Does the Progressive Liberal Party (PLP) administration’s budgetary provisions remain true to its pledges to an impatient and hurting populace whose expectations for relief and renewal are extremely high... and to what extent does the 2012/13 national budget meet those high expectations?

The Budget: Part II

Consider this

By Philip C. Galanis

Last week, we invited our readers to consider whether the national budget for fiscal 2012/13 as presented by the Rt. Hon. Prime Minister and Minister of Finance addresses the important promises that were made during the general election campaign.  In answering that question, we reviewed the fiscal environment that the PLP Administration inherited on May 7, 2012 and the attendant limitations and constraints for the nation’s first budget for Mr. Christie’s second non-consecutive term in office.

This week, we would like to continue to Consider This… Do the PLP administration’s budgetary provisions remain true to its pledges to an impatient and hurting populace whose expectations for relief and renewal are extremely high, and to what extent does the 2012/13 national budget meet those high expectations?

The macro view

The government anticipates that it will incur a total deficit of $570 million for the fiscal year ending June 30, 2012 and a Government Finance Statistics (GFS) deficit of $504 million for that period. This represents an increased GFS deficit of $256 million or 103 percent more than was originally approved by Parliament for fiscal 2011/2012. The GFS deficit as a percent of GDP will be 6.3 percent — a new record for The Bahamas — more than a doubling of that figure of three percent in the preceding year.  The increased GFS deficit will be financed by additional borrowings which will push the national debt from $4.3 billion at December 31, 2011 to $4.8 billion a year later, rapidly approaching 60 percent of GDP, also a new record — and not in a good way.

Similarly, the GFS deficit for 2012/13 will be $550 million which, as a percent of GDP, will be 6.5 percent — another new record for The Bahamas.  By the end of fiscal 2013, the national debt will exceed $5.3 billion, more than 60 percent of GDP.

Recurrent revenue measures

The recurrent budgeted revenues of $1.55 billion for the next fiscal year are anticipated to increase by only $100 million or seven percent over the actual outturn of the preceding fiscal year.  This compares to an increase of $435 million or five percent in the gross domestic product (GDP) for the same period.

At first glance, the projected recurrent revenue appears to be overly optimistic for several reasons. First, recurrent revenue is projected to exceed the increased GDP rate of growth by two percent.  Secondly, last year’s budgeted revenue of $1.514 billion was not achieved.  The actual, revised projected revenue came in at $1.45 billion or $64 million less than was originally budgeted.

The third and most compelling reason that we believe that the projected recurrent revenue is overly optimistic is that over the past five years, the average increase in recurrent revenue was three percent. To suggest that we will achieve more than a doubling of that amount to seven percent next year is questionable.  The government anticipates that it will collect an additional $148 million more in excise taxes in the next fiscal period than it did last year, although at the same time it foreshadows a reduction in almost every other category of tax revenue over the preceding year, except for tourism taxes which are expected to increase by $8 million.

Capital revenue

The government expects to receive no capital revenue for the ensuing year as compared to $86 million last year.

Recurrent expenditures

The recurrent expenditures for 2012 will end at $1.7 billion, $27 million or two percent more than the $1.68 billion that was originally approved by Parliament for fiscal 2011/2012.  For 2012/13, recurrent expenditures are forecast at $1.82 billion, an increase of $114 million or six percent over the preceding year.

Several recurrent expenditure allocations have been made to address specific campaign promises.  There is an allocation of $4.4 million for the re-established Ministry of Financial Services and $3.2 million for the establishment of the Ministry for Grand Bahama, both campaign pledges.  Thirdly, the government has provided $15 million “for the implementation of early initiatives in the Charter [for Governance], such as the introduction of Urban Renewal 2.0.”

Several other items are noteworthy relative to budgeted recurrent expenditures. These include significant subventions for the following ministries and departments:

Department of Public Service, $187 million – an increase of $13 million;

Royal Bahamas Police Force, $132.2 million – an increase of $5.6 million;

Royal Bahamas Defence Force, $54.7 million – an increase of $3 million;

Department of Education, $202 million – an increase of $5.4 million;

Ministry of Education, Science & Technology, $49 million – an increase of $3.7 million;

Department of Social Services, $40 million – an increase of $5.9 million;

Public Hospitals Authority, $199 million – an increase of $13.2 million.

