05152018 business

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TUESDAY, MAY 15, 2018

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IMF: $240m ‘correction’ needed for fiscal targets

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net

T

HE Bahamas needs a further $240m “adjustment” to hit its Fiscal Responsibility targets, the IMF warned yesterday, as it called for more “trimming” of the civil service wage bill.

The International Monetary Fund (IMF), in its newly-released Article IV report, suggested that further sacrifice was required for the Government to hit its fiscal consolidation goals even though its 2017-2018 targets were “within reach”.

The Fund “urged” the Minnis administration to further cut recurrent spending, which goes on fixed costs such as civil service salaries and rents, and avoid “an undue squeeze” on capital spending on essential infrastructure - the very method by which it has narrowed the 2017-2018 deficit.

* Needed to hit 2021’s 0.5% deficit goal * More civil service ‘trimming’ called for * 50% debt-to-GDP long-term target

The Government’s Fiscal Responsibility Bill, unveiled on yesterday, seeks to cut the fiscal deficit to 0.5 per cent of gross domestic product (GDP) within three years.

But the IMF warned it might miss this target without its recommended Budgetary “adjustment”.

“The fiscal target for fiscal year 2018 is within reach, despite the unbudgeted purchase of [Bahamas] Resolve promissory notes, although at the expense of lower-than-budgeted capital spending,” the IMF said.

“Staff recommended an additional adjustment of 2.25 per cent of GDP to bring the deficit to 0.5 per cent of GDP by fiscal year 2021- the medium-term target under the proposed fiscal rule - to put the public

debt-to-GDP ratio on a firmly downward trajectory.

“Staff urged the authorities to identify measures to undertake this adjustment, with a strong focus on reducing current spending and avoid an undue compression of capital spending.”

The Fiscal Responsibility Bill’s key targets require the Government to slash the fiscal deficit to 0.5 per cent from 2020-2021 onwards, slashing it from a sum equivalent to 5.8 per cent of GDP in the 2016-2017 Budget year.

The Bill’s “first schedule” sets out a “glide path” or “road map” for achieving this, acknowledging - as the IMF stated - that “significant fiscal adjustments” are needed over the next two budget years to hit this objective.

To enable the public sector and wider Bahamian economy “to achieve the fiscal objective in an orderly manner”, and avoid unnecessary shocks, the Bill calls for 2018-2019 and 20192020 deficits that “shall not exceed” 1.8 per cent and one per cent of GDP, respectively.

K P Turnquest, Deputy Prime Minister, last night indicated to Tribune Business that achieving these “fiscal balance” targets would not be painless.

“We’re going to do our best to meet the targets,” he confirmed. “It’s going to require some reconciliation and some adjustment, but that [a 0.5 per cent deficit[] is our goal.”

SEE PAGE 4

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$3.7bn pension liability creates ‘big time bomb’

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE GOVERNMENT’S unfunded multi-billion dollar pension liabilities, projected to hit $3.7bn by 2030, were yesterday branded “a big time bomb waiting to go off”.

Robert Myers, pictured, the Organisation for Responsible Governance’s (ORG) principal, told Tribune Business that unfunded civil service pensions were threatening to send The Bahamas “bankrupt” unless swift corrective action was taken.

He spoke out after the International Monetary Fund (IMF), in its full Article IV report on The Bahamas, again warned that the current system - where civil servants contribute nothing to funding their retirement - is “unsustainable”.

The Washington DCbased Fund again listed civil service pensions, together with the public sector’s wage

* IMF RENEWS ‘UNSUSTAINABLE’ WARNING * AND ORG CHIEF FEARS ‘BANKRUPTCY’ * ACCUSES GOV’T OF ‘IGNORING’ WOE bill and loss-making stateowned enterprises (SOEs), as three key reforms that the Government must target if it is to reverse The Bahamas’ fiscal decline.

“The civil servants’ pension system is unsustainable,” the IMF warned. “Government employees draw pensions at retirement without contributing to the system while employed.

“Staff analysis in the 2016 Article IV Staff report noted that accrued government pension liabilities totaled B$1.5bn in 2012, and would

SEE PAGE 5

BICA chief: avoid ‘stretch’ targets on fiscal responsibility bill goals

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE BAHAMAS must avoid setting “stretch” fiscal targets, a top accountant warned yesterday, branding the 0.5 per cent deficit goal as “aggressive but achievable”.

Gowon Bowe, the Bahamas Institute of Chartered Accountants (BICA) president, told Tribune Business that the Government needed to set a “realistic and credible” timeframe for achieving the 50 per cent debt-to-GDP ratio required by the Fiscal Responsibility Bill.

The draft legislation, unveiled yesterday, calls for the Government to state the year when this long-term objective will be achieved, and Mr Bowe warned that setting an overly-ambitious target that is not met will undermine confidence in legislation designed to

overhaul The Bahamas’ fiscal governance.

He described the draft Bill as “time to put the money where the mouth is” on improved fiscal transparency and accountability, adding that it represented an “iron clad commitment” to impose binding discipline on current and future governments.

“I think the main element now is the public consultation and working with them [the Government] to say: ‘Let’s make it as realistic and achievable as possible to maintain its credibility’,” Mr Bowe told Tribune Business.

