We continue our analysis of the government’s 2021/2022 budget.
“From Hurricane Dorian to the ongoing COVID-19 pandemic, we have collectively weathered an unprecedented level of social and economic shocks. There is no doubt that together, these twin crises have presented the most significant obstacles for our continued national development in the last 100 years.”
So said the prime minister and minister of finance in his budget statement on May 25.
Despite this sobering observation, the prime minister then delivered a statement and presented a budget that bore no resemblance to the economic and financial reality that The Bahamas faces today.
Instead of leveling with the Parliament and the public, the prime minister and minister of finance painted a picture of delusion and fantasy. Instead of an austerity and sacrifice budget, he presented a budget of spend and indulgence.
Not surprisingly, the prime minister was silent on the high levels of unemployment in The Bahamas. His government failed to undertake a single unemployment survey during 2020.
Anecdotally, we know that unemployment is very high, and that job growth is anaemic. One need only consider the tens of millions being spent by the government, churches and the private sector on unemployment, and on food and social assistance programs to know the destitute state in which many, many people find themselves.
The budget calls upon no one to make a sacrifice; not even the government itself. And instead of reduced expenditure growth, the budget increases expenditure by a whopping $270 million and projects unrealistic and unlikely revenue growth over the current year.
There is no freeze or reduction of salaries and/or benefits for leaders in the country.
Meanwhile, the government reduced expenditure on essential services like education, health, police, and the defense force.
The budget will allocate more — $512.5 million — to loan interest payments than it allocates for the ministry and departments of education, the police, and the defense force combined ($498 million).
In all, the government projects to take in $1.8 billion in proceeds from borrowing in the coming fiscal year.
This borrowing takes place at a time when interest rates, while generally low, are not so for countries like The Bahamas with junk-bond status. We continue to descend into the rabbit hole of increasing debt with loans having to be refinanced at higher rates of interest.
While the prime minister was delivering his rosy make-believe budget, the World Bank was advising the world’s media that its Development Policy Loan to The Bahamas provides support on an exceptional basis as the country had been graduated from the International Bank for Reconstruction and Development (IBRD). The financing said the World Bank responds to an emergency request from the government for exceptional IBRD assistance to respond to the COVID-19 crisis.
The World Bank noted that The Bahamas “faced severe socioeconomic impacts due to the pandemic, which led to a sudden stop in tourism and an estimated economic contraction of 16.2 percent over the past year”. And it further noted that “unemployment, already on the rise after Hurricane Dorian, increased further, and poverty is estimated to have increased in 2020”.
It said its “operation” aimed to:
– help The Bahamas enhance COVID-19 relief and resilience, strengthen financial stability and the business environment, and improve fiscal sustainability and resilience;
– enhance unemployment benefits and provide food assistance to those workers and households most affected by the COVID-19 crisis, and measures to develop an inclusive vaccination policy, and
– support reform actions to expand coverage of deposit insurance, strengthen the crisis management framework, strengthen public financial management, and improve governance of the Central Bank.
Meanwhile, the prime minister announced yet another loan from Banco Santander, also guaranteed by the World Bank’s Multilateral Investment Guarantee Agency (MIGA), that would support upgrades of Princess Margaret Hospital and Rand Memorial Hospital.
When viewed against the budget, the statements are alarmingly instructive.
Our series on the government’s 2021/2022 budget will continue in this space in the coming days.