These allocations demonstrate the government’s commitment to essential areas of our economy and society that require urgent attention.  Moreover, the increases reflect many of the areas that the PLP consistently promised the electorate they would address once they were returned to office.

The increases for the Public Service and Social Services demonstrate the government’s stated intentions to improve the conditions of the average Bahamian, whether working or in need.  Enhanced subventions to the Public Hospitals Authority reflect that healthcare is a priority issue and those to the Department of Education and the Ministry of Education, Science and Technology confirm the government’s oft-stated intentions to address the deficiencies in education as a method of creating a better future for young Bahamians.  The increases to the Royal Bahamas Police and Defense Forces confirm the government’s determination, as spoken about at every rally, to break the back of crime and to address the problem of our porous borders, with regard to illegal migration, poaching and gun-running.

A substantial percentage of recurrent expenditure, 18 percent, is allocated to servicing the national debt.  The interest on the public debt alone is budgeted at $207 million along with debt redemption of $121 million, which in the aggregate represents $66 million more than the preceding year.

Capital expenditure

Total capital expenditure for 2012/13 is budgeted at $400 million. The two largest items in this category are for the Ministry of Works & Urban Development for $229 million and Sundry Capital Expenditures for $132 million.  In the Ministry of Works, the largest expenditures have been allocated for road construction, highways, streets and bridges in the aggregate of $175 million. Sundry Capital Expenditures include provisions for the Baha Mar Road Development for $48 million, as well as subventions for Capital Subscriptions to International Agencies, the Broadcasting Corporation of The Bahamas, Bahamasair Holdings Ltd. and the Water and Sewerage Corporation in the amounts of $12 million, $5.5 million, $18 million and $20 million, respectively.

Conclusion

Within a very short period, the Christie administration has quickly sought to address the fiscal realities left by the former administration, while simultaneously attempting to honor some of its election campaign pledges.  In this first budget, the government has made a commendable attempt to balance the scales by holding off increasing taxes on Bahamians, while concurrently seeking to allocate its limited resources in an economically anemic environment.

However, the government would be wise to remember that this is a Bahamian public with great needs and little patience. As understanding as the people may be with this 2012/2013 budget, which is a hybrid of the outgoing Ingraham regime and the fledgling Christie administration, that understanding will only go so far before the expectations that were raised so high during the campaign need to be not only met but exceeded and the country put back on steadier, more fiscally secure ground to ensure the glowing future that was promised by the PLP.

Jun 11, 2012

thenassauguardian

The Budget: Part I

Caribbean Blog International

Dr Duane Sands, the former chairman of Bahamas Mortgage Corporation (BMC) says: ...the newly-elected Christie administration's goal of building 1,300 new houses over its five-year term was "probably unachievable"... ...suggesting it should instead focus on continuing to reduce the Corporation's 35 per cent loan arrears rate

Gov't's 1300 Housing Goal 'Unachievable'


By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

THE former Bahamas Mortgage Corporation (BMC) chairman yesterday said the newly-elected Christie administration's goal of building 1,300 new houses over its five-year term was "probably unachievable", suggesting it should instead focus on continuing to reduce the Corporation's 35 per cent loan arrears rate.

Dr Duane Sands told Tribune Business he was doubtful the BMC would be able to finance the aggressive housing initiative proposed by the newly appointed-housing minister, Kenred Dorsett, questioning: "Where is the money going to come from?"

Mr Dorsett, the minister of the environment and housing, recently said more than 1,300 government homes were expected to be built over the next five years.

But Dr Sands told Tribune Business that while the Bahamas Mortgage Corporation's financial standing had improved, he was doubtful it would be able to finance that many homes.

He explained: "It is difficult to imagine where the money is going to come from, because the Mortgage Corporation's financial standing - while improved - is not likely going to be strong enough to sustain that degree of new debt.

"If you have a deficit in the national Budget of $500-plus million in just this year alone, the likelihood that we are going to be able to afford any additional spending is going to be unlikely. I find it to be a very aggressive, ambitious and probably unachievable goal."

Dr Sands added: "I don't know where the money will come from. Floating more bonds means now that you have more guaranteed government debt. Unless they talk out of both sides of their mouth, talking about no new taxes and, at the same time, extending the government debt by new spending, I don't see how it is possible."

