This downgrade by Moody’s is no surprise, and given the trajectory we are now on, it may not be the last in the foreseeable future. It is noteworthy that the PLP Chairman issued a press statement on Moody’s downgrading of The Bahamas’ credit rating before the Government or the Ministry of Finance did so.
It is also noteworthy that his release seemed based on Moody’s “draft” press statement that typically it first presents to the Ministry of Finance for fact-checking and then releases later in a final form. Clearly there was more urgency to offer a political response to Moody’s action than a national interest one. This would explain why the PLP’s pre-emptive statement was, not surprising, all about blaming the former administration for the downgrade.
Regrettably, this backward looking response entirely missed the point about Moody’s forward looking assessment of the state of The Bahamas’ fiscal affairs, for which the governing Progressive Liberal Party now has responsibility. In its statement, Moody’s says, “We see limited prospects for the fiscal consolidation necessary to strengthen the government’s balance sheet and stabilize debt levels.” It further says, “We do not expect reforms necessary to increase recurrent revenues, most importantly the introduction of a value-added tax and a modernization of the property tax system, to materialize before 2014/15.” It is clear from these statements that the International Credit Rating Agency is looking for a forward-looking action plan that demonstrates that the Government is serious about changing the fiscal fortunes of the country for the future. In the best of circumstances it will be difficult, if not impossible, to limit reform of the tax structure to three years which takes us beyond 2014/2015 already. In the absence of tax reform we are kidding ourselves. We are well past the point that adjusting the margins on spending and revenue will have any significant impact. Minimum expenditure in this country approaches 20 per cent of GDP
Despite its harsh criticism of the former administration during previous downgrades and its vociferous complaints that spending was out of control, deficits were too high and the national debt was rising too fast, since coming to office, the Christie Administration has been on an alarming spending spree with a bloated cabinet, significant numbers of new hires and re-hires, extensive domestic and international travel, and liberal contract offerings. Its actions have taken a serious toll on the country’s cash flow, despite statements by the Prime Minister and Minister of Finance that revenue was on target. The planned deficit is higher than the one they complained about at $550 million and the national debt continues to rise at or above the pace they criticized. There is precious little being done by the Christie administration that could improve this state of affairs. No accelerated revenue enhancement measures, no serious effort to cut spending and no serious effort to collect outstanding revenues can be seen. . Without discipline in managing our fiscal affairs; which is clearly not the case now; it took and takes no genius to see the road ahead. In the circumstances, Moody’s seems to conclude that the Bahamian economy’s limited growth due to tepid growth in the US economy combined with weak government action warrants a downgrade of our credit rating, meaning the cost of borrowing for the country is likely to go up.
This action on the part of Moody’s does not hurt the PLP; it hurts The Bahamas and all Bahamians. Therefore, all of us must be concerned; it is time for serious action. It is time for Prime Minister Christie to lead our nation. The effort being spent on a suspect gambling referendum can be better spent on an honest dialogue with the Bahamian people on the dire state of the country’s financial resources. The Government’s cash flow is in bad shape, as bad a shape as we have probably seen since the days of the terrorist attacks of 9/11. The country must be advised that it is time for some sacrifice, discipline and elevated productivity, if we are to begin turning around our fortunes.
I have said before and I will say it again, the broad efforts going forward must be aimed at 1) Reducing the level of deficit spending, necessarily increased during the days of the Great Recession, (2) Reducing the growth rate of the debt- to-GDP; and (3) Eventually decreasing the debt- to-GDP levels in order to reestablish the fiscal space the country enjoyed prior to the onset of the crisis. There is no question that doing this is challenging given the global economic environment generally, but more particularly that of the United States of America, but focus on achieving it should be intensified.
Further, the Government must take decisive action in promoting broad economic growth through innovative marketing programmes in tourism, pursuing new opportunities for international financial services, increasing investment promotion, expanding support to and opportunities for small and medium size enterprises, increasing the ease with which business is done in The Bahamas, so as to improve our profile as a prime jurisdiction within which to do business; continuing the modernization of the nation’s infrastructure; and pursuing a fiscal policy that reduces our debt burden and creates an optimum environment for economic growth and prosperity for our people throughout our commonwealth.
Blame Ingraham is not a chorus line that will prevent future downgrades or promote any upgrades. Blame Ingraham is not a chorus that will bring tax reform, spending reform, fiscal discipline or economic prosperity now and into the future. When people elect new leadership, they do so looking forward to better, not excuses about the past. Prime Minister Christie, you begged for this job you now have; earn the trust you got. Quit fiddling, the Rome you said was burning, is burning faster! As one of your cabinet ministers said in a previous life, “don’t hold your head, use your head”. Take control of this ship of state and exercise the tough leadership necessary or while you make your PLPs happy, the nation will go to hell.