“Setting stretch targets is not the appropriate position at this point in time, and what needs to be very clear is the transition plan, the strategic plan to get to these benchmarks over the transition period. Embedded in that needs to be an accompanying road map of where we expect to next

* Three-year 0.5% deficit ‘aggressive but doable’ * Goals must be ‘realistic’ to maintain credibility * Responsibility Council likened to ‘SuperPAC’

GOWON BOWE year, the year after, and the timeline of targets set.

“Ultimately, what we want in passing this is it becomes the road map and iron clad commitment made to the people. This is one instance where I would say to Government: Let us be

realistic in our projections; this isn’t one of those times when we need to be optimistic. If a longer period is needed, let’s be honest and candid now.”

While cutting the Government’s direct debtto-GDP ratio from the present 58 per cent to 50 per cent is the long-term goal, the Fiscal Responsibility Bill also sets out the goal of achieving a fiscal deficit equal to 0.5 per cent of GDP - around $53-$54m - within three years.

The Government has to slash the fiscal deficit from a sum equivalent to 5.8 per cent of GDP in the 2016-2017 fiscal year, with the Bill setting out a “glide path” or “road map” for achieving this.

It acknowledges that “significant fiscal adjustments” are needed over the next two budget years to hit this objective.

To enable the public sector and wider Bahamian economy “to achieve the fiscal objective in an orderly manner”, and avoid unnecessary shocks, the Bill calls for 2018-2019 and 20192020 deficits that “shall not exceed” 1.8 per cent and one per cent of GDP, respectively.

Mr Bowe yesterday said there were multiple “variables” that impacted the debt-to-GDP ratio, with the rate of economic growth as well as the Government’s revenue and spending plans - all able to throw this off course.

While achieving a 50 per cent debt-to-GDP ratio within three years is “very aggressive”, and would require the Government to produce Budget surpluses, Mr Bowe said the deficit reduction goal was more achievable.

“As it relates to the GFS deficit versus GDP, getting it to 0.5 per cent in three years is an aggressive target but more achievable than debt-to-GDP,” the BICA president told Tribune Business. “We need to be in a position where, hand on heart, the targets set are achievable in the timeframe set out.”

He warned that a failure to be realistic threatens to undermine the Fiscal Responsibility Bill’s credibility, as “missed targets” would result in fiscal adjustments and political controversy that may prove disruptive to the Bahamian

SEE PAGE 3

IMF: 10 YEARS TO HIT Christie Gov’t deficit 1,060% above responsibility target LONG-TERM DEBT GOAL

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE BAHAMAS will take ten years to hit its long-term debt target, the IMF warned yesterday, as it again blasted the Christie administration’s “lax spending control” pre-election.

The International Monetary Fund (IMF), in its latest Article IV report on The Bahamas, said the long-awaited Fiscal Responsibility Bill will “lock in” VAT and other revenue reform gains, and prevent their squandering through “repeated misses of budget targets”.

The former PLP government ran up $2.2bn in additional debt during its five-year term in office, despite enjoying a net $750m VAT windfall during

* HITS ‘LAX SPENDING CONTROL’ PRE-ELECTION * 14% CONTINGENT LIABILITIES NOT IN DEBT MATHS the tax’s first two years, as result of spending increases outpacing income.

The Fund yesterday said the proposed Bill, and its targets, will provide the “anchor” and discipline to prevent a reoccurrence of such practices - but warned that cross-party “political will” still remains essential to placing The Bahamas’ finances back on a sustainable path.

SEE PAGE 7

By NATARIO MCKENZIE Tribune Business Reporter nmckenzie@tribunemedia.net

THE DEPUTY Prime Minister yesterday said the Fiscal Responsibility Bill will prevent a repeat of the 2017 pre-election spending splurge by requiring reporting to Parliament.

K P Turnquest said the legislation mandates a “PreElection Economic and Fiscal Update”, to be given between 20-30 days before voters go to the polls, that will give Bahamians a new tool for government spending oversight.

“We want to ensure that we do not have the kind of ramp-up in spending that we saw in the last election.

That is unsustainable and it is a tremendous burden on future governments and the Bahamian people,” said Mr Turnquest.

“If we use the former administration as an example, it is clear why this provision is needed in the legislation. The former government’s deficit in the year before the election was 5.8 per cent of GDP, almost double the deficit in the previous year.

“They projected the deficit at $100m and overshot this target by over $500m or 600 per cent. They managed to miss their budgetary estimates by over a half a billion dollars and this took place without the public having any idea of the state of the Government’s finances.”

Mr Turnquest said the Bill sets the deficit limit at 0.5 per cent of GDP, based on a comprehensive analysis performed by institutions such as the

SEE PAGE 8

PAGE 2, Tuesday, May 15, 2018

THE TRIBUNE

GB POWER UPGRADES BOOST WEB EFFICIENCY Bahamas represents GRAND BAHAMA Power Company’s (GBPC) website revamp, pictured, aims to provide customers with greater efficiency and security, following its May 1 launch.

Dominique Pinder, GBPC’s customer service manager, said: “As the island’s utility, GBPC is committed to providing innovative solutions that enhance our customers’ experience.

“For many years we have provided customers with the convenience of online service options to access their account information and pay their electricity bill.

Today, our website offers an improved, efficient and

secure experience for our customers.”

