The Bahamas is one of the most difficult places for its own citizens to do business or become entrepreneurs!

An Open Note To The Bahamas Prime Minister, The Hon. Philip Davis

As The Bahamas prepares to celebrate fifty (50) years as an “independent” country, one is left to ponder if we have truly made any real strides towards economic prosperity

As this is our country Mr. Prime Minister, then we the people should have more of a stake in it. As Voltaire said, “A multitude of laws in a country is like is a great number of physicians, a sign of weakness and malady.”

"The Way Forward"

By: Dr Kevin Turnquest Alcena

LLB (Hon-1st Cl.), LLM (Hon-1st Cl.)

PhD in Economics / Ph.D. in Clinical Psychology

Ph.D. in Public Health / PhD in Herbal and Holistic Medicine

Titular Professor

Lawyer & Fellow—CILEx; ACIArb; & Snr. Fellow–AMLA

Sept. 21, 2022

Great Economist, Adam Smith said, “A nation is not made wealthy by the childish accumulation of shiny metals, but is enriched by the economic prosperity of its people.” Well if the wealth of a country is incumbent upon the state of its economics, then Mr. Prime Minister - The Bahamas and its leaders have been “…weighed in the balances, and art found wanting” (Daniel 5:27)! As this nation prepares to celebrate fifty (50) years as an “independent” country, one is left to ponder if we have truly made any real strides towards economic prosperity.

The passing of Queen Elizabeth signified the ending of an era of which those left behind have broken through the barriers of hundreds of decades of forced tradition. The tearing down of these invisible walls and unrealistic expectations have now given the future generation’s options and choices their forefathers were forbidden to make.

However, can we as a “sovereign” nation say the same? When one considers the many archaic and draconian measures still in place that hinders progression in The Bahamas, are we really moving forward? Or are we stuck in decades of false traditions and mental slavery that keeps us in cycles of poverty rather than prosperity?

If Smith’s idea of economic prosperity is to be believed, then where is our wealth Mr. Prime Minister?

Do not get me wrong sir - this is not an indictment on you per se, but rather a question for all of those that have made themselves available to represent the public.

Granted Mr. Prime Minister, The Right Honorable Philip “Brave” Davis, you have made excellent headway in trying to transition this country through a pandemic and into recovery, as well as aiming to improve the social and economic status of the less fortunate. There are still some key areas that need immediate attention and with the right team of advisors I do not doubt some of these issues can be resolved.

Firstly, let’s take a look at the issue of Bahamians helping Bahamians. The Bahamas is one of the most difficult places for its own citizens to do business or become entrepreneurs! The process at Inland Revenue itself is nonsensical. It’s almost completely automated, which makes it difficult to speak to someone on the phone or even in person. What’s the point of having a building full of people if you cannot speak to anyone?

Moreover, if the system has been automated, why is the turnaround time so long? Furthermore, you are required to fill out the application for all agencies on one website, yet, we still have to wait for each of these agencies to separately respond, especially Environmental Health and Ministry of Works!

May I suggest that if one agency is used to fill out the application, then the system should be digitized so that all agencies can tap into a central portal that will allow all relevant parties to receive a notification of when requests come in, and they can begin working on them simultaneously so that the response time and confusion are drastically diminished!

Another issue with doing business in this country is the bureaucracy and the ridiculous criterion of having a “letter of good standing” from N.I.B. If this institution is supposed to have an entire unit dedicated to ensuring that employers are paying their contributions, why then is this letter necessary? If the personnel hired for this task are doing their jobs by prosecuting those who are not meeting their obligations - then this procedure can be quelled.

As this is our country Mr. Prime Minister, then we the people should have more of a stake in it. As Voltaire said, “A multitude of laws in a country is like is a great number of physicians, a sign of weakness and malady.”

Secondly, the government needs to devise a national plan to eradicate illiteracy and the decreasing national average. Social promotion has and still does not help in meeting the needs of our children.

There are over 5,000 students leaving school every year in this country with less than 20% attending college. So, what happens to the other 80%? What prospects do they have if they cannot meet the basic needs of reading and writing? Stephen Covey said one of the “Habits of Highly Effective Leaders” is being innovative.

It is imperative that technical schools be erected to help those that cannot comprehend or pass ten (10) academic subjects. Jamaica, for example has fourteen (14) Technical Schools and two (2) Agriculture schools, which means they are even training their students to feed themselves and their families.

If our brothers and sisters in the Caribbean understand the importance of alternative education, why haven’t we? The government should take a note out of Haiti’s book - in that it has asked Cuba to assist them with their illiteracy problem.

The Human Resource of our country is the most critical part of any nation because we are a service based economy. Another alternative to alleviating the educational problem could be the introduction of a National Service. This would assist those males and females between the ages of 17-21 who are delinquent and continue to be a menace to society, but are not old enough to be placed in Fox Hill Prison.

The programs in place are not helping and only making these young people aggressive and unproductive citizens of society. Something must be done, and the usage of the old Victorian system has already set our kids up for failure. “Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing it is stupid” (Albert Einstein).

Thirdly, as I have said many times before, the national debt dilemma truly needs to be addressed. A national plan begins with having the right set of people in place that can not only give advice, but wise counsel. Proverbs 11:14 says, “Where no counsel is, the people fall: but in the multitude of counsellors, there is safety.”

Mr. Prime Minster, wise counsel can keep you and this country from destruction. Simply appointing people to this post or this position does not expand knowledge or make for a great plan. There is no economic think tank or advisory board that can steer this country in the way forward.

We need persons with international connections that can help the country with debt management, and transition to a position of prosperity. Stephen Covey said, “Make time for planning; wars are won in the general’s tent.”

We are continuing the same old structure of bringing back and allowing bureaucrats to dictate or give advice on the way forward. We are looking to you for a paradigm shift in how we do business in this country, because at present - we are digressing.

We see a cycle of people repositioning themselves over and over again; the former this one or that one, and all at the expense of the taxpayer’s money.

The Opposition Leader suggested a good recourse for decreasing our debt; that being allowing Bahamians to buy bonds into our debt. This alternative makes good economic sense and is innovative. The old anachronistic structure at Central Bank needs to be change and rid ourselves of some of these committees. The country is too small and too deep in debt to continue down this path.

Recently, there have been some Bahamians who have decided to open a council in Miami and become digital nomads. This is because the taxes here are too high and defeats the purpose of trying to improve one’s social economic status.

How are we going to help the 49,000 people that is out of work with the existing structure in place? We need to deregulate the country, and allow for ease of doing business for both Bahamians and foreigners.

N.I.B. should be privatized before it goes broke from all the borrowing and mismanagement of money that takes place.

Another ingenious idea to assist in ridding us of this national debt is the implementation of a National Lottery. We have the knowledge and people with the ability and connections to direct the leaders on how to go about doing this. A National Lottery can aid in supplementing Social Services, Education and Youth and Sports, because as it stands - we have no monies to overhaul these ministries.

Also, looking at a Public Service Reform and reducing the public service by at least 20,000 as we can no longer maintain it - will be a big step in moving in the right direction.

In concluding, Matthew 20:26 states, “…Instead, whoever wants to become great among you must be your servant.” Mr. Prime Minister, as a great leader - you are called to serve the people and to do so, you must meet the people where they are at.

