By I. Chester Cooper, Shadow Minister, Finance
As feared, the Minnis administration has triggered a review of our sovereign credit rating from a major international agency due to the rhetoric of the budget debate.
The Progressive Liberal Party warned that the world was listening as minister after minister in the new government painted a portrait of a doomed economy without a fiscal plan for the way forward, yet here we are.
International Credit Ratings Agency Moody’s revealed on Thursday that the country’s Baa3 rating was placed on review for a downgrade, specifically because of “official statements that The Bahamas’ fiscal position was weaker than previously estimated and that the government’s debt ratios would continue to worsen over the coming years.”
The damage has clearly already been done as far as reckless statements go. A downgrade by Moody’s would see our credit rating at “junk”, or non-investment grade, status. This would accompany the junk status that our sovereign credit rating is already at with the other major ratings agency, Standard and Poor’s.
The government must now take a course of corrective action to stave off a likely downgrade and put us on a path to steadily upgrade our credit rating whenever Moody’s decides.
First in achieving any of this would require some sort of plan from the government. Two months after the general election, we still have no specific short-term or long-term fiscal consolidation plan, despite promises by the minister of finance to deliver one.
Also, the FNM must, no matter how late to the game, develop an economic recovery strategy that will encompass drawing in more foreign direct investment, increasing the ease of doing business, continuing and expanding mortgage relief for troubled homeowners, job creation, reducing the cost of electricity, stemming the tide of crime, and further allowing Bahamian businesses to access global capital to increase employment, and laying out a plan to further develop our capital and Family Island infrastructure.
To be sure, there is not much point at this juncture in blame-casting; and this latest development is nothing to be celebrated, as despite our divergent views, the failure of the FNM government will mean the failure of The Bahamas.
We must work together, despite differing philosophies and approaches, toward the success of The Bahamas. We call upon the Government to engage a bi-partisan solution to the problem and consult the top private sector experts in formulating an economic growth plan and appointment of an economic growth czar. Key to this plan must be organic growth to be driven by domestic investment and entrepreneurial growth through the said streamlining of the business license process and significant investment in entrepreneurship via the Bahamas Entrepreneurial Venture Fund; as well as finding sensible solutions to mitigating the impact of hurricanes like Matthew which has had a severe impact in prior fiscal period.
Next, the Government of The Bahamas must act responsibly and reject any suggestion that fosters uncertainty regarding the Baha Mar development and its new owner Chow Tai Fook Enterprises Ltd.
The Minnis administration’s pontification over wild requests by Sarkis Izmirlian that suggests he should somehow reacquire the property at Cable Beach has surely led to uncertainty among those who would wish to book and invest in the property in this most fragile stage of its infancy. We note that S&P cited the stalled opening of Bahamar as a reason for their downgrade. The former administration was successful in ensuring the opening of Bahamar. We re-iterate in the public’s interest that Bahamar must succeed!
Mr. Izmirlian remains a friend to The Bahamas and a permanent resident of this country.
A prudent government would be assisting him in finding another project in the country in which to invest his considerable resources; the property at South Ocean situated next to Albany comes to mind.
Anything less than full-throated support in word and deed for Baha Mar is potentially harmful to our economy at this time.
Next, we would suggest the government postpone the resolution to borrow $320 million-plus to facilitate deficit spending this fiscal year, and implement appropriate alternative strategies.
We suspect this was mere posturing, optics, from the current administration with a plan to revise such a hefty downward outlook at the time of the mid-year exercise to appear the savior of the economy. But such dangerous games are not suited for serious minded governments to play. Governance is serious business!
This government should focus, like the last, on using the revenue and spending control tools at its disposal to focus on reducing the deficit, not prefacing the year to come with such a burdensome level of debt without looking for cost savings and ways to increase revenue.
The government would be well-served to build upon the groundwork left by the former administration in terms of financial consolidation and revenue administration.
Emphatically, I do not share the “cup-board bare pessimism” of the Government.
Bahamar is opened, there is an agreement is place for a new era in aviation, opportunities for energy reform, a pathway for re-vitalising and re-opening hotels in Freeport and other initiatives left in place by the former Government.
I am duly satisfied that with a combination of faith and work our cupboard will never be bare. I encourage the Government to accelerate its forward movement in the interest of the Bahamian people!
The Progressive Liberal Party stands ready to assist.