The Ministry of Finance announced that the government is moving expeditiously to address the country’s fiscal situation which has given rise to a credit rating review exercise and possible downgrade by Moody’s.
A statement issued by the Ministry of Finance yesterday outlined the government’s plans to address the fiscal situation.
“These steps include the planned introduction of Fiscal Responsibility legislation, new procurement regulations and a comprehensive public expenditure review, with the objective of achieving savings and ensuring consistency with the government’s policy priorities,” the statement read.
Last week, Moody’s, a top investment agency, placed the Baa3 bond and issuer ratings of the government of the Bahamas on review for downgrade.
Moody’s, in a recent statement, said the decision to place the ratings on review was prompted by official statements that the Bahamas’ fiscal position was weaker than previously estimated and that the government’s debt ratios will continue to worsen over the coming years.
Also within the government’s plans for fiscal recovery, the Ministry of Finance noted that the risk posed to the nation’s fiscal position by the threat of weather-related events is also under review.
“Work on all of these areas has commenced, and the results are expected before the end of this fiscal year,” the statement read.
“In supporting initiatives, the government’s efforts to strengthen revenue administration are receiving renewed focus, especially in the areas of real property taxes, customs, VAT and business licence administration and enforcement.
“Their effectiveness will be reinforced by the government’s plan to introduce a Revenue Administration Bill, to enhance the mechanisms available for dealing with tax delinquencies.”
The Ministry of Finance also assured that the government will tackle the challenges to economic growth that confronts the country by moving quickly to improve the ease of doing business in The Bahamas, addressing structural impediments to growth and attracting foreign direct investment that has a demonstrably positive impact on the local economy.
“While this review is an unfortunate development, it serves to underscore the imperative of taking decisive and timely measures to secure the fiscal health of The Bahamas and by extension, the future welfare of all Bahamians,” the Ministry of Finance noted.
However, the Ministry of Finance said Moody’s action was not unexpected, given the undesirable state of the fiscal situation, as detailed in the government’s 2017/18 Budget Communication.
This week members of the Progressive Liberal Party defended the former administration after Deputy Prime Minister and Minister of Finance Peter Turnquest accused the PLP for the possible downgrade of the Bahamian economy.
Senator Fred Mitchell said the PLP tried to warn the Free National Movement (FNM) government to stop “talking down” on the Bahamian economy during the Budget Communication.
However, yesterday Mr. Turnquest said he was disappointed by the remarks of Senator Mitchell and other PLP politicians who responded to the possible downgrade.
He explained that the government has made a conscious decision to be transparent and factual about the fiscal situation of the country.
“This is necessary if we are going to undertake reforms to secure the future of this country for future generations. For this reason, we have chosen not to mislead the Bahamian public with respect to extent of the fiscal mismanagement we faced on coming to office,” Mr. Turnquest said.
“We would risk having the same low credibility of the previous administration that Messrs. Davis (Philip Davis) and Mitchell were an integral part of, if we attempted to undertake the necessary reforms to stabilize the public finances without explaining the facts to the public.
“The evidence of fiscal mismanagement is clear to everybody, including the rating agencies. The previous administration had five consecutive years of missed fiscal targets.
“To believe that this current action by Moody’s could be avoided or delayed by the continuation of the previous administration’s pattern of issuing misleading statements on the country’s fiscal health is akin to believing in the 21st century that the earth is flat.
“If the previous administration had been more transparent, more honest and more responsible, the country would not have been facing these challenges.
“This administration in the budget exercise has laid out a clear plan to return this country to fiscal health. This action by Moody’s only reinforces our belief that we are correct in our conclusion that meaningful reform is needed now, not next year or some other future date.”