Dr Sands noted that the Mortgage Corporation's sinking fund is underfunded by millions of dollars. He said: "Serving that bond interest debt and bond maturity debt requires more money than the Mortgage Corporation takes in.

"The money is going to have to come from somewhere, and most likely the money is going to come from the taxpayers in some form or fashion, because the mortgage guarantee fund simply doesn't have enough money in it."

He added: "I have gone on record as saying he 2002-2007 programme was the most irresponsible use of money in the Mortgage Corporation's history. If you want to repeat that now, simply to say you have built so many houses, is unreasonable. Who is going to pay the bill?

"I would encourage them to continue to strengthen the position of the Bahamas Mortgage Corporation by aggressively pursuing some of the policies that have been shown to be effective, and which have reduced the arrears from 40 per cent to 35 per cent, as opposed to throwing caution to the wind."

Attempts to contact Mr Dorsett were unsuccessful up to press time.

June 08, 2012

tribune242

Caribbean Blog International

It is regrettable that a Bahamian national hero like William “Bill” Cartwright - the originator of the idea of party politics in The Bahamas... and a founder of the nation’s first major political party in 1953 - the Progressive Liberal Party (PLP) - is not more fully recognized during their lifetime... ...Despite this repeated notion, we too often fail to live up to our words about recognizing and appreciating those who so generously contributed to nation-building

Honoring William ‘Bill’ Cartwright

thenassauguardian editorial

We mourn the passing of William “Bill” Cartwright, who though little known by many Bahamians today was a consequential figure in the life of the modern Bahamas.  We offer our condolences to his family.

William Cartwright was involved in various aspects of Bahamian life, including as the publisher of a magazine that enjoyed some success. We salute him for his contributions to the print media.

For those who are often tempted to use politicians as scapegoats for our collective national failures, we note that a national hero like Mr. Cartwright was a politician. Those who speak often of honoring our national heroes should remember that many of them made their contributions through politics and government.

Indeed, William Cartwright was a founder of the nation’s first major political party in 1953.  Along with the late Cyril Stevenson and the late Sir Henry Taylor, he helped to found the Progressive Liberal Party.  He served for a time as a representative in the House of Assembly for Cat Island.

Though his role in the PLP waned, he will go down in Bahamian history as the originator of the idea of party politics. This was a major advancement in our democratic experience.

It was through party politics that majority rule and independence were achieved. It was through party politics that democracy was secured. It was through party politics that we became a vibrant stable democracy.

Some months back, we ran a story on the visit of Governor General Sir Arthur Foulkes to Bill Cartwright to celebrate the latter’s birthday.  As founders of our modern Bahamas, these men remember well the sacrifices made in the struggle for racial, social and economic justice.

What concerns us is how increasingly fewer people appreciate this history.  It is incumbent on the press and others to more fully tell the story of men such as William Cartwright.

It is also incumbent on public officials to ensure greater appreciation for the nation’s founders as well as others who make significant contributions to national life and development.

The naming of public buildings in honor of such individuals is a welcome and important aspect of such appreciation. So, too will be the mounting of permanent and temporary exhibits in the eventual opening of a national museum.

Additionally, it would be good to record through audiovisual media the voices and images of historic figures.  Some of this is done through current television programs.  But we need a more extensive record by those trained in areas like history and various social sciences.

It is regrettable that individuals like Mr. Cartwright are not more fully recognized during their lifetime.  Despite this repeated notion, we too often fail to live up to our words about recognizing and appreciating those who so generously contributed to nation-building.

It is a sign of ingratitude that we have not been as fulsome in our praise and recognition of citizens like William “Bill” Cartwright.

While a state-recognized funeral is welcome for Mr. Cartwright, when will we stop making speeches about honoring such individuals during their lifetime, and actually start doing so more fully.

In this we all share some blame and the responsibility to do better. A man like William “Bill” Cartwright and others deserve much better.

Jun 08, 2012

thenassauguardian editorial

Caribbean Blog International

Decades after the implementation of the Bahamianization policy and faced with a globalized world that promotes free enterprise and trade, The Bahamas still finds itself in an economic enigma ...whereby its people appear to be regressing rather than progressing

A revived social contract: Bahamians First

By Arinthia S. Komolafe

“Bahamians First”, the campaign slogan adopted by the newly-elected Progressive Liberal Party (PLP), is a pledge by the PLP to put the interests of Bahamians above all others in The Bahamas. It is also a call to Bahamians to believe in The Bahamas and consequently themselves. A post-election analysis seems to confirm that the message resonated among the Bahamian people, resulting in a landslide victory for the PLP on May 7, 2012.