Progression requires change, and it must begin with those who have taken a step forward and chosen to lead those they are in authority over. Many are still struggling to get by and need help in getting to their destination.

It’s time to be more than just innovative, but think outside the box; time for something new. As Barak Obama said, “Change will not come if we wait for some other person, or if we wait for some other time. We are the ones we've been waiting for. We are the change that we seek.”

Source 

The Bahamas nears " the ranks of 'Third World' nations via the rapid rise in the national debt... ...with an International Monetary Fund (IMF) report warning that our nation's 57.6 per cent debt-to-GDP ratio has passed the threshold at which it will act as "a drag" on its economic growth

Debt 'Pushing Bahamas' Deeper Into Third World


By NEIL HARTNELL

Tribune Business Editor

THE Bahamas has "pushed ourselves further into" the ranks of 'Third World' nations via the rapid rise in the national debt, with an International Monetary Fund (IMF) report warning this nation's 57.6 per cent debt-to-GDP ratio has passed the threshold at which it will act as "a drag" on its economic growth.

James Smith, a former Central Bank governor and now-Ministry of Finance consultant, told Tribune Business that the Bahamas had "dug ourselves a hole" with a national debt projected to hit $4.613 billion by end-June 2012, adding that its fiscal woes were begin to resemble "more and more" those of its many troubled Caribbean neighbours.

As he acknowledged that it would be "very difficult" to get the Bahamas' fiscal deficit and national debt back on to a sustainable trajectory, Mr Smith's comments were given further credence by an IMF paper, published on Friday, which showed this nation's debt-to-GDP ratio was now likely to 'drag down' its economic growth.

The paper, Threshold Effects of Sovereign Debt: Evidence from the Caribbean, analysed the Bahamas and 12 other regional nations, and found that above a 55-56 per cent debt-to-GDP level, any further increase in that ratio would impede economic growth.

The Bahamas, which is projected to have a total debt-to-GDP ratio of 57.6 per cent by month's end, according to government statistics, has already breached that barrier.

"The main finding is that there exists a threshold debt to GDP (GDP) ratio of 55-56 per cent," the four authors of the IMF paper found. "Moreover, the debt dynamics begin changing well before this threshold is reached.

"Specifically, at debt levels lower than 30 per cent of GDP, increases in the debt-to-GDP ratio are associated with faster economic growth. However, as debt rises beyond 30 per cent, the effects on economic growth diminish rapidly.

"And, at debt levels reaching 55-56 per cent of GDP, the growth impacts switch from positive to negative. Thus, beyond this threshold, the debt becomes a drag on growth."

Tackling the rapid rate of increase in the Bahamas' fiscal deficit, projected to hit a record $550 million under the GFS measurement during the 2012-2013 fiscal year, and the national debt could arguably be the Christie administration's greatest challenge over the next five years.

But, beyond some revenue enhancement measures largely left in place by the former Ingraham administration, pledges of tax reform and efforts to get the private sector going, it has yet to lay out a clear strategy for containing the fiscal deficit and national debt.

"The trend is still very worrisome," Mr Smith conceded, "because it's very difficult once you've let the horse out of the barn. It's very difficult to get it back".

He argued that the projected $550 million fiscal deficit for 2012-2013 was largely "a catch up from all the expenditure that has taken place", meaning it has resulted from extra debt servicing and spending commitments made by the former Ingraham administration.

"You couldn't even roll it back," Mr Smith added. "If you stopped everything, it would be more costly and would put a brake on what little growth there is.

"There's going to be no quick turnaround, as the world economy is still sluggish. By and large we have dug a hole for ourselves."

The former finance minister and Central Bank governor told Tribune Business that it was "a fair assessment" to argue that the Bahamas' fiscal predicament was due more to spending increases, particularly on the Government's recurrent or fixed costs, as opposed to the revenue side of the equation.

"In the last year or so we seemingly outspent the fall off in revenues, and from a policy perspective we should have been holding back when we realised we were not emerging from recession, at least not at the pace the US was," Mr Smith said.

A report by the United Nations' Economic Commission for Latin America and Caribbean (ECLAC), released on Friday, blamed the Bahamas' 2010-2011 nominal fiscal deficit of 4.7 per cent on spending increases that outstripped a 10 per cent rise in revenues to a sum equivalent to 17.7 per cent of GDP.

"The improved revenue was offset by a substantial nominal rise in expenditure to 22.9 per cent of GDP," the ECLAC report noted.

"Current expenditure reflected a sharp increase in payments for goods and services, and higher debt interest payments as government borrowing mounted. Growth in capital expenditure more than doubled with major investments in road infrastructure and in the airport expansion project."

Mr Smith, meanwhile, told Tribune Business that the Bahamas effectively needed an 'out of the box' game changer, something not associated with its traditional industries, to reverse the decline.

"We need some kind of external something we didn't plan for to get us quickly out of this," he added. "The things that we can predict, nothing seems to give us the sufficient impetus that we need in the short-medium term.

"We're beginning to look more and more like the rest of the Caribbean," Mr Smith told Tribune Business, referring to the likes of Barbados, Jamaica and St Lucia, all with debt-to-GDP ratios of around - or above - 100 per cent.

"We've been trying to pull ourselves so hard out of the Third World, but seem to have pushed ourselves further in. It's really going to take a combined effort - the labour has got to become more productive, the investment support machinery has got to be more efficient. We've simply got to work a lot harder as a country. It's not business as usual."

The bulk of Bahamian GDP was derived from tourist spending, but Mr Smith questioned whether US visitors - who still account for over 80 per cent of stopovers - would return to pre-recession spending levels even if there was recovery at home.

"We don't have the level of tourist expenditure needed to support increased GDP growth," he added. "To the extent that we are using subsidies to the tourism sector in terms of assisting the hotel industry, the likes of Companion Fly Free, we are actually getting less spending per tourist dollar, as we are actually paying to get them here. We're not getting the same bang for the buck."

The authors of the IMF paper urged the Bahamas and others above the 55 per cent debt-to-GDP mark to "adopt policies that do not impede growth" by setting the ratio on a downward trend.

Acknowledging that it was difficult for the Caribbean to embark on fiscal consolidation, given the recession's hangover and high unemployment levels, the IMF paper urged governments to combine with the private sector to "present more innovative ideas, and rehash some of the current policies for the region:".

The authors, for instance, called for "greater progress" in sectors such as information technology and renewable energy.

June 18, 2012

Tribune242

Caribbean Blog International

The Government's own projections show its direct debt standing at 50.6 per cent of GDP, or $4.057 billion, as at end-June 2012... ...then increasing to $4.607 billion, or 54.5 per cent of GDP, by the close of the 2012-2013 fiscal year

National Debt To Exceed $5bn By Mid-2013



By NEIL HARTNELL

Tribune Business Editor

THE Bahamas' national debt will breach the $5 billion mark before the end of the upcoming 2012-2013 fiscal year, the Government's Budget projections disclosed yesterday, with the debt-to-gross domestic product (GDP) ratio also surpassing the 60 per cent threshold.

Unveiling what fiscal conservatives would likely describe as 'a horror show', Prime Minister Perry Christie unveiled a projected $550 million GFS deficit for the 2012-2013 fiscal year, a sum equivalent to 6.5 per cent of Bahamian GDP.

Together with the projected $504 million deficit for the 2011-2012 fiscal year, which is set to close on June 30, this means the Government will have to borrow more than $1 billion in just two years to cover both its recurrent and capital deficits.

