposed of in a satisfactory manner when useful life is over.

3.  By creating government regulatory and economic policies and incentives that support – and in certain cases require – these changes among manufactures, providers and consumers.  Finally we need to be global stewards of the earth’s resources, and ensure that our consumption practices do not undermine the living standards of consumers in other countries, or those of future generations.

Minister, it was not our intention to make this open letter too long, you will appreciate however, that you are “the Consumer Minister” and Bahamians are waiting to give you an ear full.

In conclusion minister, one of the eight basic rights of consumers enshrined in the United Nations is the right to choose.  For now, Bahamian consumers have chosen your party as the governing one.

Through this letter the consumer’s movement has chosen in your second year of office to inform you about our many concerns.

To summarize, for our system to work- we need strong public watchdogs, which include both government agencies and the consumer movement itself.  We need to make investing in an effective consumer protection infrastructure a national priority, and we need to consider how this infrastructure can be improved and modernized.  We need to help families meet their basic needs, and beat back predatory financial practices, so consumers will be able to live in dignity and save for the future.  And we need to do more to curb wasteful over consumption practices that threaten the environment.

Therefore, minister we wish to pledge you our full support on all consumer matters.  With that we will close with a word of caution, we have taken this opportunity to talk with you in your second year of your first term, and as consumers we hope to hear from you soon; otherwise, like we have said to other consumer ministers in the past, lets meet to discuss the way forward, or we will meet you in the streets and in the ballot boxes- and we assure that it will be the consumers that will emerge still standing.

Charles Fawkes is the President of the National Consumer Association and organizer for the Commonwealth Group of Unions, Inside Labour columnist for the Bahama Journal, Editor of the Headline News, The Consumerguard and the Worker’s Vanguard

The Adversarial Relationship Between The Multinational Oil Companies and The Government of The Bahamas

The Local Oil Companies in The Bahamas are Brazenly Attempting to Manipulate Public Pressure on The Bahamian Government for Further Increases

Consumers and oil and gas prices

By Charles Fawkes

Nassau, The Bahamas

HOUSE OF LABOUR: The price of oil and gas will continue to remain high in the coming months because the oil companies locally and on the international scene will continue to manipulate the oil market- (whether it be because of the war in Iraq or whatever)- creating artificial shortages in order to "jack up" prices to make huge profits.

They will blame ravenous global demands and petroleum producers' reluctance to boost supplies.  They will also blame security problems in Saudi Arabia and Iraq claiming that these problems have inflamed the market.  They will also blame the Organisation of Petroleum Exporting Countries (OPEC) and any event they can latch on to.

Recently, June delivery for crude oil rose 77 cents on the New York mercantile exchange to $38.98 per barrel, a new 13-year high, while unleaded gasoline for June delivery gained 4.4 cents to $1.31 per gallon, the highest settlement since the contract started trading in December 1984.  June heating oil climbed 2.02 cents to settle at 98.81 cents per gallon.  Natural gas futures climbed 3.8 cents to settle at $6.269 per 1,000 cubic feet.  Increases in oil and gasoline futures typically cause pump prices to rise.  Refineries are running flat out ahead of the peak summer driving season, but costlier crude makes it more expensive for them to produce gasoline.  The average price of regular unleaded gasoline in the United States is $1.84 per gallon, according to the Energy Department, and analysts say the cost could rise as high as $3 per gallon in some regional markets.

Additionally, contracts of North Sea Brent crude for June delivery soared by $1.30 to $35.78 per barrel in late trading on London's International Petroleum Exchange.  Markets rose after the U.S. ambassador to Saudi Arabia, the world's No.1 oil exporter, advised Americans to leave the country following the killings of five foreign workers at a petrochemical plant there.

The Organisation of Petroleum Exporting Countries, which pumps one- third of the world's oil, has reaped a windfall from higher crude prices.  OPEC insists that it aims for an average target price of $25 per barrel for its benchmark blend of crude, but the actual benchmark stood 37 per cent higher than this at $34.13 on Monday, May 17, the most recent day for which OPEC complied data.  OPEC blames high prices largely on speculators and political tensions in the Middle East.

