The dust has settled from yesterday’s polling, and now the real work must begin according to a former Minister of State of Finance who said the next few days and weeks will be critical as the new government formulates how it will resuscitate the economy.
The country’s economic recovery was the top priority of voters in yesterday’s election, according to a recent Intel Cay survey.
But before implementing its economic recovery plan, this new administration must go on a fact-finding mission and possibly develop a new interim budget, James Smith – who is also a former Central Bank governor – said.
“It’s almost a fact-finding mission,” he told Guardian Business yesterday.
“You have to actually go in and find out where you are, what commitments have been made months out, years out, et cetera. We need to know what balances are there in the consolidated fund. So, it’s a kind of a round table discussion with your treasurer, financial secretary and any other important ministries and departments that would need to brief you almost immediately to get a handle on things.
“You also almost immediately begin the preparation for an interim budget because you would have commitments already made by the former government, you look at it to see which ones you have to go along with, [but] there may be some that you can [continue] if things are tough and others that you might want to walk away from. But everything depends on the preliminary scope of everything that is going on within the public service.”
This examination of the country’s finances comes in the midst of a depression caused by the COVID-19 pandemic and economic crisis which saw the country’s deficit balloon to $1.3 billion and debt to more than $10 billion in the last year alone.
Accompanying that depression was reduced revenue, by as much as 40 percent, after the tourism sector saw a slow return at the start of the year.
And still many thousands of Bahamians remain unemployed and/or in need of government social assistance.
“Oh yeah, [it] will not be an easy job at all,” Smith said of the tremendous task ahead of the new finance officials.
“Of course, we’re still in the middle of this pandemic and very high unemployment and extra expenditure on social services for people who find themselves in hardship, not to mention the cost of the health bill which is going up for supplies and overtime for the frontline workers, so it’s a bit of a tough position I think for any government.”
While the Minnis administration has been forthcoming with that state of borrowing, the country’s revenue shortfalls and increased spending, it did not – despite repeated requests – reveal the state of the treasury or account balances.
A customary phrase in the days and weeks following a general election has been that “the cupboards are bare”.
Smith said that political pandering does not reflect the true state of the country’s affairs and there is always a way for the government to meet its obligations.
“That’s just a political phrase, it has no meaning in the real finance world,” he said.
“The government has a standing facility with one of its bankers, in fact with more than one bank, and you know because it is the government, it has the ability to issue things like Treasury Bills and bonds in order to get funds in, so it isn’t anything like a personal bank account or anything like that.
“But for the last 25 years, the government has always been in an overdraft position quite frankly and the reason for that is because there is a mismatch between money coming in and money going out. For instance, every government has to make the payroll but every quarter, it will be different.
“More money comes in around the last quarter in the Christmas season from customs, so you might tend to have more than you need for those months but from there on, you’re spending constantly on salaries and other expenses like rent, et cetera, on a regular basis, but the money doesn’t come in regularly. So, to cover that difference between what is coming in and what is going out, you just resort to short-term facilities like Treasury Bills or overdraft facilities.”