NASSAU, BAHAMAS — The government must launch a comprehensive program to drive economic activity, according to Progressive Liberal Party (PLP) Deputy Leader Chester Cooper.
The opposition finance spokesman was responding to the International Monetary Fund’s (IMF) recent statement on its Article IV mission to The Bahamas.
“The IMF’s critical review is an opportunity for The Bahamas to respond with a disciplined program of prudent actions and innovation,” he said.
“The IMF covered much, but there are exigent points that must be specifically addressed. The most important action the government must take at the moment is to launch a comprehensive program to drive economic activity, generating US dollars and stabilizing the inflow and outflow that characterizes the balance of payments for The Bahamas’ economic system.”
Cooper continued: “This speaks to the need for constant coordination and alignment of policy objectives throughout ministries, with methods and tools to drive outcomes which both stabilize and advance our economic life in these islands. There would be no better way to achieve this than through digitization of our government systems; something I have repeatedly called for and has often been promised by this administration, but has yet to be manifested.”
Cooper also accused the Minnis administration of having no debt management strategy “that can be clearly ascertained”.
“What it is engaged in is just seeking money from any source through any means no matter the implications. That $600 million in bonds due to mature in 12 years were priced at 8.95 percent six weeks ago, and just this past week $225 million in bonds were issued at 8.25 percent, speaks to the fact that the first tranche was overpriced,” said Cooper.
“It also speaks to the lack of a clear borrowing strategy. In the six weeks since the original issuance, there has been no new favorable economic information that could account for the reduction in the price of the bond. That the Ministry of Finance appears to be celebrating the lower price of 60 percent less money is laughable. It should serve as an indictment on the management of our fiscal affairs.”
He further noted that the IMF’s calls for the reorganization of the Department of Inland Revenue and the Customs Department were “troubling”.
“Not even five years ago, The Bahamas was hailed as having the best VAT (value-added tax) implementation in the Caribbean and the customs reform measures were seen as an example to other countries in the region,” he said.
“The last VAT increase was implemented without proper study and consultation and resulted in economic contraction and inflation. We have nothing to show for it but misery and failed fiscal targets. All things considered, while the overall economic situation is challenging, and I see the stark reality in front of us, I see no reason for panic. When we consider our proximity to the United States, and the movements of global forces, The Bahamas is nested in a zone positioned for economic recovery and expansion. The only thing hindering that is leadership. Sound leadership, along with the right vision, priorities and execution, aimed at prudent targets, would see us advance and have confidence restored in our capacity to manage our affairs.”
The IMF last week noted that real GDP is projected to decline by 16.2 percent in 2020, followed by a modest rebound of two percent in 2021, and to converge back to its pre-pandemic level only by 2024.
The current account balance is projected at a deficit of 17.4 percent of GDP in 2020. The Fund underscored that the country faces long-standing structural impediments, which the COVID-19 pandemic has brought to the fore.