The International Monetary Fund gave such a glowing report of the state of the Bahamian economy when they left here following their so-called Article IV Consultations from 1 to 12 April 2019. This is where a team of people come and review what is happening in the country and then say how its going. They were fulsome in their praise how everything is going in the right direction. Or so it would appear. If they did in fact say that, then they must have drunk the same Kool-Aid that the Minister of Finance Peter Turnquest drank. Hidden in all their technical verbiage was the fact that notwithstanding all the growth metrics, unemployment remains high. That is the problem, while the economy appears to be growing, tourism is doing well there are still too many people without work and have no prospect of work. The bottom line is that the people at the bottom have no money to spend. In the meantime, the social services lines are getting longer each day. Chester Cooper, the spokesman for the PLP on Finance responded with this statement:
STATEMENT IN RESPONSE TO IMF STAFF CONCLUDING STATEMENT ON 2019 ARTICLE IV MINNIS
CHESTER COOPER, PLP DEPUTY LEADER, EXUMAS AND RAGGED ISLAND MP, SHADOW MINISTER OF FINANCE
TUESDAY, 16 APRIL 2019
What is clear from the latest International Monetary Fund Staff Concluding Statement of the 2019 Article IV Mission and the government’s response to it is that nothing delights the minister of finance more than making the IMF and credit ratings agencies happy.
The reality on the ground for most Bahamians is harshly different than the rosy picture the government would wish to paint.
The Minnis administration released a statement yesterday basking in the glow of praise from the IMF while indicators in the country where we actually live are dismal.
What was not addressed by the minister is the fact that the IMF has pointed to a looming contraction in GDP growth after the next fiscal cycle.
Though there will be economic growth in this fiscal year, what has been achieved has been through growth in tourism driven in large measure by Baha Mar, a key plank in the former government’s policy achievements, and a roaring U.S. economy that may be poised for a slowdown.
That the government seeks to pat itself on the back for something it had little to do with is amazing, though not surprising given the Minnis administration’s lack of accomplishments thus far.
The fact is that unemployment is up, the healthcare plant is in shambles; we don’t have enough ambulances to service our population; we don’t appear to have the wherewithal to fix a traffic light; the roads are sparingly paved as potholes abound; Ragged Island is still in disrepair, her people desperate for relief; people cannot keep the lights on; people are living in cars and the government cannot keep a constant supply of electricity.
All the while the government is starving capital expenditure in a vain attempt to meet a deficit target.
The narrow focus on achieving its deficit target at any cost is concerning.
Instead of additional expenditure cuts in light of continued human suffering and crumbling infrastructure, the government must focus on collection of existing taxes to increase revenue.
Though, with the government’s mishandling of the Revenue Enhancement Unit, this will surely be difficult.
It should be noted that at the mid-year point, revenue underperformed to the tune of almost $200 million despite the 60 percent increase in value-added tax (VAT).
The government hopefully now sees that it botched the VAT increase implementation with ineffective, politically-motivated exemptions.
We said before there were more effective ways to help low income households via Social Services.
Yet, the suffering continues.
Hopefully, now that the IMF says the government must focus on economic growth, the Minnis administration will do that, notwithstanding the fact that we in the PLP have been saying exactly that for the past two years.
But be warned, the PLP will support no new taxes in the upcoming budget exercise, or in future, until there is renewed efficiency in collecting the existing taxes.
The IMF also pointed out the need to reduce debt; we agree.
We note that at half-year point of its term, the government has borrowed in excess of $2 billion total, inclusive of restructured sums.
This has actually increased the debt-to-GDP ratio to 57.4 percent from 53 percent in 2016 despite upward revisions in national accounts to reflect the overall size of the economy as at end of 2016/2017.
The IMF rightly pointed out the dangerous increase in the foreign currency component of the debt to 36 percent today versus 27 percent the year before.
This needs to be managed.
It is also clear folly in that there is excess liquidity in local banks due to a lack of lending.
The government should be borrowing locally when there is a need to borrow, as opposed to borrowing funds in U.S. dollars.
The National Development Plan collated by the last administration, and unceremoniously shelved by this one, took great pains to outline income inequality, as mentioned by the IMF, and outlined tangible ways to address it, as well as other pressing issues.
The way in which scarce resources are allocated to improve the quality of life of the citizenry, grow the economy, reduce unemployment, provide affordable health care, ensure price stability, and achieve a more rational distribution of national income is the true measure of economic performance.
In these areas, the government’s policies are woefully lacking.
We need to concentrate more on job creation programs, particularly for our youth, than trying to please external agencies at IMF and Moody’s.
This continuous harping on the deficit and debt ratios to explain government’s fiscal policies is losing its shine.
I will have much more to say in the upcoming budget debate.
We trust that the government will not seek to stifle debate then as they did in the mid-year budget.