Following the government’s announcement that it intends to borrow $252 million from the International Monetary Fund (IMF), Progressive Liberal Party (PLP) Deputy Leader Chester Cooper questioned where is the nearly billion dollars the government has already borrowed this fiscal year.
The Ministry of Finance announced on Sunday that the IMF financing is being offered at a low interest rate of 1.054 percent and will be used primarily to fund Hurricane Dorian and COVID-19-related programs for the rest of the fiscal year.
The government has already borrowed approximately $936.5 million this fiscal year to fund its budgetary operations, according to its nine-month fiscal snapshot on budgetary performance.
“It is the first time in the history of The Bahamas that we are borrowing from the IMF. On the face of it, 1.05 percent is not an unattractive rate, in a market where the government’s 2024 paper is trading at 15 percent, following the recent downgrade and negative outlook. However, the offer raises many questions. We have previously warned about leaving a rainy day reserve, as well as borrowing headroom,” Copper said in a statement yesterday.
“With more than $3 billion borrowed even before Dorian and COVID-19, that Bahamians cannot see or touch, it appears that the chickens may be coming home to roost. We also question the intended use of the proceeds and what, if anything, this new borrowing has to do with Hurricane Dorian. There has already been considerable borrowing for Hurricane Dorian commitments, with very little to show for it. Where has the money that has already been borrowed gone? Which commitments have not been met? How much of this new money is needed for the commitments that were not met?”
According to the government, the financing has been offered with no structural adjustment strings attached and no conditionality elements. However, Cooper chided, “The public must be assured that no implicit or explicit conditions exist.”
The plan to borrow was announced ahead of the scheduled 2020/21 annual budget exercise, expected to take place in the House of Assembly on Wednesday.
Cooper said with public trust in the Minnis administration “at an all-time low”, the best that Bahamians can hope for “is that the damage this administration continues to do is not irreparable”.
“The reality is, the upcoming budget is going to be brutal on the ordinary citizens of this country. The next budget, more than anything, represents the cumulative impact of a series of poor fiscal decisions in the three previous budgets. Those poor decisions started with the disbanding of the revenue task force, continuing with a VAT increase, which did not account for elasticity in the economy,” he said.
“The results of the FNM’s budgets have been failed target after failed target and delivered nothing but misery to the Bahamian people. The promise in week 10 of the crisis, that the new budget will make sure that no one goes hungry, rings hollow. Many Bahamians are going hungry now as the prime minister’s promise of a food delivery network remains just that.”