GBPC has evolved its online services in line with technology advances, including a new payment portal for customers who pay their bills online.

Improvements include a swifter bill payment process, immediate credit to accounts when payments are made, and multiple account capability.

Zevargo Cox, the utility’s IT director, said the website - which was developed by Bahamian designers - is a major improvement to the company’s Internet presence.

Through various discovery workshops, GBPC used consumer journey mapping to chart the ideal

course for customers. This was done by identifying key touch points, based on customer feedback, to develop the ideal experience. The goal was to make frequently-used customer service functions more easily accessible.

“I know that many of our customers use our e-billing service to pay their bills,” said Mr Cox. “We set out to find an interface that would make the process faster and easier by facilitating immediate processing of online payments.”

He added that “with customers now being able to view bills and balances in real time, there’s never been a better time to sign up for GBPC’s e-billing”.

ENTREPRENEUR PLANS NIGHTLIFE EXPOSURE A BAHAMIAN entrepreneur is aiming to launch a website and mobile app that will promote all activities this nation offers to locals and visitors alike.

Sherwin Johnson, EVO Bahamas’ president, said he hopes to unveil the Bahamas Nightlife website and mobile app by summer 2018.

“Most times, Bahamian businesses, especially small ones, don’t have the mega dollars like large corporations to entice both locals and touristS into their establishments,” he added. “This is why The Bahamas Nightlife was created. It gives everyone a level playing field to attract as many customers as possible.”

Mr Johnson said many tourists do not experience the “real Bahamas” as they are only directed to the companies that pay local drivers to bring customers to their doors.

“Moreover, most Bahamians have lost the enthusiasm to enjoy The Bahamas like they should,” he added. “This is also because they are not privy to information if it is not in their ‘circle’.

SHERWIN Johnson

“So, whether you are looking for a club to party at or a church service to worshipat, a quiet lounge or even a business seminar, The Bahamas Nightlife will give you enough information to

decide what you want to do.”

Businesses that sign up for a small fee will be allowed to add events, promotions and features to an integrated calendar that will allow Internet and app users to

select activity by date, category, location and time.

The website and mobile app also has a dedicated product and services page for other business.

The Bahamas Nightlife is forecasting that it will get 270,000+ views per month, and is offering to partner with other companies. Mr Johnson said he had approached the Ministry of Tourism, and other businesses, seeking assistance for his product’s complete roll-out.

at STEP conference

THE BAHAMAS Financial Services Board (BFSB) made sure this nation was well represented earlier this month at the annual Society of Trust and Estate Practitioners (STEP) Caribbean Conference.

The summit was held in Bridgetown, Barbados, from May 7-9 under the theme “Fast Forward: Future Thinking”. STEP is the global professional association for practitioners who specialise in family inheritance and succession planning. The organisation works to improve public understanding of the issues families face, and promotes education and high professional standards among its members.

More than 250 delegates attended this year’s conference to discuss topics that included: 1. The Common Reporting Standard (CRS) 2. Fake News, scandals and political uncertainty 3. Data Security and Cyber Threats 4.

Terrorist Financing - Follow the Money 5. Cryptocurrencies and Digital Assets - estate planning considerations Next year’s STEP Caribbean conference will be hosted in The Bahamas at the Baha Mar Resort.

FROM L: Tanya Murray, ministry of financial services; Indira Munroe-Farrington, BFSB; and Khaliah Brown, ministry of financial services.

SPONSOR Prize Winner: BFSB presents Alma Galeanos from Belize with a hand-crafted Bahamian straw basket with Androsia accents.

THE BAHAMIAN contingent at STEP Caribbean 2018.

THE TRIBUNE

BICA CHIEF WELCOMES FISCAL ‘SEAT AT TABLE’

By NATARIO MCKENZIE Tribune Business Reporter nmckenzie@tribunemedia.net

Tuesday, May 15, 2018, PAGE 3

Bill calls for the creation of relates to the legislation itself an independent Fiscal to ensure that we are being Responsibility Council. The balanced.

Council will consist of five “This is not a stick to wield members to be appointed over the head of government by the Governor-Gen- but, more importantly, to eral on advice from the make sure that barometers Speaker of the House, one are understood and are comof whom “shall have quali- municated in a manner that is fications and experience in understood by the common accounting” and be nomi- person. We look forward nated by BICA. to working arm in arm with The Council will “assess the Government as it relates compliance with the general to its implementation, then principles, fiscal responsi- thereafter looking forward bility principles and fiscal to being a participant in objectives, and advise on holding our government fiscal and budgetary mataccountable.” ters of the Government Mr Bowe said the accountincluding reviewing the ing profession is playing a fiscal strategy report; annual key role in the Government’s budget; mid-year review; pre-election economic and move from cash-based to fiscal update; Government accrual accounting. “We annual accounts; reports on expect the local profession deviations from the fiscal to be a major part of moving responsibility requirements; the Government reporting to and fiscal adjustment plan of that basis because it’s the only the Government in response real basis of understanding your assets and liabilities,” he to deviations.”

Mr Bowe added: “We as a explained.

“The focus locally is always profession certainly look forward to participating in the around the liabilities but, in actual Council that is going reality, do we have a compreto be formed, and participat- hensive understating of the ing in the public debate as it assets of the Government?”

