Deputy Prime Minister Peter Turnquest yesterday defended the government’s decision to borrow more than half a billion dollars, insisting that the only alternatives were to increase taxes or cut spending.
He insisted the government had very few options to meet the huge financial obligations left behind following Hurricane Dorian, which caused widespread destruction in Abaco and Grand Bahama.
Turnquest made the comments as he led the debate on the mid-year budget in the House of Assembly.
Turnquest said the storm caused $3.4 billion in damage, losses and additional costs.
“Faced with this reality, the government decided that it will not impose additional tax burdens on Bahamians to cover the cost of recovery,” he said.
“More taxes could slow down the already strained economy as people would consume less, given the need to pay more in taxes.
“Although we have a large budget gap to close in the immediate term, this is not a viable option.
“Therefore, the government will not be increasing taxes or introducing any new taxes to cover the cost of Hurricane Dorian.
“[W]e could slash spending by a few hundred million, but that means starving the economy of job opportunities and commercial activities by way of reduced capital and other major projects. Large spending cuts would also reduce the resources available to assist the vulnerable with social assistance benefits and other recurrent programs.
“To balance the budget in one swoop, we would have to cut total expenditure, across the board, by over 20 percent, based on spending estimates at the time of the National Budget. Indiscriminate cuts like this would affect everyone, and not just in the storm-affected islands. This is not an option.”
Turnquest added, “The bottom line is, the only way to finance these extraordinary expenses without breaking the backs of taxpayers, starving the economy of opportunity and draining the government of already tight resources, is to borrow – but only to do so consistent with an articulated plan to bring the budget back in line over the medium term.”
The government is seeking parliamentary approval to borrow $587.9 million to cover the revenue shortfall and expenses associated with Hurricane Dorian. The borrowing is projected to drive the country’s debt to $8.2 billion by the end of the 2019/2020 fiscal year.
Progressive Liberal Party (PLP) Deputy Leader Chester Cooper, in his contribution to the debate, called the Minnis administration’s fiscal plans cruel, insensitive and ill-planned.
He accused the government of using the hurricane as a scapegoat for its poor fiscal management.
“Government debt has grown more rapidly under this administration than any other, deficits larger than any other,” he said.
Cooper added, “The debt to GDP (gross domestic product) ratio that now stands at 64.4 percent will end up being much higher than the 54 percent when they came into office because the economy simply cannot grow fast enough under them to outpace their borrowing.”
He added, “I would say at the outset that I find this entire exercise to be one steeped in subterfuge, duplicity and mismanagement of our national finances by this administration.
“And it is all being carried out under the guise of a killer storm that has laid bare the ineptitude of this administration and, quite frankly, its lack of a plan or vision for this country.”