NASSAU, BAHAMAS — A compulsory bond offering to defer a portion of the public sector payroll in an effort to avert mass lay-offs is not “illogical” or “unreasonable”, a well-known banker said yesterday.
While addressing Parliament yesterday, Prime Minister Dr Hubert Minnis noted that Barbados had successfully implemented such a strategy in an effort to avoid mass layoffs and keep persons employed.
Minnis said: “I don’t believe in lay-offs.”
According to Dr Minnis, when the government reopened its borders many of the hotels that had reopened were doing quite well.
“RIU was running at about 30-35 percent occupancy and they were trending around 50 percent for August,” he said.
“Four Seasons had already reached 40 percent occupancy and they were trending July weekends at 65 percent. The Warwick was also doing well at 30 percent occupancy in July and 40 percent in August.
“Our tourism product was coming back,” he said.
With the resurgence in COVID-19 cases, the government has re-implemented numerous restrictions and some resorts that were open have opted to close.
“As a government we have a difficult decision to make,” said Dr Minnis.
The prime minister made particular reference to Bahamasair.
The heavily subsidized national flag carrier has suffered a major financial hit as a result of the COVID-19 pandemic and will need increased government assistance to survive, its chairman Tommy Turnquest has warned.
Minnis noted that around the world airlines are parked, not flying and filing for bankruptcy.
“Bahamasair is supported by the government and the people of The Bahamas,” he said.
“Yet its staff fully paid and with no work. I spoke to my colleagues in the Caribbean and at some point in time we will have to make a decision whether Bahamasair staff who are sitting there, should we pay them a percentage of their pay, say 70 percent and defer the other 30 until things have changed.
“Barbados was successful in using what they call compulsory bonds and keeping persons employed,” said Minnis.
He noted that if their salary is reduced by a percentage, it would still be guaranteed and paid via the bond they would be paid back over 12-18 months.
“At some point we will have to make that decision whether we follow what is happening around the world with mass layoffs which causes serious problems and I have issues with that, as opposed to deferring a percentage of individuals salary until the pandemic is resolved and the economy’s starts to grow,” Minnis said.
“That’s something we have to think about and it’s a difficult decision. The nation must always come first.”
Gowon Bowe, Fidelity Bank (Bahamas) chief financial officer, yesterday said the recommendation was not unreasonable.
Bowe said: “I think we have seen elements leaked to see what the reactions would be. I think I could call a weather balloon, let me send it up and see what the reaction is going to be from the unions for instance.
“It is not an illogical recommendation or an unreasonable consideration because ultimately the government doesn’t have a money tree. If I am saying a lot of persons aren’t working and are doing 25-30 percent productivity in some instances, a private business would be considering layoff.
“The government is saying defer payment and it’s not an idea not considered by business and carried out in some instances.”
Bowe said: “What we have not done a good job of is saying what we are spending on a monthly and weekly basis. One of the things that has to be looked at is the balance of payments.
“We need to maintain confidence and accountability in how much we are spending in US dollars on monthly basis and how we are getting US dollars whether it be land sales or limited tourism dollars. We also have to look at government spending, if government revenue has fallen off a cliff.
“I think a large number of conversations are being had on where the government had loans, overdrafts and commitments coming due, how are they able to reschedule those with the greatest amount of efficiency. Obviously the greatest outflow is government payroll.”
Bowe added: “Everyone is not going to be made whole and not every one is going to be happy. The decision making has to center on how we actually make the best decision that will impact the largest number of people.”