THE Bahamas Institute of Chartered Accountants (BICA) president yesterday welcomed the “seat at the table” to assess the Government’s fiscal responsibility compliance.

Gowon Bowe, pictured, speaking at a press conference to announce the long-awaited release of the Fiscal Responsibility Bill, said: “This is certainly something that is welcomed.

Those elements that relate to the financial reporting; the internal controls and disciplines that will actually be put in place, are going to be music to the ears of my colleagues - certainly in the accounting profession but, more important, to the wider community.

“From a professional standpoint this is about being able to firstly get a seat at the table and get the information, but secondly have the ability to perform an objective and unbiased assessment.”

The Fiscal Responsibility

LAW FIRMS ADDS NEW PARTNER CALLENDERS & Co has named announced environmental and human rights attorney, Martin Lundy II, pictured, as its latest partner.

“Callenders is proud to name Martin Lundy a junior partner,” said Chad Roberts, managing partner at the law firm’s Nassau office. “With the firm’s history dating back more than 100 years, Callenders’ partnerships have symbolised the best in the profession, excellence in work ethic and sterling integrity, all characteristics which Mr Lundy has demonstrated consistently since joining the firm in 2012.”

Mr Lundy came up through the ranks as a pupil under the tutelage of the late Colin Callender QC. He was promoted to associate a year later.

Starting out in commercial law, Mr Lundy’s practice quickly grew to include Bahamas Investment Authority applications; exchange control matters; dispute resolutions; and multijurisdictional trust disputes; including one complex case with interlocutory motions that touched assets and victims in dozens of countries.

Mr Lundy then began to handle human rights and environmental matters, providing a voice to those who sought political asylum or refugee status, but were locked up in detention centres for

years despite international bodies decrying such acts.

“Martin Lundy is a litigant’s litigant.

An integral part of the Callenders hard-working human rights team, and a growing figure in international human rights issues,” said Fred Smith QC, Callenders managing partner. “Martin’s skills and dedication are being recognised beyond our national border.”

In recent years, Mr Lundy has participated in global human rights discussions, contributing to panels in Jamaica, Costa Rice and The Bahamas.

“I am willing to fight for the rights of those who have been wronged, and I am willing to fight to protect the environment,” said Mr Lundy. “There is a mantra in the international human rights arena that environmental rights are human rights. Indeed, they are one and the same.”

Mr Lundy graduated from the University of Sheffield in 2009 with his Bachelor of Law (LLB).

Upon graduation he commenced and completed the Bar Vocational Course at BPP, and was called to the Bar of England and Wales in July 2010 as a member of the Honourable Society of Lincoln’s Inn. Later that year he was called to The Bahamas Bar.

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BICA CHIEF: AVOID ‘STRETCH’ TARGETS ON FISCAL RESPONSIBILITY BILL GOALS FROM PAGE ONE economy and wider society.

And, to achieve the growth necessary to bring the debt-to-GDP ratio into line with the Bill’s target, Mr Bowe said The Bahamas needed to find “a big win” that was more than just one project. He suggested this required proper execution of several key initiatives, including “ease of doing business” reforms and the Over-the-Hill revitalisation.

The Bill, as revealed

by Tribune Business, provides for the creation of a five-member Fiscal Responsibility Council to oversee the Government’s fiscal affairs and “assess its compliance” with its objectives.

The Bahamas Chamber of Commerce; Bahamas Bar Association; University of the Bahamas; BICA; and the Certified Financial Analysts’ Society of the Bahamas will each nominate one Council member apiece, with Mr Bowe yesterday hailing the move as providing the diverse skill sets necessary to properly analyse the Government’s fiscal management.

“This is effectively a SuperPAC, the Public Accounts Committee (PAC), as this is not people being drawn from Parliament but being drawn from greater skill sets in the country,” Mr Bowe told Tribune Business.

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CIVIL AVIATION AUTHORITY OF THE BAHAMAS REQUEST FOR INTERNAL AUDIT SERVICES OVERVIEW The Civil Aviation Authority (CAAB) wishes to engage a suitably qualified company/firm to provide internal audit services. The successful bidder must be able to comply with best practices and standards as promulgated by the Institute of Internal Auditors (IIA).

This would be in addition to assisting the Board and Management in the execution of their responsibilities, through consistent and transparent review of the CAAB’s compliance with regulations, policies and procedures aligned with organizational goals and objectives.

APPLICATIONS & ENQUIRIES An additional Information packet is available for collection at the head office for any and all interested parties. Proposals are to be submitted, in sealed envelopes, addressed to: Director General Civil Aviation Authority of The Bahamas Internal Audit Services JL Centre #26 Blake Road Nassau, Bahamas RE: PROPOSAL FOR INTERNAL AUDIT SERVICES All proposals should be hand delivered to said address no later than 4:00 p.m. on Monday, June 4, 2018 and include four (4) hard copies, and one (1) electronic copy should be submitted in PDF format via e-mail to: proposals@bcaa.gov.bs

PAGE 4, Tuesday, May 15, 2018

THE TRIBUNE

IMF: $240m ‘correction’ needed for fiscal targets

FROM PAGE ONE

The Bill also sets out a “long-term” target of reducing the Government’s direct debt-to-GDP ratio from the current 58 per cent to “no more than 50 per cent”. The year by which this target is to be achieved has to be set out in the Government’s “fiscal strategy report”, which must be submitted to Parliament no later than the third week of

November each year.