And the $1.054 billion financing gap does not include debt principal redemption, which is set to total $66 million and $121 million, respectively, for the fiscal years 2011-2012 and 2012-2013. Together, that adds a further $187 million to the fiscal deficits, taking the gap between revenues and spending over the two years to $1.241 billion.

The Government's own projections show its direct debt standing at 50.6 per cent of GDP, or $4.057 billion, as at end-June 2012, then increasing to $4.607 billion, or 54.5 per cent of GDP, by the close of the 2012-2013 fiscal year.

Yet this masks the extent of the overall problem, because it does not factor in the $551 million worth of debt the Government has guaranteed on behalf of state-owned Corporations and agencies.

That sum was equivalent to 7 per cent of GDP at year-end 2011. Placed on top of the Government's direct charge, that takes the Bahamas' total national debt to $4.608 billion, or 57.6 per cent of GDP, at June 30, 2012.

And, when added to the projected $4.607 billion direct charge on government at the end of the 2012-2013 fiscal year, the Bahamas' total national debt will hit $5.158 billion - a sum equivalent to 61.5 per cent of national GDP.

And, if the Government's medium-term Budget projections are correct, GFS deficits of $357 million and $272 million in 2013-2014 and 2014-2015, respectively, will take the direct charge to $5.215 billion at the end of the latter period.

Assuming the $551 million in government guaranteed debt remains relatively unchanged, the total Bahamas' national debt will hit $5.766 billion by June 30, 2015, a sum equivalent to 63.3 per cent of GDP.

That indicates the fiscal position will likely continue to weaken despite the improvement generated by positive GDP and economic growth, and also suggests the Bahamas will hit the $5.5 billion debt mark more than a year earlier than the International Monetary Fund's (IMF) 2016 forecast. It also appears that the Government is again relying on economic growth to keep the debt-to-GDP ratio below the 70 per cent the IMF has classified as a 'danger' threshold.

The toll this will exact on the Government's finances, and its ability to fund spending priorities and areas such as education and health, was brought into sharp relief by the Prime Minister yesterday, when he said debt servicing (interests) and debt principal requirements would collectively total $328 million for the 2012-2013 fiscal year - a sum equivalent to 18 per cent of recurrent spending.

Overall, the Budget was pretty much what observers expected, with Mr Christie, as Minister of Finance, performing a delicate balancing act between conveying a message of fiscal prudence and 'holding the line' on the deficit on one hand, while trying to stimulate the private sector and deliver on pre-election campaign promises with the other.

The main 'political battleground' themes surrounding the 2012-2013 Budget were also well-defined yesterday, with the Prime Minister describing the Government's deficit and debt levels, and overall fiscal position, as "much worse than we had anticipated".

Michael Halkitis, his minister of state for finance, went further in castigating the former Ingraham administration for "reckless" spending, particularly during the final months of its term.

He added that the previous government's fiscal policies had "severely constrained our room to manoevere", a signal that the PLP administration will likely lack the financial headroom to implement at least some of its pre-election manifesto promises.

The Opposition Free National Movement (FNM), though, will likely retort that the Government already knew the extent of the Bahamas' fiscal woes, having been fully briefed on the New Providence Road Improvement Project cost overruns and voted on all borrowing/spending resolutions brought to Parliament by the former administration.

It will argue that the Government is simply looking to blame the Ingraham administration, and in doing so, provide a cover for why it is unable to deliver on pre-election promises that the FNM has branded unrealistic.

Still, whichever way it is sliced and diced, the Bahamas' fiscal situation is dire. "The fiscal accounts are in much worse shape than we had expected as we came into office," Mr Christie warned yesterday.

"Indeed, this year's projected GFS deficit outturn is significantly higher than had been forecast by the previous administration last year's Budget communication. The GFS deficit in 2011-2012 is now projected at $504 million, up by a full $256 million from the previous government's estimate of $248 million."

The $256 million overshoot on the GFS deficit is 103 per cent, or more than double, the FNM's 2011-2012 Budget forecast, with the total $504 million deficit equivalent to 6.3 per cent of GDP - an unsustainable level more than double the 3 per cent estimate.

As a result, the Government's direct debt-to-GDP ratio will hit 50.6 per cent at June 30, 2012, as opposed to the 46.2 per cent level projected in last year's Budget.

Mr Christie's presentation, though, indicated that the majority of the GFS deficit overshoot for 2011-2012 was attributable to capital spending set to come in $119 million, or "almost 43 per cent", above target at $399 million - compared to the forecast $280 million.

The Prime Minister said the capital spending overshoot was "due in substantial part to a considerable increase in spending on the New Providence Road Improvement Project".

While faring a little better, the FNM administration also seems set to exceed its recurrent deficit estimates by 54.8 per cent, the projected outturn for 2011-2012 being $257 million as opposed to $166 million.

This, Mr Christie said, was the result of a combination of recurrent revenues "underperforming relative to the forecast" and recurrent spending beating projections at $27 million to hit $1.707 billion. Recurrent revenues for 2011-2012, he added, were set to come in at $1.45 billion, off target by $64 million.

Moving forward, Mr Christie pledged that the Government would move to "redress the unsustainable balance in our recurrent account" through a two-pronged strategy.

This, he said, would involve constraining recurrent spending so it grew in line with the Bahamian economy's growth, and "engineering a transformation of recurrent revenue to bring it to a more appropriate level relative to the size of the economy".

Promising to "hold the line" on recurrent spending in 2012-2013 "to the maximum extent possible", Mr Christie said it was still projected to rise by 6.7 per cent or $114 million to $1.821 billion, compared to $1.707 billion in the last fiscal year.

He added that $55 million of the recurrent spending rise was due "to the increased requirements for debt redemption in the coming period".

As for recurrent revenues, Mr Christie said they were projected to improve to 18.3 per cent of GDP in 2012-2013, up from 18.1 per cent in the current fiscal year. The Government is forecasting an increase from $1.45 billion to $1.55 billion, due to improved collections from Excise Tax and real property tax reforms.

As for capital spending, the Prime Minister said this would remain flat at $400 million in 2012-2013, attributing this to "a large inventory of ongoing projects" - including the $77 million borrowing for the New Providence Road Improvement Project.

May 31, 2012

tribune242

Caribbean Blog International

The Bahamas Chamber of Commerce and Employers Confederation (BCCEC) support permitting oil exploration in Bahamian waters ...once regulatory safeguards were in place... ...potential earnings could "eliminate The Bahamas' National Debt in five years"

Chamber Backs Oil Exploration

By NEIL HARTNELL

#Tribune Business Editor

THE Bahamas Chamber of Commerce and Employers Confederation (BCCEC) yesterday backed permitting oil exploration in this nation's waters once regulatory safeguards were in place, telling Tribune Business potential earnings could "eliminate the National Debt in five years".

I Chester Cooper, the BCCEC's chairman, effectively told this newspaper that the Bahamas - and its economy - could not afford the 'opportunity cost' of passing up the financial benefits if commercial quantities of oil were found within this country's territorial boundaries.

Projecting that revenues worth a conservative $1 billion per year could be generated if the Bahamas Petroleum Company (BPC) and its joint venture partners were to discover oil deposits that could be extracted, Mr Cooper said the sector had the potential to "transform the economy" - both directly and through spin-off commercial activities.

