With government expenditure up 4.5 percent during the first half of the 2018/19 fiscal year, international credit ratings agency Moody’s recent warning to government to exercise spending restraint is “a reality check”, according to Bahamas Chamber of Commerce and Employers Confederation (BCCEC) CEO Jeffrey Beckles.
Beckles said while Moody’s opinion does not come as a surprise, given fiscal projections in the 2018/2019, it does speak to the amount of work required to avoid account-led slippage.
“I think that from the genesis of the budget communication we knew there was a lot of work that needed to be done and over the last several years we’ve been trending toward this decision where the government had to take [the] position that we have to start fiscally reigning in our spending. Will it be achieved in 12 months? Obviously not. Is it going to be a challenge to achieve it in three years? There’s going to be a lot of work required to do that,” Beckles told Guardian Business.
“So, it doesn’t really come as a surprise. What it does say to us on the heels of the more positive rating report, [is] we are making progress. And I think that’s what people need to focus on, that we are making progress. But it really puts us into a reality check that it’s going to take some work.”
Although Moody’s improved its outlook on The Bahamas last week from negative to stable, maintaining a Baa3 credit rating, in a more detailed opinion it suggested government’s fiscal deficit target of 1.8 percent of gross domestic product (GDP) would “require spending restraint” as government is unlikely to hit its revenue projections.
“We know that government has to take a holistic look at its entire budget and the entire spending regime that they use now. And, obviously, we are encouraging government to be mindful and we know they are sensitive to social need and making cuts that would make the economy slow down anymore,” Beckles said when asked about Moody’s suggestion.
“We have every confidence that government will take an in depth look, line by line, at exactly where it can cut. We have been spending quite a bit over the last few decades and there’s no doubt that there is fat to be trimmed, but we are confident government will do what is necessary to be very prudent in their exercise. And we have every confidence that they will do just that.”
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