“It’s difficult to say at this particular point,” Mr Turnquest replied, when asked to specify when the 50 per cent debt-to-GDP target will be achieved. “But we are planning for a balanced Budget in 2019-2020; 20202021 at the latest, at which point we expect to start the claw back depending on GDP growth.

“This is about putting in the framework that will help us start this process”

of fiscal consolidation. The Bill also permits a “compliance margin” equal to 0.5 per cent of GDP in assessing whether the Government has hit its targets, and “caps” recurrent spending growth at the “estimated” long-run nominal GDP growth rate once “fiscal balance” is achieved.

The Article IV report, unveiled yesterday, shows the Government has followed the IMF’s recommendations “to the letter”,

given that the targets set out in the Bill mirror those suggested by the Fund.

“The fiscal rule should include a permanent ceiling on the fiscal deficit no larger than one per cent of GDP, with annual deficit targets set at 0.5 per cent of GDP to allow space for automatic stabilisers to operate,” the IMF said.

“These targets, binding from fiscal year 2021 on, would allow space to accumulate savings in the proposed natural disasters fund. To further avoid procyclicality, the rule should also cap the growth rate of current expenditure at the estimated long-run growth of nominal GDP; and include exceptional circumstances clauses to be triggered only when confronted with significant negative shocks.”

Such shocks would include major hurricanes, and Tribune Business reported earlier this year on the IMF’s call for The Bahamas to build-up a “disaster relief” fund equivalent to two to four per cent of GDP to mitigate the financial effects of such disasters.

The IMF’s Article IV report called for central government debt to become The Bahamas’ fiscal responsibility “anchor”, which the Bill also incorporates.

“A natural anchor is the central government debt ratio, which helps guide expectations and (if prudently calibrated) ensures the sustainability of public finances,” the IMF said.

“Debt anchors need to be complemented with operational targets, such as deficit and spending ceilings, that guide fiscal policy towards

the medium-term fiscal anchor.”

The long-term 50 per cent debt-to-GDP target was also recommended by the IMF, together with a “deficit ceiling” equal to one per cent of GDP and a recurrent spending “cap” at three per cent. The Fund said the 0.5 per cent annual deficit target, which the Government has also agreed to, will create space to set aside funding for the “disaster relief fund”.

The IMF also yesterday reiterated its call, first made last year, for the Government to gradually reduce the public sector’s size - but only once the private sector was able to pick up the job creation “slack”, and absorb persons released from the civil service.

It recommended “trimming the wage bill through a gradual rationalisation of public sector jobs - as private sector job creation strengthens - and wage restraint”. The Minnis administration’s termination of temporary workers, many of whom were hired just before last year’s general election, once their contracts have ended has already caused political controversy.

The Government, though, is arguing that it has little choice but to bring the civil service’s $733m wage bill under control, and relieve the burden on hard-pressed Bahamian taxpayers from a public sector that has become too big.

The IMF’s Article IV report yesterday said of the Government: “They are taking steps to gradually

trim the wage bill, and have asked state-owned enterprises (SOEs) to prepare plans to become self-sufficient. They also acknowledged the need to reform the pension system.

“The authorities highlighted that the reduction in capital spending is temporary, and in response to their ongoing efforts to identify priorities. In addition, they expect to rely more on Public Private Partnership (PPP) in the future to fund infrastructure investment.”

The Fund’s report also revealed that the Government is mulling whether to treat some food products as “zero-rated” for Value-Added Tax (VAT) purposes, in the belief this will be more effective than increased social security spending to alleviate the tax burden on lower income Bahamians.

This would fulfill a 2017 election campaign promise, but the IMF warned: “The administration has announced fiscal austerity measures and intends to table fiscal responsibility legislation. However, Dr Minnis has also promised introducing a zero-rate VAT for some food items, which would have to be weighed against fiscal sustainability objectives.

“They [the Government] are carefully reviewing the potential impact of a zeroVAT rate on some food items, and noted that this option may be easier to administer than conditional cash transfer programmes, which have been difficult to manage in the past.”

THE TRIBUNE

Tuesday, May 15, 2018, PAGE 5

$3.7bn pension liability creates ‘big time bomb’ FROM PAGE ONE rise to B$3.7bn by 2030 as the population ages.”

The IMF called for reforms that involve “moving to a contributory regime in the near term, and to a defined-contribution scheme in the mediumterm”. This would require civil servants to contribute a portion of their salary to funding their retirement, rather than having this financed 100 per cent by the taxpayer through the Budget - as is done currently.

Mr Myers yesterday described these unfunded pension liabilities as The Bahamas’ “single biggest problem” alongside energy costs, the near-$8bn national debt and $300mplus annual deficits, and accused successive administrations of “ignoring” the looming problem.

“That’s going to be a big time bomb waiting to go off,” the ORG principal told Tribune Business of the civil service pensions. “That’s a big issue that they just keep ignoring. The pension liabilities, outside of debt reduction and deficit reduction, it’s the single biggest problem we have.

“It’ll make the losses incurred by Bahamasair pale in comparison, or any of the others. You could take ZNS and all the others, add them together, and the [pension] liabilities would still be significantly bigger. If you look at those numbers, it’s tantamount to telling you that if you don’t deal with it you’re going to go bankrupt.”

