THE PRIME MINISTER’S ABSENT ECONOMIC & FISCAL PLAN

March 7, 2024

The Prime Minister’s Mid-Term Budget presentation and related display was a sad detachment from the reality of the country’s true economic and fiscal situation. This is not partisan hyperbole. Anyone taking the time to do a simple review of the accompanying reports laid in Parliament by the Prime Minister, as Minister of Finance, will readily appreciate the clear gap between his rhetoric and his Ministry’s documented reporting.

The Davis/Cooper administration continues to double down on the fantasy that it will meet its $131 million budget target for the full fiscal year, even though it has reported a near $260 million deficit after only six months. Even accepting that the third quarter of the fiscal year- January to March – will run fiscal surpluses as is typical; the final quarter of the fiscal year will run substantial deficits due to the usual end of year settlement of government commitments. This is why the Opposition agrees with the host of local financial experts and multi-lateral funding agencies in the conclusion that the Davis administration will bust its budget by a wide margin.

The International Fund (IMF) has projected a deficit of close to $380 million. The rating agency Standard & Poors and the financial firm Santander have also forecasted deficits even higher than that of the IMF. No doubt the Minister of Finance would have internal analysis that points to a massive overrun of the deficit target. Yet instead of acknowledging this clear reality, our Prime Minister continues to mislead the public about the fiscal situation. There is no amount of “greater enforcement” or other existing measure that would close the current fiscal gap – especially with a government spends public funds with such wasteful extravagance. It is at best wishful thinking and at worst willful denial.

After reviewing the fiscal management of this administration in its most recent annual Article IV report on The Bahamas, the IMF made the following pertinent assessment: “The government’s medium-term fiscal targets need to be backed by credible measures.” The inference is clear. The current fiscal targets of the Davisadministrationarenotpresentlysupportedbytherequired‘credible’measures. This failure will have dire implication for the financial health of the country.

The Prime Minister’s stewardship of the economy is even more dismal. By his own admission, the robust economic recovery has stalled. Without any public acknowledgement and clearly hoping no one would notice, the Davis administration has slashed real economic growth forecasts for the current fiscal year by a whopping 80 percent – from 5.5 percent to 1.1 percent in the mid-term budget report. After inheriting an economy that was rebounding at a 14 percent annual growth rate in 2021, the Davis Administration has taken the country right back to the slow growth/no growth economic trajectory, with all of the unfortunate implications.

In my budget presentation in Parliament last June, I referenced the IMF’s April 2023 World Economic Outlook to warn the nation’s executives that the projected growth rate of the global economy had been slashed. I stated at the time that in light of the global outlook, the government’s rosy economic projections in the budget were too high and not supported by expert analysis. Unfortunately, the government did not listen. They built their budget – and their spending – on an unrealistic economic forecast. The imminent outcome of their folly will be a budget deficit much higher than budgeted.

More than that, the fact that, according to the Ministry of Finance, the economy is to revert back to 1.1 percent growth shows that the Davis administration has been exposed. TheDavis/Cooperteamhasnoeconomicplanandtheyhavedonenothing to keep economic growth at acceptable levels. Meanwhile, the World Bank reports that our Caribbean neighbours are expected to grow on average at 4 percent this year, almost four times our pace. So, what is the excuse of the Davis/Cooper

administration? WhyistheBahamianeconomybacktosputteringalongwhilemost of our regional counterparts are roaring forward?

We know the answer. This PLP government has shirked its responsibility for sound and prudent governance in several key respects. They have failed to lay out and execute a sound Debt Management Plan. They have not committed to reforming State-Owned Enterprises which continue to absorb more resources with no increase in productivity.

Despite current reactionary rhetorical bellowing, the government is NOT reforming the Energy Sector in an open, inclusive and transparent manner. They must lay out the vision, draft and communicate the plan of action – and then engage in competitive bidding to raise the resources required to transition to cleaner and less expensive energy sources. There must be fulsome tax, legal and administrative reforms that have equal focus on expenditure restraint. There must be full openness and transparency on all public affairs.

These and other critical reform measures are the foundation upon which we can stimulate sustained economic growth while ensuring sound fiscal prudence. Unfortunately, this administration has been distracted by frivolous priorities that provide them with PR opportunities, as opposed to focusing on the things that create lasting structural changes to our economy that lead to improved real wages and improved standards of living.

Sadly, the Prime Minister is distracted with the glitz and glamour of the office and simply has not been paying attention to details of governance. Instead of inspired and competent management, the Prime Minister and his team have been busy profiling and picking low lying fruits with limited impact, instead of working tirelessly to create a more equitable and distributive society. The result has been an economy that is beginning to stall. This will not affect the PLP leadership and their