FEARS BAHAMAS 'IN IMF'S HANDS' WITHIN 3 YEARS
Share This Article:
Diigo/FurlPublished On:Friday, December 09, 2011
By NEIL HARTNELL
Tribune Business Editor
A FORMER Bahamas Chamber of Commerce president yesterday made the apocalyptic prediction that this nation's economy would "be in the hands of the IMF" within three years, the next government's primary job being to halt the fiscal "bleeding from day one".
Khaalis Rolle, who is also the opposition Progressive Liberal Party's (PLP) candidate for Pinewood in the upcoming general election, said yesterday's Tribune Business disclosures regarding the Bahamas' national debt and fiscal deficit projections showed this nation was headed in the same direction as Greece.
That southern European nation has been forced to implement painful austerity measures (tax hikes, spending cuts and public sector lay-offs) in a bid to address a debt-to-GDP ratio that is hovering around 150 per cent, and Mr Rolle told this newspaper the Bahamas was making "every single decision" that Greece made in the run-up to its sovereign debt crisis.
"I see Greece on the horizon," he told Tribune Business yesterday. "When you start to finance consumption with debt and it's ongoing, there's absolutely no way your economy can survive. In three years we'll be in the hands of the IMF if we continue along the same path.
"If the IMF is warning us, if the credit rating agencies are warning us....... Greece started out this way. You will see that every single decision we made, Greece made. We're making the same mistakes Greece made, and it doesn't seem as if we're learning a lesson from the past. There's a clear indication that where we are now is where Greece was, and we've not heeded any warnings."
The IMF's projections are that the national debt will exceed $5.5 billion by end-June 2016 unless the Bahamas alters its fiscal/public policy course, with another $1.64 billion added over the four years following the 2011-2012 fiscal year-end.
The Fund is forecasting that the Bahamas will run recurrent deficits of between $171 million and $134 million over the next five years. Throw in the annual $250 million capital spending deficit that the Government incurs, and the total fiscal deficit is forecast by the Fund to vary from a $389 million low to a $440 million high between 2012-2013 and 2015-2016. That will add a total $1.64 billion to the national debt.
As a result, the total national debt is projected to increase from $4.151 billion at the 2011-2012 fiscal year-end to $5.631 billion at June 30, 2016.
Mr Rolle, meanwhile, sidestepped the issue of what policies a Progressive Liberal Party (PLP) government would enact to deal with the Bahamas' looming debt crisis, saying he could not speak for the party or any plan it might develop.
Dealing in generalities only, he nevertheless told Tribune Business: "From day one the job of the PLP government will have is to stop the bleeding. This is a deep wound we're going to get, and from day one we have to stop the bleeding."
Mr Rolle also criticised the Ingraham administration's failure to apply the correct supply-side economics, and suggested that by borrowing for today when it came to infrastructure investments, it was compromising the Bahamas' ability to re-invest in the future.
Focusing on the New Providence Road Improvement Project (NPRIP), which is projected to now cost $155 million, the ex-Chamber president said that given the general quality of Bahamian roads, it was likely all corridors being worked on now would require further maintenance spend within the next three-seven years.
As a result, the Government would neither be able to amortise the NPRIP's capital spend over a 20-year period, nor have considerable sums to invest in ongoing maintenance.
"There are a lot of things we can do to improve infrastructure that are less costly than what we're doing now," Mr Rolle said. "The amount of roadworks is far more that what was practical and reasonable.
"With the new access ways, I don't see any dramatic improvement in productivity and traffic flow. I've seen marginal improvements."
And he added: "The US cycle of investing in roads is seven-10 years, but look at the quality of the roads you get in the US compared to the Bahamas. If their lifespan is seven-10 years before they do major roadworks, ours is probably three-five, or three-seven.
"So, when we need money to reinvest in our roads, we won't have any. When we need money to invest in something else, we can't have it. Our cost of borrowing will soon be so high that we will not be able to borrow anything to finance crime-fighting, education, health."
Questioning whether the current administration had engaged in long-term planning, Mr Rolle said the various infrastructure projects initiated by the Government should have been financed primarily by cash flow, rather than debt.
That might have been difficult to do amid the recession, and the Government's falling revenues, but Mr Rolle said the "quality" was simply not there to enable these infrastructure projects to be capitalised/amortised over a 20-year period. If it was, then he would have no objection to them.
The PLP candidate added that the tax increases implemented by the FNM government during the 2010-2011 Budget showed it did not understand supply side economics.
"I believe in supply side economics, and you can't raise taxes and get something," Mr Rolle said. "In a difficult period you're not going to get anything, especially if you increase taxes on businesses.
"We're implementing all sorts of initiatives that have not generated results. Name one initiative that puts us in a better position than we were in. A part of management is that when you implement solutions, those solutions should have good results."
Comments