Calling for a "non-partisan" debate on oil exploration in the Bahamas, the BCCEC chairman acknowledged that a comprehensive environmental, health and safety regime was required to protect this nation's environment and tourism industry.

Urging the Government to "get on with it" when it came to developing such a regulatory regime, Mr Cooper pointed out that the energy and tourism industries already co-existed in the Caribbean, in the shape of Trinidad & Tobago and Barbados. Cuba, also a tourism-dependent destination, has begun to drill in waters near its territorial boundaries with the Bahamas.

Emphasising that the BCCEC's support depended on the necessary safeguards being in place, Mr Cooper suggested it was time to lift the debate on oil exploration, and BPC's activities, to a higher level and away from being a 'political football'.

"Now that the political season is over, it is a good time to have a comprehensive, non-partisan debate on the issue," he said.

"We support the continued exploration of oil and, if successful, the eventual development of a safe and well-regulated industry. We urge the Government to quickly put the proper regulations in place for the orderly development of this industry."

Oil exploration was first seized on by the Democratic National Alliance (DNA) as an issue that it could exploit for political mileage in the general election run-up. Then former Prime Minister Hubert Ingraham attempted to use it, and BPC, to portray the Progressive Liberal Party (PLP) as 'conflicted' and unlikely to act in the nation's best interest, given that Davis & Co (now Deputy Prime Minister Philip Davis's law firm) and former PLP attorney general, Sean McWeeney, were named as the company's legal advisers.

There were then suggestions that Prime Minister Perry Christie had acted as consultant to BPC while in Opposition. Eventually, the PLP pledged to hold a referendum on whether oil drilling and exploration should be permitted in Bahamian waters, while Mr Ingraham backtracked from an earlier position that the FNM would not permit the industry if re-elected.

Ultimately, the former Ingraham administration returned to its already-stated position that oil drilling would not be permitted, and no new licences issued, until an appropriate regulatory regime has been implemented. Government officials have already visited the likes of Norway and the UK to examine those countries' regimes, and what the Bahamas can learn from and bring here.

Nevertheless, just prior to the general election, the Government decided not to renew the five BPC licences that expired on April 26, 2012, and returned the company's $300,000 fee payments to it. This leaves the ball very much in the newly-elected Christie administration's court.

BCCEC chairman Mr Cooper, meanwhile, indicated that the tremendous economic benefits - if oil was discovered in sufficient quantities in Bahamian waters - meant this nation, with its limited natural resources, narrow economic base and troubled government finances, could not afford to spurn this opportunity.

"The likely revenues can eliminate the National Debt in five years and contribute significantly to education, healthcare and development of infrastructure across the country and, importantly, an expansion in GDP leading to more favourable economic metrics," Mr Cooper said.

He added that the revenue generated from oil exploration could be used to reduce import tariffs on oil imports, reducing energy and gasoline costs. This, in turn, would lower the cost of living and doing business in the Bahamas, and make this nation much more competitive in attracting foreign direct investment (FDI).

"We cannot afford to be dismissive of these realities," Mr Cooper said, acknowledging that a proper regulatory regime - and its enforcement - were "a must" to preserve the environment and tourism industry.

Noting the example set by other Caribbean nations, he added: "It doesn't have to be one or the other - both can co-exist. It is being done in the region, in Barbados and Trinidad & Tobago.

"Clearly, the risks can be managed. We further understand that the Cubans are drilling right across the Bahamas' border. So we need not re-invent the wheel with respect to the regulations. We can draw on our friends in the international community with tried and tested regulations, like the US, UK, Trinidad and the Clean Caribbean Initiative."

Calling on the Government to "get on with it" when it came to developing a regulatory regime, because the opportunity cost of not doing so was too great, Mr Cooper said the Bahamas had to ensure its people were either trained abroad - or qualified Bahamians enticed back home - to participate in the oil exploration sector.

The BCCEC's energy and environment committee, he added, felt there was too much misinformation circulating on oil exploration, and called on the Government and BPC to better educate the public. The BCCEC is also planning to start discussions by hosting a luncheon on the topic shortly.

May 18, 2012

tribune242

Caribbean Blog International

Policymakers and other interested parties would need to closely monitor the national debt situation to ensure that the nation’s economy remains healthy and that our living standards are not threatened by excessive public sector debt

The national debt

thenassauguardian editorial

Governments, international agencies, rating agencies and most businessmen regard the level of national debt to the size of the economy (GDP) as one of the most important economic indicators in assessing the current and future health of the economy.

The national debt consists of funds borrowed directly by the government plus any debt of the government corporations which have been guaranteed by the government.

Governments usually borrow funds when there is a need to undertake capital projects (office buildings, schools, roads, docks etc.) and the revenue from taxes is insufficient to cover the capital works.

The size of any economy determines the level of potential taxes that could be collected to meet government expenditure needs for, among other things, education, health, law enforcement, social welfare and of course, debt servicing of any loans taken out by the government.

Current and future living standards in any country are influenced by the amount of resources applied by governments, on a yearly basis, to education, health, national security, social welfare and other public sector areas.

In order to ensure that sufficient resources are available on a sustainable basis for those fundamental public sector functions, good fiscal management compels governments to restrain the growth in debt servicing to a level where it does not threaten to crowd out and push aside the needs of the other important sectors of society.

In many third-world countries in Africa, Asia, Latin America and the Caribbean, the public resources from tax revenues to finance public debt have exceeded the public resources allocations for education and health; a position considered by many as an undesirable path towards the lowering of living standards.

In an attempt to address poor policy choices by governments, international agencies such as the IMF (International Monetary Fund), World Bank and the IDB (Inter-American Development Bank) which provide economic advice on a global basis, urge governments to try and keep debt ratios (total national debt as a percentage of total national output or GDP) to a reasonable level.

In the case of developing countries such as The Bahamas, the level suggested is somewhere in the region of 40 percent.

Most countries, particularly those in the developing world, have fallen short of that objective.

Indeed, with the exception of Trinidad and Tobago at 26 percent, many developing countries are in the high 80s (Barbados) or, in some cases the ratio exceeds 100 percent, (Jamaica at 123 percent for example), while the European countries have set the debt to GDP ratio at 60 percent as the desired level for their community.  Our nearest neighbor and largest trading partner, the United States, has a debt to GDP ratio that stands at an unusually high level of 97 percent.

When a country’s debt to GDP is high, it implies that the country is struggling and could have difficulty servicing its debt.

Currently The Bahamas’ ratio is in the high 50s and growing.

It is not yet in troublesome territory, but given the trend over the past few years and the growing commitments to further borrowing, including the Chinese loans and the associated capital needs of the utility companies, there is surely some cause for some concern.

The policymakers and other interested parties would need to closely monitor the debt situation to ensure that the nation’s economy remains healthy and that our living standards are not threatened by excessive public sector debt.

Oct 25, 2011

thenassauguardian editorial

Caribbean Blog International

Standard & Poor's (S&P) latest assessment of the Bahamas' public finances: ...hinted strongly that it was not overwhelmed by the Government's fiscal plans and that the Ingraham administration could do more to set the national debt and deficit back on a more sustainable path

S&P: Bahamas needs 'proactive' debt policy


By NEIL HARTNELL
Tribune Business Editor
tribune242


A major Wall Street credit rating agency would raise the Bahamas' sovereign credit rating if the Government initiates "a more proactive policy response" to reduce this nation's national debt, noting the economy's "modest growth prospects" and likely "limited" improvement in the fiscal deficit prior to the upcoming general election.

