Improving our economic situation
By Alfred Poitier
The fact that the outlook for the Bahamian economy has been downgraded to negative by Moody’s should come as no surprise to the opposition or the governing party of The Bahamas. As a matter of fact, the downgrading is water under the bridge. It is now time to avoid the water from rising over the bridge. The pertinent question is how do we regain a positive outlook for the economic future of our country and avoid the actual downgrading of The Bahamas’ rating?
Moody’s has listed specific reasons for the negative outlook for our economic future which are listed below:
• Debt increased by 150 percent over the past decade
• Debt increased by 40 percent in the last two years
• Debt to gross domestic product is 40 percent above the average
• Economic growth has been a modest six percent over the past 10 years.
Simply put, if your revenue is not increasing proportionately to your increasing debt then at some point your revenue will not be able to pay your debt. This is the major concern of Moody’s and thus the negative outlook rating that it gave The Bahamas.
Our slow economic growth cannot sustain the continuous high level of borrowing. The constant budgetary deficits must be addressed and actual payments on our national debts need to begin. Government needs to work towards a balanced budget and stop spending more than we make.
The blame game needs to be thrown out of the window. The fact is we have borrowed beyond safety levels and now we must find ways to correct this situation. The easiest way to correct this challenge is to simply boost our revenue. Governments usually boost revenue by increasing taxes, which unfortunately increase the cost of living for citizens of the country.
However, creative governments find other ways of increasing revenue such as providing incentives for citizens to do more within the existing tax structure, creating more revenue by increased volume. Creative governments also look at providing incentives for new industries that will not only provide needed services to residents, but also improve the quality of life for them and create new streams of revenue for the government.
Many opportunities have been placed before our governments to diversify our economy by encouraging Bahamian ownership in new industries. But we have missed the boat, or for whatever reason, failed to embrace them. There is no doubt that the government needs to find other means to grow our economy.
Foreign investment is good mainly for the short-term but as the foreign investor makes his profits over time he will more than likely send his profits out of the country. In the long-term his investment may not be as beneficial as if a Bahamian did the same investment, as chances are his profits will remain in The Bahamas and probably even be invested in another venture.
It is time for us to seriously consider the natural resources that we have been blessed with and utilize these resources to the benefit of our citizens. Serious consideration should be given to drilling and the processing of natural gas, first and foremost, for local consumption. This could help reduce fuel costs for necessities such as electricity, transportation and so much more. This would also reduce the level of importation of fuel products and could provide export revenue for the country as well.
The problem is our government relies heavily on gasoline taxes and may be reluctant to promote anything that would reduce the amount of gasoline imported to the country. However, consideration should be given to the fact that the new industry could very easily provide equal or greater revenue to the government provided proper licensing fees and reasonable taxes are applied.
I used natural gas as an example of the natural resources we do have in The Bahamas. However, there are many other areas of industry that The Bahamas is poised for based on either location or natural resources. Simply putting a plan in place to explore, with the intent to execute one of these options, can change our present economic outlook from negative to a minimum of stable. Yes, I did say just putting a plan in place.
Obviously prudence must play the major part in addressing the financial ills of our country but governments must show faith in the citizens through the provision of opportunities through legislation and/or financial aid to advance new, and to grow existing, industries in The Bahamas.
Sep 07, 2011
