Perspective

The piper must be paid

Election budgets delay inevitable pain

In last month’s article “A snap in a surge”, we spoke to the potential recklessness of government tabling an election budget that aims to buy support at the polls, while kicking the national-debt can down the road.

A country’s debt to gross domestic product (GDP) compares what the country owes to what it produces, and this indicator matters because the higher a country’s debt to GDP, the higher the risk of default on its debt payments.

The Bahamas’ debt to GDP ratio stood at a record 97.4 percent at the end of 2020.

Low debt to GDP can be difficult to maintain during periods of economic crisis, such as has been wrought by the COVID-19 pandemic, which plunged the Minnis administration into unprecedented borrowing.

As a result of the country’s increased debt burden, interest payments in the 2021/2022 budget are estimated to come in at $512.5 million.

To put that amount into perspective, the country’s allocation for interest payments on loans will be the single largest recurrent expenditure line item behind public sector salaries and wages, which are estimated at $670.9 million.

The country’s allocation for interest payments is only approximately $34 million less than the total allocations for the Ministry of Health, Department of Public Health and Department of Education combined.

The country’s high level and rate of borrowing comes as record recurrent deficits – which is the difference between what government collects and what it spends – have left government cash strapped, unable to pay vendors and some workers on a timely basis.

As the country’s financial experts have rightly warned, The Bahamas’ debt position is unsustainable.

During the current fiscal year, spending cuts were ordered for government departments and ministries, and hiring freezes were implemented save for essential positions, in order to hold the line on the government’s public sector wage bill.

But not unexpectedly, the Minnis administration tabled a budget that increased allocations for wages, salary and allowances in the public service by approximately $29.6 million.

The increases are spread out across multiple departments and ministries, which means that in addition to provisions for new hires, provisions for raises and reclassifications have also been made.

Months after coming to office, Public Service Minister Brensil Rolle blasted the previous Christie administration for its pre-election hires, indicating that the public purse grew by $16,532,738 due to the hiring of public sector workers in the run up to the 2017 general election.

Do governments in The Bahamas engage in varying degrees of pre-election hiring and public sector gift-giving? Yes.

Have previous administrations faced a 97.4 percent debt to GDP and a $9.66 billion national debt, choosing nevertheless to increase the public sector wage bill in the midst of a pandemic that leaves the prospect for tourism and tax inflows uncertain?

No.

Budget allocations are just that – allocations – and whether government will be able to make good on what the budget allocates remains to be seen, given variables including what we hope will be an uneventful hurricane season for the country.

According to the World Tourism Organization (WTO), international tourism arrivals to the Americas were down 77 percent in January, and global tourism is expected to come in anywhere between 55 to 67 percent below 2019 levels at the end of 2021.

The WTO said its projections are based on a number of factors, “most notably a major lifting of travel restrictions, the success of vaccination programs, or the introduction of harmonized protocols such as the digital green certificate planned by the European Commission.”

Borrowing hundreds of millions of dollars only to find new ways to spend it – thereby mortgaging tomorrow’s future for today’s desire to hold on to political power – is in part what has gotten The Bahamas to the financial state it is in today.

There is no guarantee that giving public officers extra money in the upcoming fiscal year will significantly improve the administration’s chances of victory at the polls, but what is certain is that The Bahamas cannot afford for successive governments to continue to behave as though borrowed money is “free money”.

A CLOSER LOOK

Under the Ministry of Public Service and National Insurance, $2 million has been added for salary adjustments, and allocations for new appointments have increased by $2 million.

A $12 million allocation for “special employment projects” was repeated for the upcoming fiscal year.

The Cabinet Office allocation for contract worker salaries increased by $212,550.

In the Office of the Prime Minister, the allocation for contract worker salaries increased by $379,000, and the allocation for consultants increased by $106,200, to $806,200.

In the Ministry of Finance, the contract worker salary allocation increased by $240,000, and $1.5 million was added for new appointments.

For the Department of Immigration, $1.22 million was added for contract workers and new appointments, and $900,000 was added for new appointments in the Department of Customs.

The recurrent allocation for Disaster Reconstruction Authority increased from $200,000 to $1.74 million.

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