Standard & Poor's (S&P), in its latest assessment of the Bahamas' public finances during a round-up of developments in Latin America, hinted strongly that it was not overwhelmed by the Government's fiscal plans and that the Ingraham administration could do more to set the national debt and deficit back on a more sustainable path.

The analysis, prepared by Bahamas country analyst Lisa Schineller, said S&P's 'stable' outlook on this nation's sovereign credit rating "reflects our expectation that the Government will gradually reduce its fiscal deficit and will maintain a generally stable external financing profile".

On the downside, she said the Bahamas 'BBB+' and 'A2' short and long-term ratings, respectively, " could come under pressure if the Bahamas' fiscal deterioration persists and the economic base erodes more severely".

Yet, more interestingly, Ms Schineller wrote: "Conversely, we could raise the ratings if the Government takes a more proactive policy response to reduce debt levels or if the Commonwealth's economic prospects strengthen."

For its 2011-2012 Budget, the Ingraham administration is projecting a GFS fiscal deficit of 3 per cent or $248 million. Debt principal repayments of $66 million are stripped out of this measurement, the total deficit forecast to be $314 million.

Direct government debt, as a percentage of gross domestic product (GDP), is projected to grow to 46.2 per cent at the end of the next fiscal year on June 30, 2012, and keep on rising to 47 per cent and 47.7 per cent at the end of fiscal 2012-2013 and 2013-2014 respectively.

In its latest analysis, S&P projected that general government deficits would decline to an average of 3.6 per cent of GDP over the period 2011-2013. Net general government debt, which stood at 33 per cent of GDP in 2010, was projected to continue rising to 38 per cent by 2012, gross debt having risen from 36 per cent in 2007 to 47 per cent last year.

"The Bahamas' fiscal deficit is projected to decline over the forecast period, but improvement might be limited ahead of the next general election that is due by May 2012, given the still subdued growth outlook," S&P said.

"Specifically, the Government increased capital and social spending to mitigate the impact of the recession on society despite a decline in tax revenues............ Importantly, the Government's external amortisation needs are low, as the share of external debt to locally issued debt is about 20 per cent."

The Wall Street credit rating agency is projecting a general government deficit of around 5.3 per cent for the 2010-2011 fiscal year that is due to end on June 30, down from the 6.6 per cent gap incurred in 2010.

"The Bahamian hotel industry has recovered somewhat but does not expect a meaningful revival of tourism in 2011, and still appears dependent on promotion deals," S&P added. "The Bahamas was significantly affected by the global recession, and like elsewhere in the Caribbean, has recovered very slowly.

"We expect the Bahamas' tourism sector to improve slowly in line with the US economic outlook (and US consumer). The economy's dependence on one product (tourism accounts for more than 50 per cent of GDP and employs more than 50 per cent of the labour force) and one market (US tourists account for more than 80 per cent of the total) is a vulnerability."

S&P included among the Bahamas' weaknesses the rise in the fiscal deficit and national debt, given the weak recovery, coupled with spending increases and reduced tax revenues.

It also noted the "high current account deficit and weak, albeit fairly stable, external liquidity".

June 16, 2011

tribune242

The threat of excessive public sector debt in The Bahamas...

The national debt

thenassauguardian editorial



Governments, international agencies, rating agencies and most businessmen regard the level of national debt to the size of the economy (GDP) as one of the most important economic indicators in assessing the current and future health of the economy.

The national debt consists of funds borrowed directly by the government plus any debt of the government corporations which have been guaranteed by the government.

Governments usually borrow funds when there is a need to undertake capital projects (office buildings, schools, roads, docks etc.) and the revenue from taxes is insufficient to cover the capital works.

The size of any economy determines the level of potential taxes that could be collected to meet government expenditure needs for, among other things, education, health, law enforcement, social welfare and of course, debt servicing of any loans taken out by the government.

Current and future living standards in any country are influenced by the amount of resources applied by governments, on a yearly basis, to education, health, national security, social welfare and other public sector areas.

In order to ensure that sufficient resources are available on a sustainable basis for those fundamental public sector functions, good fiscal management compels governments to restrain the growth in debt servicing to a level where it does not threaten to crowd-out and push aside the needs of the other important sectors of society.

In many third-world countries in Africa, Asia, Latin America and the Caribbean, the public resources from tax revenues to finance public debt have exceeded the public resources allocations for education and health; a position considered by many as an undesirable path towards the lowering of living standards.

In an attempt to address poor policy choices by governments, international agencies such as the IMF (International Monetary Fund), World Bank and the IDB (Inter-American Development Bank) which provide economic advice on a global basis, urge governments to try and keep debt ratios (total national debt as a percentage of total national output or GDP) to a reasonable level.

In the case of developing countries such as The Bahamas, the level suggested is somewhere in the region of 40 percent.

Most countries, particularly those in the developing world, have fallen short of that objective.

Indeed, with the exception of Trinidad and Tobago at 26 percent, many developing countries are in the high 80s (Barbados) or, in some cases the ratio exceeded 100 percent, (Jamaica at 123 percent for example), while the European countries have set the debt to GDP ratio at 60 percent as the desired level for their community. Our nearest neighbor and largest trading partner, the United States, has a debt to GDP ratio that stands at an unusually high level of 97 percent.

When a country’s debt to GDP is high, it implies that the country is struggling and could have difficulty servicing its debt.

Currently The Bahamas’ ratio is in the high 50s and growing.

It is not yet in troublesome territory but given the trend over the past few years and the growing commitments to further borrowing, including the Chinese loans and the associated capital needs of the utility companies, there is surely some cause for some concern.

The policy makers and other interested parties would need to closely monitor the debt situation to ensure that the nation’s economy remains healthy and that our living standards are not threatened by excessive public sector debt.

3/18/2011

thenassauguardian editorial

Bahamas Blog International

Continuing budget deficits and the national debt... Bahamas

The mid-term budget
thenassauguardian editorial




The prime minister and minister of finance has presented to Parliament a statement on the fiscal affairs of the country for the six month period ending 31st December, 2010. It seems clear that the country is still being severely challenged on the fiscal front and the economy has yet to emerge from the depths of the global recession.

The most important budgetary item, total revenue, is trailing estimates by $50 million despite the tax hikes and the improved revenue administration announced at the start of this current budgetary cycle.

That outcome is not surprising when one considers that in our economy, our major source of government revenue is customs duties, which are determined by the level of imports, which in turn is determined by employment levels and tourists arrivals.

Unemployment is in the mid-teens, according to the latest available figures which have not been released since 2009, and air-arrivals — the most important tourist category — is seemingly stagnant at 1.3 million; a figure that has hardly changed in two decades.

From a policy perspective, it seems clear that efforts to boost tourist arrivals (by air) and at the same time expand employment opportunities are of critical importance going forward.

Although the budget statement gave a hint of cautious optimism regarding the outlook for economic growth and development over the short term, it is difficult to overlook the ominous threat to that growth also contained in the statement in reference to the almost 24 percent increase in gas prices at the pump and the 37 percent increase in the surcharge applied by B.E.C. to our electricity bills.