The Government has known of its growing pension crisis for some time, but successive administrations have neglected to take any corrective action, instead preferring to “kick the can down the road”.

Tribune Business possesses a presentation delivered by the KPMG

accounting firm in 2013, the early years of the Christie administration, which provided options for how the Government could arrest a growing liability that threatens to burden future Bahamian generations.

KPMG estimated the unfunded, “pay-as-yougo”, civil service pension liabilities at around $1.5bn.

These liabilities are set to increase to $2.5bn by 2022, and $4.1bn by 2032, unless reforms are enacted.

The IMF, for its part, said in 2016: “Government pensioners (15 per cent of the public work force) receive pension payments from the Budget that, on average, stood at one per cent of GDP and 7.3 per cent of tax revenue per year in 1994 – 2014.

“The accrued pension liabilities [will total] $1.5bn in 2021 (17.9 per cent of GDP). Pension payments and liabilities are projected to reach $230m (1.5 per cent of GDP) and $3.7bn (24 per cent of GDP), respectively, by 2030.”

The payments to civil service pensioners come directly out of the Government’s annual Budget, as no specific scheme has been set aside for them. The 2017-2018 Budget allocates $95m to pension payments, and projects that this sum will be held constant for the

next two fiscal years.

The IMF’s 2018 Article IV report projects a $2.2bn increase in these unfunded liabilities over the 18 years to 2030, which translates into an average increase of $122m per year.

“If that doesn’t wake somebody up they probably shouldn’t be in the job,” Mr Myers said yesterday.

“They’ve got to get that capped. You can’t afford to lose over $100m per year.”

The IMF previously called for civil servants to contribute five per cent of their salaries towards their pensions, with the Government matching this sum, converting the system into the “defined contribution” scheme most commonly used worldwide.

“Pension payments have trended up to an estimated 1.1 per cent of GDP in fiscal year 2017, and population aging will increase them further,” the IMF said last year. “Staff recommended transforming the civil servants’ pension system into a contributory regime in the near term, with contributions commensurate with benefits, and with a view to move to a defined-contribution scheme in the medium term. Setting contributions at five per cent of wages for pensionable employees could yield revenues for 0.3 per cent of GDP.”

accompanying notes as being with related parties. Related parties’ balances are stated at cost,

due to their short-term nature.

THE TRIBUNE

g) Accrued expense – Accrued expenses are stated at cost in the statement of financial position, due to their short-term nature. h) Financial instruments A financial instrument is any contract that gives rise to both a financial asset in one enterprise and a financial liability or equity in another enterprise. Financial assets and financial liabilities are recognized in the Company’s statement of financial position when the Company has become a party to the contractual provisions of the instrument.

Financial assets are derecognized when the Company’s contractual rights to the cash flows from the assets expire, or it transfers the rights to receive the contractual cash flows on the assets in a transaction in which substantially all risks and rewards of ownership of the financial assets are transferred. Financial liabilities are derecognized when their contractual obligations are discharged, cancelled or have expired.

Financial assets recognized in the statement of financial position include fixed deposit and due from related party. In the statement of financial position, financial liabilities consist of accrued expenses.

BCS TRUST SERVICES COMPANY LTD. i) toInterest – Interest income represent bank interest received on fixed deposits and are Notes Financialincome Statements recorded on the accrual basis.

December 31, 2017 j) Expenses – Expenses are recorded on the accrual basis.

(Expressed in United States Dollars) 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES The preparation of financial statements in accordance with IFRS requires the use of certain accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. Estimates and judgments are continually evaluated and are based on historical experience and other 10 factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.

4. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise of the following: Interest Rate Scotiabank (Bahamas) Limited - fixed deposit

0.1718%

2017 $ 500,874

The maximum exposure to credit risk from the fixed deposit is the amount listed above and carried in the statement of financial position.

5. RELATED PARTY The balance with related party is interest free and have no fixed terms of repayment, and consists of the following: 2017 Funds held by related party

$ 104,000

The maximum exposure to credit risk from related party is the amount listed in the above table and carried in the statement of financial position.

6. ACCRUED EXPENSES is COMPANY comprised ofLTD. the following: BCSAccrued TRUST expenses SERVICES Notes to Financial Statements December 31, 2017 (Expressed in United Professional feesStates Dollars)

2017 $

3,000

7. SHARE CAPITAL Authorized and issued share capital is as follows: 2017 Authorized 500,000 Ordinary shares @ US$1.00 each Issued and fully paid 500,000 Ordinary shares @ US$1.00 each

$ 500,000

11 $ 500,000

8. FINANCIAL RISK MANAGEMENT In the course of business, the Company incurs different types of risks. These include credit, liquidity and market risks, (including interest rate risk).

Management has overall responsibility for the establishment and oversight of the Company’s risk management.

8.1. Credit risk The Company takes on exposure to credit risk, which is the risk that the counterparty to a financial instrument, will cause a financial loss for the Company by failing to perform according to the terms of the contract. From this perspective, the Company’s significant exposure to credit risk is primarily concentrated in fixed deposit and amounts receivable from related party Maximum exposure to credit risk The maximum exposure to credit risk in the event that the counterparties fail to perform their obligations to the Company in regards to each class of financial instruments mentioned above, is the carrying value of those assets in the statement of financial position and disclosed in the relevant notes to the financial statements.

