The Bahamas Should Not Join the CARICOM Single Market and Economy (CSME) - according to Central Bank Governor, Julian Francis

Governor Francis said that CARICOM Central Bank Governors conducted a study on the impact the single currency would have on the region and advised heads of CARICOM that it would not be a feasible move to make

"Why?  Because there isn’t sufficient economic convergence between the countries of CARICOM to sustain a common currency," Mr. Francis said

Governor Against CSME

By Candia Dames

candiadames@hotmail.com

Nassau, The Bahamas

17 May 2005

There is no sound economic reason why The Bahamas should join the CARICOM Single Market and Economy (CSME), according to Governor of the Central Bank Julian Francis.

The show’s host, Wendall Jones, pointed out that, "There are those in the political directorate in The Bahamas as well as in other countries in the Caribbean who would say that if we do not participate in CSME we might as well not be a member of CARICOM."

Mr. Francis said this might very well be true.

"I suppose that in time if we were not to join the CSME my guess is that CARICOM would not see any particular interest in continuing its administrative and political partnership with The Bahamas," he said.

"But to the extent that these things are driven mainly by economic considerations, I would say so be it."

The CSME debate has taken on new life in recent weeks, with several prominent figures coming out in opposition to the agreement.

The growing public outcry coincides with an educational campaign launched by the government and spearheaded by the country’s Minister of Foreign Affairs, Fred Mitchell.

The government has already said that The Bahamas would request certain reservations before joining CSME.

These include opting out of the free movement of people; the Caribbean Court of Justice at the appellate level, the Common External Tariff, and the single currency and monetary union.

While on the show, Governor Francis said that three years ago, the CARICOM Central Bank governors conducted a study on the impact the single currency would have on the region and advised heads of CARICOM that it would not be a feasible move to make.

"Why?  Because there isn’t sufficient economic convergence between the countries of CARICOM to sustain a common currency," Mr. Francis said.

Asked whether the governors’ view has changed in that regard, he said, "If there has been any change I would say that Trinidad has become a bit further removed from the average of CARICOM economically.  Jamaica also has in a negative sense, and The Bahamas of course has continued its development.

"That leaves the East Caribbean and Barbados.  I don’t think that there has been anything that would have happened which would cause the governors to think differently."

Last week, a former Governor of the Central Bank of The Bahamas also came out strongly against CSME.

In a letter to the editor, Sir William Allen said there is no logical justification for The Bahamas to be a part of this single economic space, "because no one has yet identified one benefit which could only be achieved through our sign-on."

He also said that Minister Mitchell is wrong to equate CSME with the Free Trade Area of The Americas.

"This is the reason it would be helpful for the debate if it were led by a ministry or an institution which has a better understanding of the difference between a free trade area, and a single economic space- and this is not a red herring," Sir William said.

He also said, "The economic divergence between The Bahamas and the rest of the region is of such magnitude that it seems readily accepted that it should be granted temporary exemptions from key provisions of the arrangement defining this common economic space.

"No one, not the Minister nor anyone else, can know how the participation would affect The Bahamas’ economic situation, first- in terms of the impact of the provisions to which it will have to adhere, then in terms of the anticipation of the end of the exemptions it may be granted- and finally in anticipation of where the evolving harmonization within this common economic space may eventually lead."

But Bahamas High Commissioner to CARICOM A. Leonard Archer recently said in an interview with The Bahama Journal that any suggestion that the reservations would be "temporary" and The Bahamas would eventually be forced to adhere to all provisions of CSME is incorrect.

Mr. Archer said that The Bahamas may opt out of certain provisions of CSME for as long as it chooses.

He expressed disappointment that so many prominent and well-educated Bahamians are spreading "misinformation."

Mr. Archer also said The Bahamas would benefit tremendously from joining CSME.

"We are part of a global economy.  We have applied to join [the World Trade Organization].  We have been negotiating the FTAA.  Joining the CSME first provides us with certain advantages of going into WTO and FTAA," he said.

"There are also economic reasons: increased investment in The Bahamas; increased trade with the rest of the Caribbean; we could access goods and services from the Caribbean more cheaply or more economically than we are accessing them now."

Deficit Spending Plagues Successive Governments of The Bahamas

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

$164 Million Deficit Projected

By Candia Dames

Nassau, The Bahamas

candiadames@hotmail.com

Journal Staff Writer

05/27/04

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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