The Bahamianization policy

The concept denoted by the slogan represents a social contract with the Bahamian people – a revived one and arguably an updated version of the Bahamianization policy penned by the Lynden Pindling administration during the 70s. The Bahamianization policy seems to have been misinterpreted since its inception and throughout the years. Arguably, the policy has benefitted a vast majority and been abused by a few. While many believed that the policy promotes “Bahamians only”, the intent when construed properly was always to put “Bahamians First”. In a nutshell, Bahamianization sought to foster economic prosperity and independence through greater participation in business, finance and commerce by Bahamians, the protection of Bahamian assets for the benefit of Bahamians, whether through land or sustenance of state-owned enterprises and a more strict policy regarding the granting of Bahamian citizenship.

It is fair to suggest that at the time of its creation, the policy was implemented through a series of initiatives that promoted among other things encouraging the attainment of managerial positions in the tourism and financial services sectors, creation of opportunities for Bahamians to obtain tertiary education and the expansion of the housing program to provide home ownership opportunities for more Bahamians. Additionally, work permits were only granted in areas where there were no suitably qualified Bahamians and/or in instances that Bahamians were unwilling to undertake certain jobs.

Consequences of Bahamianization

Critics of the Bahamianization policy assert that the Pindling administration ran a socialist type government that was primarily opposed to the free market economy. For the most part and prior to the implementation of the policy, Bahamians were unable to afford participation in the economic structure of The Bahamas due to poverty, poor education or lack of skills among other things. Consequently, the government ran state-owned enterprises for decades – even at deficit levels and continued subsidizing the same from year to year. The government remained by far the largest employer for decades, while the tourism and financial services sectors provided the second and third highest rates of employment respectively.

Bahamians First in reality

Decades after the implementation of the Bahamianization policy and faced with a globalized world that promotes free enterprise and trade, The Bahamas still finds itself in an economic enigma whereby its people appear to be regressing rather than progressing. While it was a major feat yesterday for Bahamians to attain managerial status in the tourism and financial services sector, today such accomplishments are generally common although there is much ground to be covered in other sectors of the economy. It is disheartening however, that about three decades after the implementation of the Bahamianization policy, we have yet to accomplish substantial feats of economic ownership, particularly within the dominant twin pillar industries of tourism and financial services.

The reality is that successive governments through their fiscal and economic policies have failed to put “Bahamians First”. By these governments’ very actions, the foreign investor has been given priority over and above Bahamians owing to heavy reliance on foreign direct investment while the majority of Bahamians have been forced to take the crumbs. In essence, more jobs (which are arguably unsustainable due to their cyclical and/or fragile nature in the two main nationals industries) have been created rather than opportunities for increased ownership.

Bahamians First: Fiscal policy

The tax system in our country has been in place for years. While our politicians concede that the system of taxation is regressive and inequitable, successive administrations have made insignificant movement toward implementation of a progressive form of taxation. Many have gone as far as committing to no income tax which is arguably the most progressive and equitable form of taxation. It is noteworthy to state that we are far behind our regional counterparts who have long since implemented multiple progressive tax structures. Our failure to do so, obviously panders to special interest groups both domestic and foreign who are comfortable with the status quo and prefer to pay neither income nor corporate tax. The pledge we must remember is Bahamians First.

Bahamians First: Banking sector

The entry barriers within the banking sector exclude the majority of Bahamians from the ownership of banks. These barriers include capital requirements which are not tiered enough to allow average Bahamians to establish small banks with limitations on deposits and/or their operations. The commercial banking sector has predominantly been governed by three Canadian banks and in recent decades Bahamian owned and state-owned entities. It is therefore not surprising that having enjoyed the patronage of Bahamians; the former have repatriated billions of dollars in profits outside of our shores over the years. These entities are not to blame as they are in business to make profits. However, successive governments have not created an economic environment that allows more Bahamians to enjoy the same levels of success. The government’s failure to facilitate the establishment of a Credit Bureau, Consumer Protection Agency and foreclosure laws have further allowed Bahamians to be exploited by the system.