Locally, gas prices in January stood $2.93 per gallon. With the current manipulation of the market this could rise to $3.30 in Nassau and as high as $3.42 in the family islands

The price of no other commodity is as directly and critically linked to the cost of living as the price of petroleum products, especially gasoline and diesel oil.  So much so that the present struggle of the multinational petroleum companies in The Bahamas, for hefty increases in gas prices, begs a historical perspective and review.

Until the 1960’s, the industrialised countries had a cheap and plentiful source of oil from their former colonial territory until these, now independent, countries became wise as to the degree their most valuable resource, oil was being exploited.

In 1960, 13 of these oil-producing nations who depended largely on oil exports for their income and trade got together and formed the Organisation of Petroleum Exporting Countries (OPEC).  The members of this organisation supplies about 85 per cent of the oil imported by non-member nations and have a major influence on the petroleum industry globally.

Among other things, the organisation influences prices and set production quotas for its members to maintain their desired per barrel of oil.  Over night the price of a barrel of oil went from a couple of dollars to as much as $50 per barrel and now fluctuates around $12-$15 per barrel depending on the grade.

Those of us old enough can remember this economic shockwave felt globally by this sudden increase in the price of oil.  Many small nations' economies virtually collapsed - a disaster from which many will never fully recover.  There were severe shortages of gas worldwide and its price skyrocketed.  This was also accompanied by sharp increases in the process for all other goods and services. The cost of living also went through the roof.

In The Bahamas, we have vivid memories of the gas shortage at the time and the long lines at the stations when gas was available.  The sharp increase in the price of gas was only held partially in check by the then government, which instituted controls on its price.

This was the beginning of the adversarial relationship that exists between the multinational oil companies and the government in The Bahamas.  The companies want to extract as much as they can from the Bahamian consumer and the government, exercising controls, should be protecting the consumer from their exploitation.

The oil crisis of the 60's offered the perfect environment for the multinational oil companies like British Petroleum, ESSO, Shell and Texaco, etc., to demonstrate their greed.  We must remember that even though the members of the OPEC demanded a fairer price for their oil, they lacked technical skills and experience to extract the oil, refine it and market it.  So they were forced to rely on the multinational oil companies for their expertise.  The multinationals became, in fact, the middlemen.

The oil companies seized this opportunity to manipulate the oil market creating artificial shortages and hiking up the price in order to make huge profits.  To divert attention from their activities, they used their unlimited public relations resources and their government influence to shift the blame to OPEC.  The result was billions of dollars in windfall profits for the oil companies.  Even a nation as powerful and sophisticated as the Untied States finds the multinational oil companies formidable foes to regulate and control.  The tactics they have used in The Bahamas in recent months to extract increases in the price of gas, demonstrated that they have not changed in character.  As small and relatively unsophisticated as we are, compared to the United States, what chance do we have against them?

The local oil companies are brazenly attempting to manipulate public pressure on the government for further increases.  The pressure being applied is close to blackmail.  They may even threaten to cut back on their inventory of gasoline and diesel oil, which would create an artificial shortage on the islands.

The stakes are high for the Bahamian worker because the level of his quality of life is threatened.  The Ministry of Trade and Industry, although, granting the recent request for increase have in the past insisted that the companies absorb some of the increased cost in their 33 and 44 cents margins.  According to the Nassau Guardian, Minister Leslie Miller also suggested that both petroleum distributors and retailers being absorbing some of their increased costs in the 33 and 44 cents respective margins enjoyed by each.

"What we are trying to tell them is instead of putting all this in the Bahamian people, with their 33 cents and 44 cents, it's time they take some hits," he said.  "Your margins will get cut down in half anyhow.  Thank God you have these margins still in place for the next month come June they will be dealt with."

