DPM outlines plan to Moody’s
Deputy Prime Minister and Minister of Finance Peter Turnquest said yesterday he presented the Minnis administration’s case to international credit ratings agency Moody’s last week in an effort to avoid a credit downgrade, and is hopeful that recent cutbacks announced by the prime minister will result in a savings of about $200 million this fiscal year.
Speaking of his meeting with Moody’s, Turnquest said, “I gave them an view of what we see as our overall strategic plan going forward.
“They would have continued their discussions with the private sector, and we suspect at the end of the day they will have a realistic view of what our situation is today and how that lines up with what we expect during the next year or two years.”
Moody’s recently placed The Bahamas’ Baa3 credit rating on review for downgrade.
It said the country would avoid a downgrade if the Moody’s review were to conclude that economic trends and the government’s policy response “support a stabilization of the debt trend”.
When asked whether he thinks The Bahamas will avoid being downgraded, Turnquest said, “The ratings agencies have their own methodology and the way they look at these things. We recognize that we have a very challenging environment coming out of the last five years.
“We know that there is a lot of work to be done. We have to focus on growing this economy, and that is our primary objective at this stage, to correct and stem any unnecessary bleeding in the economy, in our fiscal situation and then to grow the GDP, so that’s what we’re focused on.
“We’re looking at various avenues to do that. We’re looking at small business development, as well as the attraction of additional small investments, and we are very confident that the combination of these things will result in increased opportunities for the Bahamian people.”
Turnquest noted that some projects introduced by the Christie administration are under review as the new government assesses areas of wasteful spending, but indicated he was not concerned by criticisms from the opposition in this regard.
“They should understand, more so than even I do, that the course that we were on was just not sustainable. And no matter who must sit in this chair, a responsible government will certainly have to look at these programs and determine how we dial back a bit so that we give ourselves a chance to stabilize the economy, stabilize our debt situation and start to stimulate the economy in a real way, and not artifically inflate numbers to mislead.”
He confirmed that the Bahamas Agricultural and Industrial Corporation (BAIC) is among the projects under review.
Agriculture Minister Renward Wells previously revealed that the Christie administration spent more than $80 million on BAMSI, most of it in salaries.
Turnquest also noted that the STAR Academy — a project for at-risk youth at the site of the old Bahamas Academy school on Wulff Road — is also under review.
The former administration committed nearly $30 million to the project, although it had no lease for the land, owned by the Seventh-day Adventist Church, it was revealed during the budget debate in June.
Turnquest said yesterday, “Where we decide a project is not priority or one that will provide immediate benefit to the Bahamian people, we will see how we can cut back or delay the construction and implementation of those programs. But at the end of the day, we want to make sure that we continue to provide the service to the Bahamian people and the [resources to the] civil service that is necessary in order for them to perform efficiently.”
In a national address last week, Prime Minister Dr. Hubert Minnis announced that the government will cut the expenditure of its various ministries by 10 percent, institute a hiring freeze and will not renew any contracts for emoluments that exceed $100,000 a year.
Turnquest said, “We believe in regard to what we know to be wasteful spending and programs that have questionable value to the Bahamian people, as well as looking at various contracts, both in terms of human resources as well as physical infrastructure contracts, that we ought to be able to realize some significant savings, whether it will amount to 10 percent, we will see.
“That is certainly our goal and our intention, and we will do our very best to ensure that we ought to try and achieve it.”
He said there is no plan to raise the value-added tax (VAT) rate of 7.5 percent.
“We still believe that we have a ways to go in terms of increasing our revenue, in terms of compliance efforts and containing our expenditure by going through the kind of disciplined procedures and reviews that we’re going through now and the implementation of a very robust fiscal responsibility regime and legislation,” Turnquest said.
He reiterated that the government has shelved campaign promises like free tuition at the University of The Bahamas.
The government has also put off plans to eliminate VAT on breadbasket items, babies’ and children’s clothing, healthcare, insurance, electricity and water bills.
“We recognize that we’ve made commitments to the Bahamian people, but we also recognize, and we think that they will understand, that we’ve met some very significant challenges in front of us, and so there’s no point in us giving freebies on the one hand, to turn around and have to take it from someplace else,” Turnquest said.
“And so, before we make any adjustments to our revenue structure, we want to make sure that it’s well thought out, that we are able to back that up by commensurate cuts in expenditures so that we do end up, at the end of the day, with our hope for a balanced budget in a very short time.”
He also said that while the process has started for forensic audits of certain government agencies and programs, no audits have actually started as yet.