As I begin let me immediately put the lie to the statement issued by the government and the progressive liberal party about the downgrade of the Bahamas’’ sovereign credit rating by moody’s. The “it’s all Ingraham’s fault” nonsense is not going to cut it this time. If the handling of the economy between 2007-2012 was so poor, our sovereign credit would have been downgraded at any time during those 5 years – it was not. Now it has been – and here is why:
As was warned when the Bahamas’’ economic outlook was downgraded from stable to negative following the passage of the government’s 2012/2013 budget which included a half billion dollars in borrowing – the country’s credit rating has now been downgraded by moody’s.
When a country’s credit rating is downgraded, the results can include higher interest rates for home mortgages, credit cards, car loans and other loans to consumers and businesses. It can also include the country being seen by foreign investors as a riskier place to do business.
If the government maintains that too much borrowing took place under the previous administration (and yes, considerable borrowing did take place), how then did it imagine that borrowing another half billion more dollars would get us out of the hole? Is that how you get out of a hole, by continuing to dig – this time not with a shovel but with an over-sized drill?
In case the government is not aware, Moody’s and former Prime Minister Ingraham are not cousins – meaning they don’t have some special relationship with him and the FNM that they do not have with Mr. Christie and the PLP. If Moody’s and the S&P were not satisfied that the former government was taking as many steps possible to address its fiscal challenges following the 2008 global economic crash such as spending cuts and improved revenue collection, it would have downgraded our credit during that period – end of story.
Moody’s downgraded our credit rating this fiscal year because of:
#1 – limited growth prospects following a protracted recession and weak recovery in tourism and construction
# 2- significant and rapid deterioration of the government’s balance sheet, exacerbated by a low revenue base
# 3- high and rising levels of debt and a weakening of debt sustainability metrics relative to peers
Reason #1 has been known for some time due to the global economic crash of 2008 and its lingering effects on ability to travel (tourism) and construct new homes and businesses.
Reason #2 however is recent – Moody’s says that in this new budget year, the money has been spent at a large and fast pace. As you would have read in a number of my past writings and blogs – the government has already spent much of the money budgeted this fiscal year and we are not fully half way into the fiscal year as yet. In those writings I also warned several months back that Moody’s would, by the end of this year or early 2013 finally tell the Bahamian people what the government has not told them and what the Opposition has not investigated – the government has spent most of our money already. Moody’s also says that our revenue is suddenly falling off this budget year. Of course it would, if persons are being permitted to bring in items and not pay customs duty – customs duty is where the majority of our revenue comes from so if the revenue suddenly falls off – that is the first place the government would look.
Reason #3 is obvious. We already were forced due to the global economic crash to borrow funds as every other nation in the world also had to do over the past few years. And instead of looking at ways of cutting debt levels, the Bahamas passed a new budget in 2012/2013 that included a half billion dollars in borrowing without a declaration of where the money would come from, at what interest rates and at what terms. So of course high and rising debt levels would be one of the key factors for the downgrade in our credit rating.
The government, instead of stepping up and being the government and immediately putting in place measures to stop its wild and un-budgeted spending of our tax dollars and the yet-to-be-accounted-for borrowing approved in this year’s budget, issues a statement – not by the Prime Minister and Minister of Finance himself, but by the Chairman of the PLP, chalking up our very serious situation to “let’s just blame Ingraham.”
Really? Our outlook was downgraded in July due to the current government’s budget. At that time we were warned that if changes were not made, our credit rating would be slashed. No changes were made. Instead, the great cash-grab began in virtually every government ministry and agency in this country. So what was warned, happened.
Bahamians can sit and be lied to by the government if they so choose, but the government of the day was warned to take action – it did not. And the action it has taken so far has been just that – taking, instead of giving the Bahamian people a clear, workable and detailed road map to fiscal recovery. Instead it decided that borrowing another half-billion dollars was just what we needed to drive us over our own version of a fiscal cliff.
How long does the government plan to only be the government when it is overspending our money and firing Bahamians but otherwise, Ingraham is still in charge?
The prime minister should have immediately addressed the nation following this downgrade. Instead Bradley Roberts sent a message to the nation that will be the message of the government going forward regarding this downgrade.
That says just about all that needs to be said on who is at the helm of a country in financial crisis, and who is not.
Sharon Turner