Consumers in the meantime are waiting anxiously to see if Minister miller can reduce the prices of gas as he has promised to do with the setting up of a National Energy Corporation and the purchase of supplies from some regional oil producers.

Charles Fawkes is the President of the National Consumer Association and organiser for the Commonwealth Group of Unions, Inside Labour columnist for the Bahama Journal, Editor of the Headline News, The Consumerguard and the Worker's Vanguard

Deficit Spending Plagues Successive Governments of The Bahamas

$164 Million Deficit Projected in The Bahamas National Budget 2004-2005

$164 Million Deficit Projected

By Candia Dames

Nassau, The Bahamas

candiadames@hotmail.com

Journal Staff Writer

05/27/04

The 2004-2005 budget projects a budget deficit of $164 million, a notable increase from the $122 million projected last year.

The $164 million deficit would be 2.9 percent of GDP.  The $122 million that was forecast last year would have been 2.2 percent of GDP.

Prime Minister and Minister of Finance Perry Christie, who made his budget communication in the House of Assembly Wednesday, said the deficit of 2.9 percent is about the same as the projected outturn for 2003/2004.

“This level of deficit is reasonable in view of the fact that the economy is on the threshold of expanding,” Mr. Christie said, “and, therefore, it would not make sense to deflate the economy at this time.

The prime minister said the government is still targeting a lower deficit than that realized in the years 2001/2002 and 2002/2003.

Mr. Christie noted that in 2001/2002, under the previous administration, the deficit reached 4.1 percent and in 2002/2003, the deficit reached 3.5 percent.  He pointed out that that was also in large part due to the fiscal policy of the previous administration, which had prepared much of the budget before the May 2, 2002 general election.

He said the projected deficit is “clearly an improvement over the previous years, demonstrating this government’s commitment to economic and fiscal prudence.”

The prime minister also reported that the continuing weakness of the global economy resulted in revenue targets not being attainable.

The 2003/2004 budget envisaged the introduction of a Flight Information Region, meaning that the government intended to take full control of the country’s airspace from the Americans.

As a result, the Bahamas air traffic control system would have been able to collect significant fees of between $40 million and $50 million to go mainly toward airport upgrades.

“The US authorities, who presently manage our airspace, had no objection in principle to the proposal, but were concerned with implications for Homeland Security,” Mr. Christie said.

Following constructive discussions with those authorities, it was agreed that instead of implementing the FIR, the US would continue to manage the airspace on security grounds, he said.

Mr. Christie added that the fees collected will be provided to Bahamian authorities and in this way the government’s intensions will be realized.

“The fact that the project did not proceed in 2003/2004 because of the external complications to which I have referred inevitably reduced revenue.

The government also expected to collect revenue from the sale of 49 percent of the shares in the Bahamas Telecommunications Company, but that too did not materialize during the fiscal year.

“The recent termination of the privatisation process does not mean that my government has abandoned the privatisation of BTC,” he assured.  “On the contrary, the privatisation of BTC remains an important item of my government’s economic agenda.

“Accordingly, the privatisation will be re-launched as soon as circumstances reasonably allow and on a basis, moreover, that will take adequate account of the lessons that were learned in the earlier process.”

Bahamian Taxpayers Urged to Meet Their Tax Obligations

The monies raised from taxes in The Bahamas are required to meet essential expenditures which are also approved by the Bahamian legislature 

PM Pleads To Taxpayers

 

By Macushla N. Pinder

Nassau, The Bahamas

Journal Staff Writer

05/27/04

 

 

 

In an impassioned plea, Prime Minister Perry Christie on Wednesday begged Bahamian taxpayers to meet their tax obligations in a timely manner.

“The taxes levied in The Bahamas are in accordance with the laws passed by this legislature, “ Mr. Christie pointed out, while making his Budget Communication to Parliament.

He said, “The monies raised are required to meet essential expenditures which are also approved by this legislature.  We have an open and transparent budgetary system and the purposes of taxation are known.”