8.2. Liquidity risk Liquidity risk is the risk that the Company is unable to meet its payment obligations associated with its financial liabilities, when they fall due.

At December 31, 2017, the Company’s exposure to liquidity risk totaled $3,000.

Market risk BCS8.3.

TRUST SERVICES COMPANY LTD. Notes to Market Financial Statements risk is the risk that there will be a change in the value of financial instruments due to changes in market conditions which includes the Company’s operating environment.

December 31, 2017 (Expressed in United States Dollars) At December 31, 2017, the Company had no significant exposure to market risk.

9. FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market price is used to determine the fair value where an active market exists as it is the best evidence of the fair value of a 12 financial instrument. The values derived from applying these techniques are significantly affected by the underlying assumptions used concerning both the amounts and timing of future cash flows and the discount rates.

The Company has no financial instruments that are carried at fair value.

10. CAPITAL RISK MANAGEMENT The Company’s Regulator, The Central Bank of The Bahamas (the “Regulator”), sets and monitors the capital requirements for the Company.

The Company’s objectives when managing capital, which is a broader concept than the “equity” on the face of the statement of financial position, are: i) ii)

To comply with the capital requirements set by the Regulator; To safeguard the Company’s ability to continue as a going concern, so that it can continue to provide returns to shareholders and benefits for other stakeholders; and iii) To maintain a strong capital base to support the development of its business.

Capital adequacy and the use of regulatory capital are monitored quarterly by the Board of Directors employing techniques based on the guidelines developed by the Regulator. The required information is filed with the Regulator at stipulated intervals.

11. EVENTS AFTER REORTING PERIOD There were no material events of significance impacting the Company since December 31, 2017 and up to April 30, 2018 that require disclosure in the financial statements.

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Tuesday, May 15, 2018, PAGE 7

IMF: 10 YEARS TO HIT LONG-TERM DEBT GOAL FROM PAGE ONE

Pointing out that the Government’s average deficit has more than tripled over the past decade, hitting 3.8 per cent of GDP between 2008-2017, compared to 1.1 per cent over the previous ten years, the IMF said: “The sharp increase in the deficit led central government debt to double in size over the past ten years, growing also more rapidly than the average for its Caribbean peers.

“While the deteriorating fiscal situation was in part the result of weak economic activity, it also followed from rapid increases in spending.

The successful introduction of the VAT in 2015 and revenue administration reforms helped boost tax revenues by 4.4 per cent of GDP between fiscal year 2014 and fiscal year 2017.

“Consequently, total revenue increased by 2.6 per cent of GDP on average over 2008-2017 relative to the period of 1998-2007. However, current spending rose at a more rapid pace, keeping fiscal deficits high.”

While acknowledging that Hurricane Matthew restoration costs had contributed to 2016-2017’s 5.8 per cent fiscal deficit, the IMF again confirmed that “lax spending control in the run-up to the general elections” was also responsible.

“The lack of an effective fiscal framework and anchor allowed rapid increases in spending, and to repeated misses of targets set in the budget,” it added. “The occurrence

of natural disasters over the past decade often led to unplanned increases in spending and borrowing. However, budget deficit targets were often missed even in years when there were no significant budgetary consequences from external shocks.

“Designing and implementing an effective fiscal framework would fill an important gap in The Bahamas’ policy framework. A well-designed fiscal framework should help increase fiscal discipline, transparency and accountability. But political will would remain a critical ingredient in the pursue of fiscal sustainability.”

The draft Fiscal Responsibility Bill, released yesterday, binds the Government to a 50 per cent direct debt-to-GDP ratio as its core long-term objective, as opposed to the current 58 per cent ratio.

The Bill requires that the Government state the year when this will be achieved in its “Fiscal Strategy” report, which must be released to Parliament no later than the third week in November.

With the Bill giving the Government a three-year “transition window” to reduce the annual fiscal deficit to a sum equal to 0.5 per cent of GDP, the IMF said adhering to this ratio from 2021 onwards “would ensure convergence to the debt anchor [of 50 per cent] by fiscal year 2028”.

Rick Lowe, an executive with the Nassau Institute “think tank”, yesterday expressed concern that the targeted debt ratio did not appear to include the Government’s

“contingent liabilities” in this calculation.

The IMF yesterday revealed that, with the inclusion of the promissory notes issued to Bank of The Bahamas by Bahamas Resolve, these liabilities - including debt guaranteed by the Government on behalf of the public corporations - now stood at 14 per cent of GDP. This places The Bahamas’ current total debt-to-GDP ratio at 72 per cent, but Marlon Johnson, the Ministry of Finance’s acting financial secretary, said the Government had been advised to focus solely on direct debt as this was the main drain on its tax revenues.

“Direct government debt is a direct call on your tax revenues,” he told Tribune Business. “I accept the argument that there are contingent liabilities, but the key concern is managing the direct call on the public purse.”

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PAGE 8, Tuesday, May 15, 2018

THE TRIBUNE

Christie Gov’t deficit 1,060% above responsibility target

Trump’s bid to help Chinese firm draws fire but raises hopes

FROM PAGE ONE

A LONG-RUNNING dispute between American regulators and Chinese telecom company ZTE may have handed President Donald Trump some unexpected leverage in avoiding a trade war with Beijing.

