Cooper: All that borrowing, and nothing to show for it

NASSAU, BAHAMAS — Progressive Liberal Party (PLP) deputy leader and shadow finance minister Chester Cooper yesterday cast serious doubts on the government’s fiscal projections, charging that the Free National Movement’s fiscal management has made the current economic crisis even worse.

The Exuma and Ragged Island MP yesterday accused the Minnis administration of having nothing to show for all of its borrowing during his contribution to the 2020/2021 budget.

“Big borrowing should equate to big things. We need a plan that will grow the economy by five to eight percent,” said Cooper.

“In my view, the path the country is on is quite clear and unless there is a drastic shift, it is only a matter of time before this administration goes back to the IMF, cap in hand, for additional funding.”

While acknowledging the impact of Hurricane Dorian and COVID-19, Cooper said: “Yes, Dorian and COVID-19 were the straws that broke the camel’s back, but the disaster of FNM’s fiscal management has made a terrible situation far worse. You will one day have to face facts, and the consequences, for the role you played in all this.”

“You are this year borrowing at least $1.3 billion but project only $25 million extra in servicing costs. I don’t believe that projection. We note that government debt servicing increased from around $290 million in 2016/2017 to $400 million in the upcoming budget, and more than $400 million the budget after that,” said Cooper.

Cooper questioned the government’s claim that it plans to introduce no new taxes despite the significant fiscal deficit.

“We see the effects of poor fiscal management by this administration in one aspect by the fact that The Bahamas government’s foreign currency bond for 2024, is now trading at up to 15 percent.”

Cooper said: “To me, and to lenders, the numbers just don’t add up.

“I don’t see any reason presented here to believe the revenue projections will return to pre-Dorian levels by 2022. They might, but I need more than a maybe if I’m a lender. I need a plan, a road map. We are told that the Economic Recovery Committee is hard at work; yet is has not reported on any initiatives to restore economic viability.

Cooper argued that the budget lacks  strategic focus on the immediate and medium-term issues the country is faced with, such as the rising debt-to-GDP ratio, the fiscal deficit and economic recovery.

He questioned the government’s plan to address the “hemorrhaging of the treasury by these state-owned enterprises”.

“Where are the efficiency studies? Where are the business plans? It is one thing to say there will be cuts, it is another thing to do a deep dive into the operations of these enterprises,” he said.

“Subsidies to SEOs are almost $400 million. We must critically analyze how our investments are performing in the Bank of the Bahamas, the Arawak Port Development, Cable Bahamas, ALIV and BTC. I am also troubled by the fact that SEOs will be allowed to add user fees in light of the proposed reduction of government subsidies.

“So, as usual, we don’t fix the problem, so the people will pay anyway,” he said.

Cooper questioned the status of foreign direct investment projects currently in the pipeline.

He furthered the family islands with their  low population density  offer the greatest potential for local ownership, such as boutique hotels and Airbnb where  more money likely stays in the economy.

“The COVID-19 pandemic has brought us into an era of social distancing,” Cooper said.

“There may be a shift from large mega resorts to smaller properties for a significant segment of travelers. The country will be challenged with a reduction in foreign exchange earnings.The demand for imports and the growing foreign currency debt levels, will place inordinate pressure on the reserves.

“What are the alternatives to shore up the reserves, other than foreign currency borrowing?  It is one thing to talk agriculture for domestic consumption or the country’s digitization, where is the discussion on earning foreign currency outside of tourism? This continued focus on import substitution, does not earn foreign currency. The idea of a substitution to reduce the demand for foreign currency is not the same as focusing on those industries that are more export-focused to earn the foreign currency, like pharmaceuticals in Freeport.

“The Family Islands, with all of its bio diversity, with each island presenting the potential for a unique experience, is a no-brainer for diversifying the tourism product and augmenting our foreign currency earnings,” said Cooper.