It would appear that the consumer, who continues to buckle under the more than $1 billion in loan arrears at the bank (mostly in mortgages), will continue to face serious financial challenges for the rest of the year.

The mid-term budget permits, among other things, for Parliament to approve by way of a supplementary expenditure Bill any additional funding that is needed for specific line items in the original budget. In this exercise, an additional $10 million was needed for the e-government initiative; $18 million is earmarked for payment to the utility companies; nearly $4 million for the police; and another $4 million for medicine.

On the Capital Budget side, $5 million went to Broadcasting Corporation and some $8.8 million to the Water and Sewerage Corporation. These cost-over runs are partially offset by under-spending on other items.

What is somewhat surprising about the listing, however, is the absence of any additional funding for Bahamasair, which is usually at the head of the line when it comes to government hand-outs. The expenditure items, both recurrent and capital, are largely within the estimates which were earlier approved by Parliament and given the fixed nature of the major items, Personnel Emoluments (wages, salaries, gratuities and pensions) that is not surprising but it is cause for concern in the face of sluggish revenue performance and the historical stance taken by successive governments not to make any major adjustments to staff levels in the public services sector.

The combination of sluggish revenue performance and rigid expenditure levels, which have become hallmarks of government’s budgets, could only lead to continuing deficits; deficits which are invariably financed by further additions to the national debt, which at an unprecedented 56% of GDP, is approaching a threshold that should be of paramount concern to all of us, especially the younger generation who no doubt would have to pay it off sometime in the future.

2/24/2011

thenassauguardian editorial

Bahamas Blog International

The Bahamas' ever-expanding national debt: "the biggest threat" to the Bahamian economy's recovery and medium to-long-term prospects...

'Biggest threat' from $4.1bn national debt
By NEIL HARTNELL
Tribune Business Editor



The ever-expanding national debt, which hit $4.139 billion at end-September 2010 after growing by 12.5 per cent or $460.5 million over the previous 12 months, represents "the biggest threat" to the Bahamian economy's recovery and medium to-long-term prospects, a former finance minister warned yesterday.

James Smith, minister of state for finance in the former Christie government between 2002-2007, said that while the Bahamas' national finances were "nowhere near crisis" point yet, the "worrisome" aspect was the "aggressive" and "accelerated rate" at which the national debt and its ratio to gross domestic product (GDP) was increasing.

Arguing that the Bahamas urgently needed to regain its fiscal headroom to cope with further unexpected future shocks to its economy, Mr Smith said the main concern was the trajectory at which the national debt and debt-to-GDP ratio were rising, especially since the revenues to service them were still falling.

Commenting on the most recent national debt figures, published by the Central Bank in its 2010 third quarter economic review, Mr Smith said: "The increase is getting a little aggressive. Any time you have this continuing trend, and it's an upward trend, that's the concern, because it comes at a time when there is no increase in revenue, so the debt service element is growing at full steam.

"With less revenue coming in, and the cost of financing the debt going up, a greater part of Government expenditure has to be dedicated to debt servicing." As a result, the sums available for the Government to spend on essential services, such as health, education and national security, would be less.

Concern:

"There ought to be some concern about the rate of increase in the debt, because it's very difficult once you step over that slope to come back," the former finance minister added. "I don't think we're anywhere near crisis; it's the trend that's the worrisome part."

The Bahamas' national debt grew by 12.5 per cent or $460.5 million over the 12 months to September 30, 2010, and by 4.4 per cent or $173.3 million during that third quarter, aided by a $100 million domestic government bond issue.

While many small island economies had managed to withstand the global recession with higher debt-to-GDP ratios than the Bahamas, a number had been forced to head for the International Monetary Fund (IMF) to restructure their debt. And they, like the Bahamas, did not have a hard currency to back their debt, being forced to borrow in foreign currency.

The Central Bank report also highlighted another concern, namely that public sector foreign currency debt stood at $1.324 billion as at September 30, 2010, with 59.3 per cent directly attributed to the central government. And, according to Tribune Business calculations, foreign currency accounts for 32 per cent - almost one-third - of the total national debt.

"That's also worrisome," Mr Smith responded, when informed by Tribune Business about the level of foreign currency debt. "What is happening is that we're seeing a build-up in foreign currency reserves, which is good, but that has been produced by the Government's foreign currency borrowing and the IMF subvention [special drawing rights]."

The real issue for the Bahamas could come "somewhere down the road" when the Government's foreign currency bond issue matured, requiring a multi-million dollar principal repayment, likely to be in the region of $200-$300 million, to be made to the investors.

While the Government's existing foreign currency bonds all had medium and long-term maturities, if the foreign reserves were not boosted by inflows from tourism and foreign direct investment, the principal repayments would represent a substantial drawdown on these reserves - currently standing at $875 million.

Ultimately, this could result in "more and more foreign currency being used for debt reduction, as opposed to bolstering the economy" through import spending and such like, Mr Smith said, adding: "We have to be careful about the foreign currency portion of the debt.

"Right now it looks good on the monetary side because the reserves have increased, but that's not come from tourism or foreign direct investment - it's come from the proceeds of debt.

Rates:

"Again, down the road, in maybe another two or three years' time, when you look at this in a global context where interest rates have been held down by quantitative easing, the rate on our foreign currency borrowing could rise because it's tied to LIBOR.

"This debt servicing component of the Budget could rise even further still."

Describing the national debt and its growth rate as "the biggest threat" to the Bahamas' medium and long-term economic growth and stability, Mr Smith told Tribune Business: "We are rapidly using up the headroom in the event we do have problems down the road, and for us it's external events that put us out."

Pointing to the 'short, sharp shock' to the Bahamian economy caused by the travel hiatus following the September 11 terror attacks, which plunged this nation into a temporary recession, Mr Smith added that with the likes of Europe and US also carrying major debt burdens, the Bahamas would have to compete for "the same pool" of financing, something that could see it crowded out or forced to pay higher interest rates on its debt.

"We're not out of the woods yet. We need to continue to get the headroom in the event of a short-term crisis," Mr Smith said. He urged the Government to conduct a careful, proper analysis of the fiscal picture to ensure the Bahamas enjoyed a soft landing.

And the former finance minister warned that while the Government "may have it under control internally", the growing national debt and falling revenues would be interpreted as a bad sign by the international community. Indeed, the rising level of government debt saw interest payments during the first quarter of the 2010-2011 Budget year to $44 million, a growth of $12.2 million or 5.29 per cent.

The direct debt charge on the Government grew by 5.3 per cent or $181.4 million over the 2010 third quarter, and by 10.6 per cent or $342.6 million in the 12 months to September 30, 2010. Bahamian dollar obligations accounted for 78.1 per cent of this direct charge.

December 31, 2010

tribune242

Bahamas Blog International

Bahamas Economy Is In A Depression says Veteran Banker Al Jarrett

Economy In Depression
By Kendea Jones:



Veteran banker Al Jarrett said yesterday that the country is really in a depression rather than in a recession because there has been no positive growth in the country for two consecutive years.

What’s worse, according to Mr. Jarrett is that the country’s may not recover next year.

"A recession is a down swing but it comes back in at 12 months. It started in 2008 and 2011 is headed in that direction. The government has yet to give you what the negative growth is in 2010 and this year is just as bad as last year in terms of the deficits and debts," he said while appearing on the Love97/JCN programme "Jones and Company".