Bahamians First: Home ownership and entrepreneurship

The cost of real estate in The Bahamians makes it difficult for quite a number of Bahamians to qualify for a home either because they are underpaid, unemployed or lack the necessary skills to attain a higher paying job. The small to medium sized enterprise sector, which is the engine of an economy, is challenged and growing at a slow pace due to what is seen as neglect by successive governments. The financial crisis, global economic downturn and ill-advised policies of the former administration have no doubt dealt a major setback to this vital sector. These factors coupled with the high cost of energy and other overhead costs have resulted in business closures and challenged the Bahamian entrepreneurial spirit.

Honoring the contract

A government that is truly about “Bahamians First” will address these inequities that have persisted and lingered within our society for far too long. It seems fair to suggest that Bahamians will continue to vote successive administrations out of office following one term of governance until it finds one that will finally speak their language and truly place “Bahamians First”. The task of this Christie administration is to implement policies that will start and end with the average Bahamian in mind. The Christie administration must honor its part of the contract to maintain the confidence of the people.

Arinthia S. Komolafe is an attorney-at-law. Comments can be directed at: commentary@komolafelaw.com

Jun 07, 2012

thenassauguardian

Caribbean Blog International

Urban Renewal 2.0 is a direct response to past and current problems facing a number of inner city communities in The Bahamas ...such as crime, poor housing conditions, joblessness, illiteracy, homelessness, and other social ills that contribute to crime and anti-social behavior

What Urban Renewal 2.0 Will Mean For The Bahamas
tribune242


The commissioner of police's statement on Urban Renewal:

THE flagship Urban Renewal 2.0 Programme is a direct response to past and current problems facing a number of inner city communities in the Bahamas such as crime, poor housing conditions, joblessness, illiteracy, homelessness, and other social ills that contribute to crime and anti-social behavior.

The project is the brainchild of the Prime Minister of the Commonwealth of the Bahamas Perry Gladstone Christie and it has the full support of the commissioner of police, the executive management team, and all members of the Royal Bahamas Police Force.

The tenets of Urban Renewal 2.0 are included in the Commissioner's Policing Plan for 2012 and are clearly delineated under priorities one, two and three.

The Urban renewal Community Based Policing programme is one of the most ambitious crime prevention programmes in the Bahamas.

It is a comprehensive approach to crime, antisocial behavior, and community safety.

It emphasises both innovation and integration of efforts and resources by a wide range of agencies and the community at large.

Objectives of the Urban Renewal Project

• To prevent crime and reduce the fear of crime in the community.


• To identify and tackle the main causes of the social conditions which promote the occurrence of crime and deviant behavior.


• To examine and improve the quality of life and the social and environmental conditions of high crime communities.


• To involve the community in problem-solving and empower citizens to play an active role in their communities.


• To identify the problems facing our young people and to engage them in positive activities and programmes geared toward making them productive citizens.

A brief history of the Urban Renewal Pilot Project

Urban Renewal was first launched as a pilot project in the constituency of Prime Minister Perry Christie, called Farm Road, in June 2002.

The community was identified as the pilot area because it showed trends that were prevalent in other communities in the Bahamas such as crime, social ills and urban decay.

Within just six short weeks of its inception, police officers assigned to the Farm Road Project visited every household and business establishment in the community.

They collected data and intelligence on environmental concerns, health issues, housing problems and criminal activities.

The police team was later joined by representatives from the Department of Social Services, the Ministry of Housing, Health Services and the Ministry of Works.

The team removed derelict vehicles, organised the demolition of abandoned buildings, dismantled street drug peddling groups, and arrested a number of prolific offenders. These initiatives resulted in a significant reduction in crime.

Within one year of the project's inception, the team established computer literacy centres, a youth marching band, a community development association and the national Urban Renewal Commission.

It also set up similar projects in eight other areas of New Providence, five in Grand Bahama and one in Abaco.

The team was awarded the Association of Caribbean Commissioners of Police Motorola Community Policing Award in May 2003 and won two other community policing awards from the International Association of Chiefs of Police (IACP).

Role of the police in Urban Renewal

Members of the Royal Bahamas Police Force who are assigned to the Urban Renewal 2.0 Programme have an expanded scope of police work which includes crime, the fear of crime, quality of life offences, social and physical disorder, and community decay.

These officers are expected to use a full range of talents, skills and abilities to not only prevent and interdict crime, but to also enlarge their role and become community problem-solvers.

