$500m deficit ‘threat to fiscal credibility’ | The Tribune – Bahamas Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government most move quickly to restore trust in its fiscal credibility, a governance reformer urged yesterday, pointing to the vast, wild differences between the new administrations forecasts and those of its predecessor.

Robert Myers, a principal with the Organisation for Responsible Governance (ORG), told Tribune Business that the nine-figure gap between the Minnis administrations projections and those of the prior government threatened to undermine business, investor and consumer confidence - not to mention that of the credit rating agencies - unless the differences were properly explained.

He was speaking after the Government, in unveiling the 2017-2018 Budget, revealed that the upcoming years deficit is projected to be $323 million - an almost $300 million increase from the $28 million in red ink that was forecast by the Christie administration just 12 months ago.

Raising further questions about the former governments fiscal forecasting, K P Turnquest, the minister of finance, said the deficit for the current 2016-2017 fiscal year was now estimated to be $500 million - a five-fold increase upon the $100 million that was forecast last May, and $150 million more than the mid-year Budget estimate.

While Hurricane Matthews role in the deficit growing 400 per cent beyond projections, Mr Turnquest said the former government had exacerbated the storms impact by entering into unfunded spending commitments that had created a $300 million government payables backlog.

As a result, the Government yesterday tabled two resolutions seeking Parliamentary authority to borrow a collective $722 million, some $400 million of which is emergency funding to cover 2016-2017s fiscal holes. The balance is to fill the 2017-2018 deficit.

Mr Myers said the persistent overshooting of key fiscal targets by such massive amounts threatened to undermine the publics faith in the Governments financial management, and negatively impact economic growth by deterring local and foreign investment.

He added that consumers and the private sector were being pushed towards a trust but verify approach when it came to the annual fiscal forecasts, with yesterdays developments further highlighting the need for a Fiscal Responsibility Act and Freedom of Information Act.

Based on the previous governments lack of control we, civil society and the public, dont know what to trust any more, Mr Myers told Tribune Business. The previous government was saying they could get the deficit down to $28 million [for 2017-2018], and were now back up to $323 million.

How could you go from one administration to the next and be so wildly wrong? Whos cooking the books? Isnt it the same public servants doing this Budget? Where are the public servants providing this Budget and the numbers? Why dont they speak up? If the Christie administration was that wildly wrong, isnt the Government reflecting what the public servants are doing?

Mr Myers also pointed to the different GFS deficit elimination projections given earlier this year by Simon Wilson, the Ministry of Finances acting financial secretary, and former prime minister, Perry Christie.

Mr Wilson, addressing a Chamber of Commerce conference in mid-February, said a fiscal balance could be achieved within the next four years, pushing this out to 2020-2021. Yet Mr Christie, in the mid-year Budget presentation in late March, stated that the Government was forecasting a break even GFS deficit by 2018-2019 - some two years earlier.

Warning that this only served to sow confusion and uncertainty among the private sector, Mr Myers added: If you have two people in the same government saying something so abundantly different, who is the public supposed to trust?

Weve got to make this whole process transparent, so we can understand things. Foreign investors can understand things, businesses can understand things, and consumers can understand things. If this is not done, consumer and investor confidence will be harmed.

He argued that there should be complete cohesion between government ministers and officials when it came to critical fiscal issues, otherwise the Bahamas was in deep trouble. Mr Myers also urged top Ministry of Finance officials to publicly stand behind the Budget, so we really do trust theyre going to be able to reduce the deficit in the time they suggest.

Its prudent for the Bahamian people to trust but verify, the ORG principal told Tribune Business.

The new governments projections show that achieving fiscal consolidation, and the GFS deficits elimination, will be much harder - and take a lot longer - than the prior administration was forecasting.

The Christie administration was forecasting that the Government would eliminate the annual deficit by 2018-2019, and actually be running a $68 million surplus. However, the Minnis administration yesterday predicted it will still be incurring $228 million worth of red ink for that fiscal year - a $296 million difference.

That is 54.4 per cent less than the $500 million deficit projected for the current fiscal year, and the Government forecast that the red ink would halve again to $106 million in 2019-2020.

The latter figure, though, is higher than the Christie administrations initial projected deficit for 2016-2017, and indicates that Mr Wilsons timeline for its elimination is more accurate.

Its unfortunate for the current administration that the previous administration was so irresponsible, as it puts a bad light on - and causes distrust - in whichever administration follows, Mr Myers told Tribune Business.

It doesnt help that we have had these wild swings in what the Government is projecting.

Read the rest here:

$500m deficit 'threat to fiscal credibility' | The Tribune - Bahamas Tribune