NASSAU, BAHAMAS — The Opposition has rejected IMF suggestions for an increase in the VAT rate, arguing that the focus must instead be on unlocking the potential of the Bahamian economy to address fiscal imbalances.
The Opposition also emphasized the need for a government that is “less wasteful, extravagant, and unaccountable with the people’s money.”
The International Monetary Fund (IMF) has emphasized the need for further fiscal adjustments and comprehensive revenue measures, including new taxes and reforms, to achieve the government’s fiscal targets and reduce debt.
Among its observations, the IMF noted that the government aims to improve its primary balance (the difference between revenue and non-interest spending) by 3.5 percentage points of GDP between fiscal years 2024 and 2026. However, the IMF described this as challenging, noting that a similar adjustment had only been achieved once in recent history. That instance required significant measures such as increasing the VAT rate and sharply cutting expenditures following Hurricane Matthew.
The IMF suggested a more extended adjustment timeline to minimize economic disruption.
“The adjustment could be spread out over a moderately longer horizon, raising the primary balance to 5½ percent of GDP by FY26 and to 7 percent of GDP by FY29. This would still bring debt to 50 percent of GDP by FY31 and would allow the private sector a longer horizon to adjust to the withdrawal of fiscal resources,” the IMF stated.
The IMF proposed several measures to achieve this, including replacing the business license fee with a 15% profits tax on large domestic firms, introducing a personal income tax for top earners, eliminating the property tax ceiling, reducing tax expenditures, raising VAT rates, increasing water rates for heavy users, and ensuring the collection of patient fees at the Public Hospital Authority.
Opposition Leader Michael Pintard, commenting on the IMF’s Article IV mission to The Bahamas, remarked: “The opposition has itself sounded the alarm regarding the same observations made in the IMF statement that point to slow economic growth in the medium term, ongoing and increasing obstacles to business formation, the failure to properly constitute the legally required fiscal responsibility council, and the fact that this administration’s fiscal plan—or lack thereof—will not be sufficient to bring the public debt back down to manageable levels.”
Pintard criticized the Davis administration for failing to remove barriers to economic growth.
“They have unleashed several onerous measures and bureaucratic hurdles stifling and suffocating Bahamian businesses. There is no evidence that they have provided even 10 percent of the promised $50 million in critically needed capital support for Bahamian entrepreneurs. They have yet to give life to their promised ‘BahamasInvest’ that was supposed to help streamline business approvals and facilitation.”
He reiterated the Opposition’s rejection of additional taxes, arguing for economic expansion and better fiscal management.
“The focus must be on unleashing the potential of the Bahamian economy as the primary means to address the fiscal imbalance. Secondly, but just as importantly, we need a government that is less wasteful, extravagant, and unaccountable with the people’s money.”
Pintard accused the Davis administration of wasteful spending, including hiring political cronies, inflating consultancy budgets, and overspending on travel.
“We have a Prime Minister who is now apparently taking private jets to crisscross the world, contributing to the government overspending its travel budget by $5 million last fiscal year. We are overpaying for high-interest so-called public-private partnerships (PPPs), which are nothing more than off-the-book and unrecorded public debt. These arrangements operate outside the government’s established PPP policy; so embarrassed is the government about the terms of these arrangements that the Davis administration refuses to share the details with the Bahamian people who are footing the bill. With no pandemic, natural disaster, or economic downturn, the Davis Administration has already added a billion dollars to the national debt just within the last two years alone. It has just tripled the first quarter budget deficit from last year, registering a deficit of $194 million in three months. And, as we and the IMF have pointed out, they refuse to follow existing provisions in the law that require the government to be timely and transparent about how they spend the Bahamian people’s tax dollars. Instead of looking at additional taxes, the government must come clean and cut back on its expenses,” Pintard said.
In a statement, the Office of the Prime Minister defended its record, noting: “The Davis administration entered government at a time of profound crisis. The government moved immediately to end harmful policies, offer relief to Bahamian families, stabilize the nation’s finances, and boost economic growth.”
The statement highlighted the IMF’s acknowledgment of the country’s “remarkable recovery” and progress.
“While there is much more work ahead, many more Bahamians are now working, and inflation is now below pre-pandemic levels. Public finances are improving, borrowing costs are declining, and the nation is on a stronger, more sustainable path forward. The recommendations made by the IMF are consistent with those made to previous administrations. However, just as we did not follow the 2021 recommendation to raise VAT to 15%, we have no intention of raising VAT. The global inflation crisis has led to higher prices in our country, adding to cost-of-living burdens for Bahamians,” the statement read.
It concluded by emphasizing the administration’s commitment to energy reforms and economic growth.
“This administration will continue to implement reforms and deliver progress while addressing the unique challenges of an archipelagic nation.”
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