Bahamas: Reducing the government 'only way' to long-term fiscal security

By NEIL HARTNELL
Tribune Business Editor:


Reducing the size of government is "the only way" to set the Bahamas' public finances back on the road to fiscal sustainability, a leading accountant said yesterday, arguing that the private sector was not large enough to generate the tax revenues needed to pay for ever-expanding public services.

Raymond Winder, Deloitte & Touche (Bahamas) managing partner, also criticised the "average Bahamian" for putting pressure on politicians to continually increase public spending through the mistaken belief that "government can solve all our ills and problems without it costing money".

Acknowledging that Bahamian political, religious and other community leaders "in teaching the average Bahamian that there is nothing free", Mr Winder told Tribune Business that people needed to take more personal responsibility and realise that the country and economy, not just the Government, needed to grow.

"We're not educating people to let them know you can't continually increase the size of government, or have the government continually provide new services, without having that money come from somewhere," he explained.

Raising taxes or introducing new ones was not the long-term answer, Mr Winder added, because the Bahamas - given its relatively small size and population - could only bear this rising burden to a certain point.

And given the recession, which had caused business activity and international trade to contract, and a subsequent decline in government revenues, Mr Winder said companies and households were in no position to absorb new and/or increased taxes and fees.

"We don't have a private sector that is big enough to pay for all these services," the Deloitte & Touche (Bahamas) managing partner said. "The majority of the private sector is unable to meet their obligations, so how do you expect to get all this without paying for these services. It's just not there.

"We need to tighten our belts and take personal responsibility for some of the things we ought to."

Backing the position adopted by Rick Lowe, an executive with the hawkish Nassau Institute economic think-tank, Mr Winder told Tribune Business: "For the size of our country, the Government is too big and has to be reduced. That's the only way to right our fiscal responsibility [position]."

Bahamians had been led to believe that growing the Government could fix all this nation's problems and social ills, without realising that the economy and country as a whole needed to grow to.

"The reality is our problems will not be solved if government continues to grow without the wider country growing with it," he added.

Yet Mr Winder said any politician who preached the message of personal and fiscal responsibility, and that the Bahamas should not keep increasing the size of government, was unlikely to find themselves a politician for too much long because it was not something the majority of voters were attuned to or accustomed to hearing.

"I blame the average Bahamian, who believes the Government can solve all our problems and ills without it costing money," Mr Winder said.

He added that "ministers of the Gospel also need to do a better job", as many were "continually pushing" for the Government to provide new services and cure all the Bahamas' problems.

Tribune Business revealed yesterday how the Bahamas' national debt stands at almost $3.8 billion, between $11,000-$12,000 per resident. Data from the Central Bank of the Bahamas' latest statistical digest showed that at the 2009 third quarter end on September 30, 2009, this nation's national debt stood at $3.675 billion. Some $3.236 billion of that was directly owed to creditors by the Bahamian government, along with a further $438.486 million worth of borrowings it had guaranteed on behalf of public sector corporations and agencies.

In downgrading the Bahamas' long-term sovereign credit rating, Standard & Poor's (S&P) had warned: "Overall, the general government deficit is projected at 4.8 per cent of GDP in 2009-2010 (ending June 2010) from an estimated 4.1 per cent of GDP in 2008-2009.

"During 2010-2012, we project general government deficits on the order of 3.5 per cent of GDP, compared with deficits of 1.5 per cent of GDP in 2003-2007."

The Wall Street credit rating agency said the Bahamas' net general government debt had risen to 30 per cent of GDP, compared to 22 per cent in 2008, and it added: "We project that it will continue rising to 35-39 per cent of GDP in 2010-2012.

"Gross general government debt is higher at 46 per cent of GDP in 2009, up from 37 per cent in 2008. The Commonwealth's share of external to locally issued debt is 20 per cent, which is relatively low but up from 10 per cent in 2007."

January 08, 2010

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