About community policing

Community policing focuses on bringing the police and citizens together to prevent crime and solve neighborhood problems. In community policing, the emphasis is on preventing crime.

Preventing crime is a big job. The police are more effective when they can depend on residents for help.

Community policing calls for a commitment to improving the quality of life in neighborhoods. Community Resource Officers (CRO) look to residents for help in solving neighborhood problems.

In essence, community policing gives citizens more control over the quality of life in their community.

General duties and activities of the police under the programme

• Directed patrol - patrols are specific and intelligence driven, designed to deal with existing and emerging problems in the community. These patrols can be done on foot or in vehicles to facilitate communication and the building of relationships between the officers and community members.


• Community involvement - Urban Renewal officers must build trusting relationships and partnerships with community members to address their specific problems.


• Identifying and prioritising problems - community members are encouraged provide officers with information about the problems they face and work with them prioritise issues and problems.


• Reporting - the Urban Renewal officer must share information with other police officers as well as the RBPF generally and with special sections (DEU, CDU, CIB, SIB, et cetera) about the specifics of his community.


• Organising - organising activities oriented to specific problems and working to enhance the overall quality of life in the community.


• Communicating - there are both formal and informal sessions aimed at educating people about crime prevention and other issues as well as managing communication with the media.


• Conflict resolution - the Urban Renewal officer mediates, negotiates and resolves conflicts formally and informally (and challenges people to begin resolving problems on their own).
• Referrals - the officer refers problems to specialised agencies.


• Visiting - Urban Renewal officers make frequent visits to homes and businesses to recruit help and to educate.


• Recruiting and supervising volunteers - the Urban Renewal officer works with volunteers to address social problems affecting the community.


• Proactive projects - the Urban Renewal officer works along with the community to solve both long-term and short-term problems aimed at improving the quality of life.


• Targeting special groups - Urban Renewal police officers will focus on special groups in the community such as the elderly, youth, women, physically challenged persons and the homeless.


• Targeting disorder - Urban Renewal officers place specific emphasis on social and physical disorders and the degradation of neighbourhoods.


• Networking with the private sector - the Urban Renewal officer actively communicates with and solicits the assistance of the business community for services and volunteer work.


• Get to know people - the Urban Renewal officers form relationships with residents so as to learn about their concerns and to build confidence and trust between citizens and the police.




June 05, 2012

Post Mortem of the 2012 General Election

By Dennis Dames


We have had two one-term governments in a row; which is a reflection of the shifting political times in The Bahamas - in my view. The Bahamian electorate is clearly more aware and wiser, and we hold those who seek to represent us to a higher standard than yesteryear.

This is no longer about Puppy love for the FNM or PLP, or the irrational support for any other; rather, the people simply want good governance and a healthy and prosperous future for themselves, their children and country.

The new Progressive Liberal Party (PLP) government should not allow their recent landslide victory to cloud the genuine wishes of the masses. We demand an environment where we could support ourselves and family, as the majority of us are not for hand-outs or political charity.

It’s all about pleasing the employer before another general election season comes. Delivering a strong and all-around job environment is absolutely essential to the present government’s possible second term success; and so is the significant reduction in crime.

Indeed, low unemployment numbers and a much more peaceful and respectable environment are totally necessary for the politically ambitious Bahamian today.

Time will reveal if the Perry Christie PLP administration is up to the task of delivering for the Bahamian boss people who are really serious about a better Bahamas for all citizens.

...does the national budget for fiscal year 2012/13 address the important promises that were made during the recently completed general election campaign?

The Budget: Part I

Consider this

By Philip C. Galanis

On Wednesday past, May 30, the prime minister and minister of finance presented his much-anticipated first budget of the new administration that was elected only two weeks ago.  This week, we would like to Consider This… does the national budget for fiscal year 2012/13 address the important promises that were made during the recently completed general election campaign?

The short answer is that it begins to do so.  However, the extent to which it does is severely constrained by the distressing state of public finances that the Christie administration inherited from the former administration.  In addition, there is a time constraint challenge that significantly factors into what was contained in Prime Minister Christie’s recent Budget Communication.

For the past few terms, when general elections were held in early May of 2002, 2007 and 2012, the usual mid-May budgetary process has been punctuated by a change of government which imposed severe restrictions on the victor because of the very narrow time line between the elections and the required presentation of the national budget.  Therefore, in the absence of a predetermined fixed election date, successive governments should make a deliberate effort to avoid holding general elections in May because of the constraints that this event places on the implementation of a national budget designed to address the victor’s national agenda.  More about that at another time.