The 2004/2005 budget projects total expenditure of $1.324 billion and total revenue of $1.063 billion.

Mr. Christie – in an unprecedented move – departed from the custom of lengthy and involved reports on budgetary allocations, giving a brief overview of his government’s spending plan.

It was the shortest Budget Communication in the post-Independence Bahamas.

About an hour and 20 minutes after he started his much-anticipated communication, Mr. Christie, who is also Minster of Finance, ended by declaring that, “The 2004/2005 budget and the economic prospects on which it is based, represent yet another landmark in my government’s commitment to the interests of the Bahamian people.”

As expected, the country’s social sector – education and training, health, housing, social services and youth development – will receive a huge chunk of the government’s $954 million 2004/2005 recurrent expenditure, a figure totaling $428 million or 45 percent.

Mr. Christie further revealed that almost 20 percent of the recurrent expenditure would be spent on national security, including the police and defence forces, judicial and legal affairs.

Some $65 million, he said, will go towards infrastructure like works and transport.

Another $100 million will be spent on economic services, including tourism, trade and agriculture and fisheries; while $173 million has been allocated to administrative services like foreign affairs, public service, finance and local government.

According to Mr. Christie, another $500,000 has been earmarked for consultancy services for, amongst other things, planning the development of Clifton Cay National Park.

“The consultancy will provide an outline of how the Park should be developed and laid out so as to maximize public benefit from it,” he said.  “In this regard, it is envisaged that the Park would provide a facility which would be of enjoyment to Bahamians as well as an attractive enhancement to the cultural experience of our visitors.”

There is also provision of $1 million for interest payment on the bonds that will be issued for the purchase of the Park.

“I am sure that the Bahamian public appreciates that while each priority is of equal weight, an appropriate balance must be maintained in allocating the increasing flows of resources between them in the coming years,” he said.

“This will involve some degree of patience because not everything can be achieved or accomplished in one single year.  The overarching consideration, however, is that all of these priorities be steadily and concurrently addressed as the flow of budgetary resources intensifies, not from increases in taxation, but rather from the strengthening of the economy arising form this government’s policies and from firmer and more efficient revenue administration.”

During his address, the Prime Minister also unveiled a package of measures that are sure to cause certain sectors of the Bahamian population to breathe a collective sigh of relief.

Among these are the removal of customs duties and stamp duties on imports from building materials used by private schools.

According to the Prime Minister, the new fiscal plan positions The Bahamas to take advantage of the country’s “imminent surge in economic performance” like that provided by Kerzner International’s Phase III $1 billion project.

He said it is this economic stability allied with political maturity that will make the country’s economy a magnet for investments.

Mr. Christie added that while geopolitical uncertainties like the continued surge in oil prices could result in early increases in interest rates, these uncertainties would have “diminishing implications as (economic) growth becomes firmly entrenched.”

“There is one factor working strongly to our advantage, and that is, the sizeable depreciation in the value of the United States dollar that has occurred since 2002 as a result of the expanding record-level Federal budget deficit and shortfalls on the US trade account,” Mr. Christie said.

“As these imbalances persist, the dollar is expected to remain weak in the year ahead, making dollar priced vacation destinations such as The Bahamas more affordable for people from North America, Europe and Asia.”

While on his feet, the nation’s chief also reiterated that the over-riding priorities for the economy, fiscal and non-fiscal, are to generate enough quality employment opportunities for all Bahamians.

“Our goals are clear-cut and unambiguous…” he said.

“Simply stated, they are to maximize the job creation potential of the Bahamian economy by strengthening the key sectors and encouraging the highest possible levels of employment-generating investment; accelerate the social advancement and inclusion of all members of society; ensure that every major settlement in The Bahamas participates in national prosperity and advancement and raise standards of delivery of public services so as to get the best possible value for the taxpayers’ dollar.”

As is customary, many Bahamians were drawn to the House of Assembly’s gallery to hear the budget communication first hand.

