By NEIL HARTNELL
Tribune Business Editor
The Bahamas' plan to reverse its fiscal woes has been branded "very ambitious" by the Caribbean Development Bank (CDB), with this nation needing to outperform GDP growth forecasts to hit target.
The CDB, in a recently-released economic assessment of The Bahamas, warned that this nation faced an "unsustainable" debt burden as a result of borrowing levels that exceed economic growth rates.
"The debt level in The Bahamas is currently unsustainable," the CDB said. "The Government has continued to increase its debt at a rate that exceeds the growth of the economy, causing debt payments to absorb an increasingly higher proportion of GDP.
"The Government of The Bahamas' fiscal plan to stem this tide is very ambitious. While a higher-than-anticipated growth outcome may help the Government to meet its fiscal projections for the medium term, a slightly slower pace of fiscal consolidation is projected in this outlook.
"In 2018, the primary and overall balances are projected to improve to -0.6 per cent and -3.7 per cent [deficits] respectively. This will not be enough to reduce the central government's debt-to-GDP ratio, which is projected to increase to 73.7 per cent of GDP in 2018."
Matt Aubry, the Organisation for Responsible Governance's (ORG) executive director, told Tribune Business that while the Government's deficit reduction targets were "ambitious", they had to be if the Bahamas was to pull out of its fiscal "nosedive".
He added that the near-$8 billion national debt, and $300 million-plus annual deficits, represented a major distraction that frequently distracted the Government's attention away from economic planning and long-term growth strategies.
And the ORG executive warned that Bahamians must prepare to endure short-term pain for long-term gain if the country is to enjoy a brighter, more prosperous future.
"I think it's vital," Mr Aubry said of the Bahamas' fiscal consolidation plan. "The higher we get on this debt ceiling, the further it gets, the harder it is to get down, and it makes it much more difficult for us to pull out of the nosedive.
"The demands to repay this debt keeps us in a reactive state, so we are unable to prioritise a more proactive model to develop the local economy and bring in foreign direct investment (FDI). When we're reacting we're making short-term decisions, not long-term ones.
"I can see where it's ambitious," he added of the Government's deficit reduction strategy. "There needs to be some significant changes in the way the Government works; to become more dexterous and measured, and go after opportunities.
"If the country is trying to stem the tide of borrowing, it's not so much focused on growth opportunities and limits the growth strategies for different industries. I think they are ambitious. At the same time they need to be because they're quickly running out of time."
Mr Aubry said ORG and other civil society groups were eagerly awaiting the upcoming Budget, normally delivered during the last week in May, to see whether the Government would deliver on promises of transparency and accountability through Fiscal Responsibility legislation and so-called 'Fiscal Rules'.
He added that ORG also aimed to partner with the Government and other stakeholders on an initiative designed to engage the Bahamian public "more in our fiscal situation", and gain their input to help address it and enact the necessary reforms.
"The formula we agree with is we have to reduce government spending, and make it work more efficiently and effectively, and make sure the economy grows - and grows more rapidly," Mr Aubry said.
"The distance between our debt and increase in GDP is starting to get very close to a point where it's very difficult to come back..... ORG always operates on a spirit of optimism that we have the capacity to pull ourselves back into line, and avoid hitting the ground like Jamaica and other places, but it's going to require honest and clear collaboration between the sectors.
Mr Aubry warned that Bahamians would have to make short-term sacrifices for long-term gain, suggesting that cuts to the public sector workforce may be unavoidable if this nation is to eliminate its fiscal imbalances and reposition the economy for long-term growth.
"The Deputy Prime Minister said it's going to hurt for a little while, and we have to be prepared to do that," he told Tribune Business. "Talking about cuts in the public service, if it makes sense and people are not meeting their goals, and systems are not creating the right outcomes, this is the time they need to be addressed.
"We can't be focused on the short-term. We have to maintain long-term goals that, if we get through this, will benefit all sides."