The state of public finances

It is now becoming increasingly evident that the former FNM administration that has always claimed to be a government of accountability and transparency has been neither. An early indication of this was first observed in the Ingraham Administration’s deliberate negligence to submit its customary and much anticipated mid-year budget report earlier this year.  It can be reasonably surmised that the former prime minister and minister of finance consciously decided to forego this practice in 2012, which he himself introduced with much fanfare and consistent conformity, for purely political reasons.

The former prime minister and his Cabinet clearly realized that if they honestly reported the state of public finances at mid-year, their deplorable financial performance would have been received with shock and awe by the Bahamian citizenry.  In the run up to elections, an honest report would likely have brought about an even more devastating outcome at the polls, and therefore, presumably, the FNM government took a conscious decision to withhold such reporting from the public, hoping that the public would place the lack of a report in the “no news is good news” category.

Another example of the FNM government’s willful refusal to report on the true state of public finances pertained to the New Providence road works, which the Public Accounts Committee, under the chairmanship of the Hon. Dr. Bernard Nottage, revealed had incurred a budget overrun of nearly $100 million.

A third instance of the FNM government’s lack of accountability regarding public finances was exposed in the current prime minister’s communication last week when the latter reported the horrendously high and historically unprecedented total deficit for 2011/2012 which rose to a record level of $570 million versus an approved total deficit of $314 million, an increase of $256 million or 82 percent more than was originally anticipated.  In line with the International Monetary Fund Government Finance Statistics (GFS) concept, the GFS deficit, which is the total deficit less debt redemption, for 2011/12 is projected to result in $504 million or 6.3 percent of gross domestic product (GDP). This is double the 3.0 percent that was presented by Mr. Ingraham as the forecast in last year’s Budget Communication.

Finally, the FNM government’s legacy to the national debt is equally disappointing and extraordinarily dismaying.  The national debt increased from $3 billion to $4.3 billion during its term in office from 2007 to 2012, an increase of 40 percent in five years.  This represents an historically high debt to GDP ratio of 56 percent.  Because of this inherited unparalleled GFS budget deficit of $504 million for 2012, the Christie administration will have to borrow an additional $504 million in order to pay off the financial excesses of the Ingraham administration.

The national debt will therefore increase to $4.8 billion by the end of the next fiscal year. But it gets worse. Again, because of the excessive commitments and spending of the Ingraham administration, all things being equal, and barring any unforeseen catastrophic developments over the next two years, given a projected record GFS deficit of $550 million for fiscal year 2013/14, is anticipated that the national debt will increase to well over $5.4 billion by 2014. This will represent a disastrously high debt to GDP ratio in excess of 60 percent.

All these unmatched and unequalled negative performance measures that the government inherited were incurred by an FNM government that frequently and triumphantly trumpeted its commitment to good governance, fiscal prudence, sound financial management, accountability and transparency in public finances.

It is fair to say that so-called good governance, fiscal prudence, sound financial management, accountability and transparency in public finances notwithstanding, Mr. Ingraham and his FNM Government have unquestionably left Mr. Christie and his government in a financial pickle.

Promises to keep

In spite of the alarming news, the Christie administration is still very determined to implement its agenda as articulated in its 100 day promises, the Charter for Governance, the Speech from the Throne and the Budget Communication.  While it will be enormously constrained by the fiscal realities that it has inherited, the new government has set about delivering on the social contract that serves as a basis of the mandate it was given on May 7.

It will be important for the new government to regularly give the Bahamian people an open and candid account of its stewardship over the next five years if it hopes to break the recent trend of one-term governments.

Conclusion

Next week, we will examine how the new administration’s budgetary provisions plan to remain true to its pledges to an impatient and hurting populace whose expectations for relief and renewal are extremely high and to what extent the national budget for 2012/13 will seek to meet those high expectations.

Philip C. Galanis is the managing partner of HLB Galanis & Co., Chartered Accountants, Forensic & Litigation Support Services. He served 15 years in Parliament.  Please send your comments to: pgalanis@gmail.com

Jun 04, 2012

thenassauguardian

The Budget: Part II

Caribbean Blog International