Among them were a key fiscal architect, Minister of State for Finance, Senator James Smith; former PLP Cabinet Minister Paul Adderley; government advisor Sean McWeeney; PLP Chairman Raynard Rigby; various FNM senators, including Tanya McCartney and Desmond Bannister, and other citizens.

The Bahamas 2004/2005 National Budget Draws Criticisms, and Praise

National Budget Debate in Parliament,  The Bahamas

New Budget Draws Criticisms; Praise

BY ROGAN M. SMITH

Nassau, The Bahamas

Journal Staff Writer

05/27/04

Some opposition Members of Parliament on Wednesday called the government’s 2004/2005 budget a “sham” that is loaded with hidden taxes and too many unrealistic expectations.

But at least two Independent Members of Parliament pointed to positives in the new budget.

Their reaction came shortly after Prime Minister and Minister of Finance Perry Christie unveiled his government’s new spending plan in a packed House of Assembly.

Brent Symonette, the Member of Parliament for Montagu and Official Opposition Whip, noted that despite assurances from the Prime Minister that there are no new taxes, there are plans to increase certain fees and implement an airport user fee.

Mr. Christie revealed that increases in bank licence fees will provide $3.5 million; and he revealed the plan to put in place the airport user fee.  Revenue collected for this fee will be used to upgrade security at ports and airports, he indicated.

Mr. Symonette said facility fees are just another way of saying taxes.

“It leaves a lot wide open,” he said.  “He (the Prime Minister) talks about coming back later to bring in further increases in fees and taxes.  This indicates on cursory reading of it, that this budget is a sham just to fulfill the legal requirements.

“They say if the economy does not rebound the way they intend it to- they will bring in new taxes and whatever are necessary to fund the government’s expenditure.”

Mr. Symonette said the budget is not very specific, and strikingly resembles last year’s budget in that it makes promises that never seem to materialize.

“There are many ifs in the budget; if the economy continues to grow; if these developments come off,” he said.  “To pin this budget on that is reckless, bearing in mind he had to admit there was some $50-odd million in flight oversight regulations that he put in the budget that didn’t materialize last year; plus the sale of Bahamas Telecommunications Company which did not materialize shows that there has been some reckless budgeting, and it’s continued in this budget.”

Leader of the Official Opposition Alvin Smith added, “Rhetoric and talk have become the trademark of the Progressive Liberal Party government.”

Mr. Smith said he is disappointed that the help and hope that the PLP administration promised back in 2002 has not yet been delivered to the Bahamian people.

He added that he expected the Ministry of Social Services’ budget to increase by a greater amount, since there are quite a number of persons on the Family Islands who need the government’s assistance.

“I expected more reductions in taxes, or elimination in taxes as it relates to duties or stamp taxes on some more basic items,” Mr. Smith added.  “There are only three items on the list, ink for computers, musical items, and customs duty and stamp tax for building materials, but only for private schools.

“I thought the government would have looked into some other areas.  I particularly thought that this year the government would have reinstated that programme we had when we eliminated taxes on building materials for most of the Family Islands.  There are too many unrealistic promises.”

Independent Bamboo Town MP Tennyson Wells said the prime minister seems overly optimistic and suggested that he should have been more cautious.

Saying no new taxes and no increase in taxes is simply a play on words, he said.

But Mr. Wells indicated that he was generally pleased with the spending plan the prime minister presented.

Another independent Member of the Parliament, meanwhile, praised the budget.

MP for St. Margaret Pierre Dupuch said that although he did not have enough time to study the budget communication, he thought the it was quite “innovative.”

“I was very impressed with several things,” Mr. Dupuch said.  “The first was that he was not increasing taxes and that plans were underway to increase revenue by increasing the efficiency of the government and the tax agencies.  I think that’s very important.

“He said that they were going to start an intensive training programme to prepare Bahamians to face the various challenges that will be coming, and the various job opportunities that will be available.  That is one of the things that is very seriously needed in this country because we have lost track of a lot of training.”