NASSAU, BAHAMAS — It is “unwise” for the government to say that there will be not cuts to the civil service amid the COVID-19 fall-out, a well-known banker and accountant has warned.
Gowon Bowe made the observation durin an Organization for Responsible Governance (ORG) panel discussion on fiscal responsibility, the Coronavirus and the budget.
He said: “It is unwise for government to say there will not be any type of movement in the civil service. I think what they should be saying is that all matters are being considered; balancing the need to maintain household incomes because reducing the workforce in government will only shift it from one pocket to the next in terms of payroll to socials services if those persons are not able to be absorbed in the private sector.”
Bowe noted that ultimately a careful balance needs to be struck based on empirical data and evidence.
James Smith, an ex-Central Bank Governor, underscored hotel employees collectively represent the largest segment of employees within the private sector, with many experiencing a significant reduction in income or no pay at all.
Smith said there has been a ‘deafening silence’ on how to address the civil service wage bill which is nearly $700 million for this fiscal year.
“It might mean freezing certain benefits and increments. These things should be on the table if we are going to address the imbalances in the upcoming budget,” said Smith.
The government has already indicated that that no public service salary reduction is currently being considered.
Meanwhile, Kimsley Ferguson, the Bahamas Public Services Union’s (BPSU) president has already suggested the government could realize some $150 million in savings if it terminates the contracts for all consultants and special advisers and postpone subvention and marketing support payments to major hotels and other private sector entities that have temporarily laid-off staff in response to the COVID-19 pandemic.
According to Smith, one of the most significant features of the upcoming budget will most likely be the relatively large increase in borrowing both in local and foreign currency to fill the gap arising out of the tremendous fall-out in government revenue due to the COVID-19 crisis.
Smith also noted that with Standard and Poor’s having reduced this nation’s credit rating to junk bond status, government borrowing will be even more costly.
“It’s really not a happy outlook for The Bahamas over the short-term,” said Smith.
Smith noted that the government has three options; raise taxes, reduce expenditure or sell government assets. He noted that the last option may be more difficult, take a longer time and “aggravate the national sentiment about the sale of government assets”.
“To the extent that The Bahamas wishes to maintain parity between the Bahamian and US dollar it actually constrains any action the government can take beyond the obvious,” said Smith.
He added: “Critical balance must be taken over the short and medium term meaning that you cannot borrow beyond a certain limit without having adverse consequences to the exchange rate.”