Mr. Jarrett said he has been following financial reports from the government closely and that he is convinced that the deficit is higher than has been reported by the government.

"Based on the government’s numbers as I see them we are looking at 4 per cent GDP. I deal with the facts that come out of the government agencies themselves. The problem is the government has been [misrepresenting] the figures. Last year, they showed the wrong debt structure when they did the budget and this year they showed the wrong GDP. Moody’s Credit Rating just corrected the government the other day. When the agency saw that, it put (government) on notice that the national debt is going to be 64 per cent."

To prove his point Mr. Jarrett said most countries use one formula to calculate their GDP.

"If you have a declining GDP that comes from the existing GDP and it is deducted. If the GDP is increasing it is added. The International Monetary Fund (IMF) says the GDP is 5 per cent, the government says its 4.3 per cent Moody’s says its 4.5 per cent, the Central Bank says its 5 and that’s in 2009," he explained.

"Now in 2010, the figures aren’t even out yet and the government is saying it is 0.5 per cent and Moody’s is saying it is 1 per cent. I am saying it is three per cent based upon on what they are saying," Mr. Jarrett said. "They have not produced a number that was correct in three years because they put the wrong numbers in from the beginning."

Government debt at the end of June 2011 is projected to stand at 49.2 per cent of GDP, up from 47.3 per cent a year earlier, according to officials.

When asked by host Wendall Jones if political affiliation to the Progressive Liberal Party (PLP) had anything to do with his findings, Mr. Jarrett quickly dismissed that assertion.

"It’s sad when Bahamians get to the point when they cannot engage you intellectually. I can’t deal with people who make statements like that because I deal with facts. I can’t respond to that. I am one of the freest Bahamians in this country. I never lied to the Bahamian public in television or radio. If I have to lie on the behalf of a political party then that party does not deserve to be in office," he said.

Mr. Jarrett also said it is clear that the government did not present a budget that was in the best interest of Bahamians.

"I think that the government made a mistake or it was too lazy to produce a budget that was all encompassing and affecting the country and its people. They were concerned about the offset budget to impress the IMF that they were doing something about the mounting debts of $1 billion plus dollars and they were told they had to stop borrowing," Mr. Jarrett said.

"Now they have to offset projects. The government has put itself in a position where the international agencies are now looking at them very closely because they came close to the edge with the over-borrowing and record deficits and debts."

The veteran banker said he believes that international agencies dictate the government’s budget.

"They are following the dictates of the international agencies and the IMF because they are saying to the government that ‘if you don’t stop what you are doing we are going to downgrade you,’" Mr. Jarrett said.

"The agencies are also saying that ‘you are going to be downgraded unless you start putting out realistic budgets that makes sense and can be achievable. You are overstating your revenues and you are increasing your expenditure based on false revenues."

Mr. Jarrett said if he were minister of finance, international financial watchdogs would have no need to make these kinds of statements.

"I would not have gone on a borrowing binge unless I had a real stimulus. I would have made sure that if I produced a budget, on the revenue side it would have been more conservative and more realistic to reflect the times we are in," he said.

"Once you have the experience and the knowledge to understand the financial market and microeconomics you would know these things."

State Minister for Finance Zhivargo Laing was quick to shoot down Mr. Jarrett’s assertion by saying the veteran banker is the one who is mistaken.

"That is just utter nonsense," he said when contacted by the Journal. "The problem with what Al Jarrett says is that he is speaking to GDP over a calendar year from January to December but the fiscal year runs from July to June. So what happens is that you have to do an average of the GDP over two halves of a calendar year to capture what the GDP would be over a fiscal period."

"When he suggest that we did not include the contraction of last year and this year, he has no clue that in a fiscal period you have to calculate over the 12 -month period in the fiscal year."

The minister also expressed confidence that the economy will begin to rebound next year.

"What we are forecasting and what the IMF is forecasting is that there will be some improvement next year over this year" Minister Laing said.

The government’s $1.8 billion came into effect on July 1.

The budget allocates some $1.55 billion for recurrent expenditure and more than $265 million for capital expenditure.

The government is however determined to tighten the rein on revenue collection.

Getting its fiscal house in order has also forced the government to roll out tough cuts to public spending and a raft of tax increases.

Immediately after doing so, the Opposition slammed the new fiscal plan as a "tax and pain budget" that would only put more pressure on the backs of Bahamians.

But Minister Laing insists that the government is doing what it can to cut the deficit.

"It is in the interest for the people of the Commonwealth of The Bahamas and generations of Bahamians to be able to have our deficit reduced and borrowing reduced because it helps us to position ourselves in the event that something else should happen in the future," he said. "Al Jarrett’s comments are often laced with his own political agenda."

July 26th, 2010

jonesbahamas

Bahamas Blog International

Zhivargo Laing: The Bahamas' best interest is worth the Free National Movement's (FNM's) political life

Laing: Nation's best interest worth FNM's political life
By KRYSTEL ROLLE ~ Guardian Staff Reporter ~ krystel@nasguard.com:



The austerity measures the government is proposing in the 2010/2011 budget were borne out of absolute necessity, Minister of State for Finance Zhivargo Laing said yesterday while contributing to debate on the new spending plan in the House of Assembly.

Over the past year and a half, the government has borrowed and spent millions of dollars to fund various initiatives in response to the economic downturn.

As a result, the national debt is nearing $4 billion.

But Laing said now that the economy is modestly rebounding, it is time for the government to try to right the country's finances.

He acknowledged that the measures that the government is taking could lead to some political fallout. Nonetheless, he said it is something that had to be done.

"To do the necessary is sometimes unpleasant, but always correct and always rewarding," he said.

"If sometimes you have to spell your political death, then march toward it. The truth is that this nation's best interest is worth our political life. We labored over many months, many hours to produce this budget. It is a challenging budget."

However, he added that it is "loaded with adequate provisions for every government ministry while all around the world civil servants are losing their jobs. We made provisions for every single civil servant to stay and they have seen not cuts in their salaries."

The government is seeking to increase the stamp tax on realty transaction, stamp tax on banks, hotel room tax, air and sea departure tax, vehicle tax, and the beer tax.

Additionally, all parliamentarians, including Prime Minister Hubert Ingraham, will take a pay cut.

Other cost-saving measures are proposed, including a stall on increments for public officers. Public service promotions are being frozen, except in special cases and public service employment is being frozen, except in extenuating circumstances, such as essential services.

Laing said there is no other way to enhance revenue but to increase taxes.

"The point is we should have a debate one day about this fundamental adjustment that we need to make to our circumstances, but over the next 12 months, we have to get revenue. We have to produce the revenue in a way that does not injure the people of the Bahamas," he said.

Laing said the country must begin to reduce the deficit and eventually begin lowering its debt to GDP.

Ingraham recently said the government debt at the end of June 2011 is projected to stand at 49.2 percent of GDP, up from 47.3 percent a year earlier.

Laing said the budget has long term implications that bode well for the country's future sustainability.

"For the next 12 months we have to attend to the business of the Commonwealth of The Bahamas. All of us are being called upon to act in a way to best assist the Commonwealth of The Bahamas to be better off financially," he added.

Laing noted that in some other countries public servants are being sent home.

He added that the majority of the taxes are levied at international sources and banks and not at the average Bahamian.

