The Opposition registers its serious concern on the contents of the Bloomberg Report of June 22, 2022 entitled “Emerging Markets’ Club of Distressed Nations Gets 4 New Members”. According to the metric employed by Bloomberg Financial, The Bahamas is ranked the sixth-worst fiscally distressed emerging market economy. The significant risk premium attached to The Bahamas’ bonds in the international bond market – which as of today was trading 32 percent below par value in the 2032 series – has beentrending sharply downward over the last six months.
Despite the pronouncements of the Davis Administration and their rosy economic and financial prognosis, the community of bond investors are heavily discounting the country’s bonds and as such, they are signaling in their actions that they have no confidence in the announced plans of the government to move the country toward fiscal stability.
The opposition appreciates that the twin calamities of Dorian and the Covid-19 pandemic have meant that the country has had to undertake significant unplanned borrowings since 2020. These borrowings were approved unanimously by both sides in Parliament as a response to the two crises.
However, the Davis Administration has yet to put forward a concrete plan for expenditure restraint and for equitable revenue growth to bring the nation’s fiscal house back into order. In fact, the PLP government instead decided to operate in breach of the Fiscal Responsibility Act and bring to Parliament a budget with a deficit much higher than the legally mandated target it set for itself in its own Fiscal Strategy Report 2021.
Further, they have made none of the projected expenditure adjustments and have instead decided to ramp up spending in a number of areas, including international travel and consultancies. The failure of the PLP to engage in real governance and to make the tough but necessary decisions is eroding the credibility of this government among Bahamians and the international bond investor community.
The government must come to the Bahamian people with a legitimate plan for fiscal consolidation. If not, the confidence of the investor community will not improve, and the government will find it more and more difficult to source the ongoing financing it needs to meet its obligations. The government must change course rapidly to avoid Bahamian taxpayers footing a higher than necessary bill for the government’s continued inaction.
J. Kwasi Thompson
Member of Parliament East Grand Bahama Shadow Minister for Finance