Laing also said the government is focused on its mission and vision for the country to have a dynamic and growing middle class, a level of saving for retirement, high levels of success for entrepreneurs and a modest level of taxation.

"That remains our vision and mission," he said.

"Our effort in this 2010/11 budget is geared towards putting us in a better position to fulfill that vision and mission."

June 10, 2010

thenassauguardian

Bahamas Blog International

The Bahamas Government Warned Against Borrowing to Balance the Country's National Budget

The Bahamas government may face a fiscal crisis in the coming years if it continues to borrow at the rate the country has been borrowing at over the years

Governor And Minister At Odds

BY Candia Dames

candiadames@hotmail.com

Nassau, The Bahamas

09/06/2004

Some members of the Cabinet are reportedly peeved over recent remarks made by Central Bank Governor Julian Francis, who warned the government against borrowing to balance the budget.

When asked on Tuesday what he made of Mr. Francis’ warning, Minister of State for Finance James Smith said, “I think the governor should stick to monetary policy like all former governors did.  The comments on fiscal policy are not sometimes useful, but I’ll limit my comments to that for the time being.”

Mr. Francis also recently suggested that Bahamians should be made to pay higher taxes, although he stressed that it was not his intention to put himself at odds with the government. 

The governor said that it is the role of the Central Bank to be a policeman on these kinds of issues that also impact the development of the monetary sector.

He indicated that the government may face a fiscal crisis in the coming years if it continues to borrow at the rate the country has been borrowing at over the years.

According to the Estimates of Revenue and Expenditure, the government expects proceeds from borrowings to total $260,277,287 to fund the 2004/2005-budget shortfall.

This level of borrowing represents $60,921,40 more than what was borrowed this fiscal year.  This comes as the government continues to face warnings about the increasing national debt, which presently stands at around $2.4 billion.

The funds borrowed will be used to help cover the projected GFS deficit of $164 million, according to government officials.

In 2001/2002, the government borrowed $207,085,781; in 2002/2003, it borrowed $219,195,153; and in 2003/2004, the figure is estimated to be $199,355,879.

But Minister Smith said the government expects that it will actually have to do real borrowing of $176 million.

“I should point out that $90 million of [the $260 million figure] are loans that have already been committed for projects in the pipeline,” he told the Journal Tuesday.

 “For instance, the IDB road project, which is about $40 million, is included in that.  So the actual borrowing needs for 2004/2005 is really about $176 million.

“That’s the amount that we will probably have to go to market for, either locally or abroad, but that decision will be made later on in the year as we see how the revenue performs.  I should also point out that these are all projections or estimates.  If we perform much better on revenue or if we hold the line on expenditure, then surely we would have a reduced need for borrowing on the recurrent side.”

Prime Minister Perry Christie explained last Wednesday that there is no need for alarm regarding the size of the national debt, given that most of it is held domestically.

On Sunday, Governor Francis, who was a guest on the Love 97 programme “Jones and Company” said, “We can’t continue to add to the national debt indefinitely and that’s really the fundamental point that I’m trying to make.”

When asked whether this figure of over $260 million is significant, Parliamentary Secretary in the Ministry of Finance Michael Halkitis said that, “It is not insignificant.”

He added, “We have to keep things running.  There’s a lot to do, especially capital works in the Family Islands.  But we don’t believe there is any cause for alarm.”

Mr. Halkitis said the government is banking on an economic turnaround before the end of the upcoming fiscal year.

“We expect a lower shortfall the next year,” he said, indicating that borrowing should be substantially lower in 2005/2006.

The Bahamas Government Declares Its Intention to Prepare a White Paper on Proposed Sweeping Reforms to the Nation’s Tax System

The existing tax regime can no longer serve the purpose of the expanding Bahamas 

Tax Review Nears Completion

 

By Candia Dames

Nassau, The Bahamas

May/24/04

 

 

 

The Government of The Bahamas intends to prepare a white paper on proposed sweeping reforms to the country’s tax system, according to Minister of State for Finance James Smith.

 

“The existing tax regime can no longer serve the purpose of the expanding Bahamas and I think it ought to be reformed to reflect the realities and one of those realities is that The Bahamas is essentially a service industry, yet we are getting most of our revenue from taxing goods,” said Minister Smith, who was a guest on the Love 97 programme “Jones and Company” Sunday.

He added, “We need a broader base tax for goods and services and this is something that I’ve been looking into, and will be looking into over the next two or three years if God spares my life - and if I am still in this position.”

Minister Smith said he is awaiting a report from a group of consultants, which is reviewing the tax structure and formulating recommendations for change.

The Value Added Tax (VAT) experts, from the U.K-based Crown Agents group, arrived in The Bahamas several weeks ago to carry out the review.

Minister Smith said VAT or GST (Goods and Services Tax) seems to be the logical form of taxation that the Bahamas should adopt.

In introducing a VAT, the government is likely to reduce some of the existing duty, he pointed out.

“So it would call for rate rebalancing because we have to recover [those funds] somewhere else,” Minister Smith said.  “So what we will do is broaden the tax base to include goods and services.  In that way, we can reduce the rate on goods and use a much smaller rate on services.  The Value Added Tax, if we go that way, also has provisions for tax credits.”

Everyone who is eligible to engage in this form of taxation would have to become registered taxpayers, he said.

Minister Smith explained that they would all have to have an independent tax number, probably tied to National Insurance, that identifies them straight across the board.

While noting that the government “is not re-inventing the wheel here”, Minister Smith also said “there is still a lot of work to be done.”

More than 100 countries use the Value Added Tax system.

Asked if there is a fear in raising taxes, Minister Smith said there is a belief among some people that the rate of taxes being imposed in The Bahamas are sufficiently high to do what the government has to do.

“However, the leakages are also so high that before we raise more rates or even enlarge the tax base, let’s make a really, really Herculean effort to see if we can plug those leakages and see exactly what is the maximum that we’re getting out of this.  Your first attack should try and stop as many leakages that you can.”

The 2003-2004 budget contained no new taxes, but a number of revenue enhancement measures, including a plan to plug leakages.

The budget also projected a deficit of $122 million, but Minister Smith has indicated that the deficit will be more than $30 million higher, given that the government paid out $24 million in unbudgeted salary increases for public servants.

A recent report from the Central Bank of The Bahamas indicated that the deficit at the end of this fiscal year is expected to be about $147 million.

But Minister Smith noted that in international terms, the country’s budget deficit is “not that huge.”

“The important thing about a deficit sometimes – more important than the size of it – is the direction of it,” Minister Smith explained.  “Are you doing anything to try and curb it because it means beyond a certain point you’d get in a sort of debt dynamics where it becomes even more difficult.

“It spins out of control and then you really have pressures to do some things that people don’t like – devaluations, cutbacks etc.  So, our deficit is manageable, but I think we need to continue to do things to stop it from growing.”

He also commented on the National Debt, which, according to the Central Bank stood at $2.369 billion at the end of 2003.

“Right now, The Bahamas is in an envious position in terms of its debt,” Minister Smith said.

He pointed out that about $1.7 billion of the debt is domestic – with a substantial portion of that being owed to government-related entities.

“So if [we] run into a difficulty and [we] have to reschedule, it would not be difficult to do because [we] would be dealing with local institutions,” he said. “We go further south in the Caribbean and we’d find countries where 80 percent of the debt is foreign and [they’re] really in trouble.”