Trump’s tweet on Sunday that he was working with President Xi Jinping of China to put ZTE “back into business, fast” after US sanctions threatened ZTE’s existence and 70,000 Chinese jobs caught many trade-watchers by surprise.

“Too many jobs in China lost,” Trump tweeted.

“Commerce Department has been instructed to get it done!”

The overture came just as Vice Premier Liu He is flying to Washington for talks aimed at heading off a mutually harmful battle between the world’s two biggest economies and just before US companies plan to plead during three days of hearings for a resolution to the dispute.

Trade analysts say it is highly unusual for a president to intercede in a case brought by the Commerce Department and to mix regulatory sanctions with trade negotiations. But they also note that Trump’s offer to rescue ZTE, which makes cellphones and other telecommunications equipment, has the potential to clear the way for progress.

“It’s a way to unlock negotiations,” said Wendy

International Monetary Fund (IMF). “If the draft legislation were in place under the former administration, their deficit in the election year would have gone over the limit by 1,060 per cent,” he added.

“By any measure, this demonstrated recklessness and a disregard for fiscal responsibility. Worse than that, the spike in this spending has created obligations on this government and the people of the Bahamas that will remain with the country for years to come.”

The proposed law mandates that the Financial Secretary prepare and publish a pre-election economic and fiscal update 30 days before the election.

Mr Turnquest warned that all of this nation’s fiscal woes cannot be remedied in one year. “Taking all of that into mind, the Budget will reflect our intention and we will see some deliberate adjustments to help us to stop the downward trend,” he added.

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WASHINGTON Associated Press

A WOMAN passes by a ZTE building in Beijing, China. President Donald Trump’s weekend social media musings about China injected new uncertainty into the Washington’s punishment of Chinese tech giant ZTE and planned trade talks between the two countries.

Photo: Ng Han Guan/AP Cutler, a former US trade negotiator specialising in Asia and now vice president at the Asia Society Policy Institute.

The United States has proposed imposing tariffs on up to $150bn in Chinese products to punish Beijing for forcing American companies to hand over technology in exchange for access to the Chinese markets. In retaliation, Beijing is threatening tariffs on $50bn in US products.

“Trump’s tweet creates an atmosphere where there’s

NOTICE

NOTICE is hereby given that DANTÉ CHARLES HANNA, Pine Forest, Eight Mile Rock, Grand Bahama, Bahamas is applying to the Minister responsible for Nationality and Citizenship, for registration/naturalization as a citizen of The Bahamas, and that any person who knows any reason why registration/ naturalization should not be granted, should send a written and signed statement of the facts within twenty-eight days from the 15th day of May, 2018 to the Minister responsible for Nationality and Citizenship, P.O. Box N-7147, Freeport, Bahamas.

more hope for reaching an agreement on trade,” said David Dollar, senior fellow at the Brookings Institution and a former official at the World Bank and the US Treasury Department.

The United States also needs China’s support as it prepares for talks with North Korea that are intended to persuade the Pyongyang regime to abandon nuclear weapons.

Commerce and ZTE last year settled charges that the Chinese company sold sensitive telecommunications

NOTICE

NOTICE is hereby given that HONEL JEAN of Central Pines, Abaco, The Bahamas is applying to the Minister responsible for Nationality and Citizenship, for registration/naturalization as a citizen of The Bahamas, and that any person who knows any reason why registration/naturalization should not be granted, should send a written and signed statement of the facts within twenty-eight days from the 15th day of May, 2018 to the Minister responsible for nationality and Citizenship, P.O. Box N-7147, Nassau, Bahamas.

MARKET REPORT MONDAY, 14 MAY 2018

t. 242.323.2330 | f. 242.323.2320 | www.bisxbahamas.com

BISX ALL SHARE INDEX: CLOSE 1,935.22 | CHG -4.07 | %CHG -0.21 | YTD -128.35 | YTD% -6.22 BISX LISTED & TRADED SECURITIES 52WK HI 4.40 19.17 7.50 3.76 1.64 0.19 4.50 8.90 6.60 5.30 11.50 2.71 1.60 8.21 6.10 11.48 7.29 13.67 12.51

52WK LOW 3.50 17.43 7.50 3.32 0.90 0.12 3.30 8.40 6.00 3.15 9.00 2.30 1.40 7.25 6.00 8.78 5.67 3.35 12.01

1050.00 1000.00 1000.00 1000.00

1000.00 1000.00 1000.00 1000.00

PREFERENCE SHARES

1.00 103.00 100.00 106.00 105.00 103.00 100.00 10.00 1.01

1.00 100.00 100.00 100.00 105.00 100.00 100.00 10.00 1.00

SECURITY AML Foods Limited APD Limited Bahamas Property Fund Bahamas Waste Bank of Bahamas Benchmark Cable Bahamas CIBC FirstCaribbean Bank Colina Holdings Commonwealth Bank Commonwealth Brewery Consolidated Water BDRs Doctor's Hospital Emera Incorporated Famguard Fidelity Bank Finco Focol J. S. Johnson

Cable Bahamas Series 6 Cable Bahamas Series 8 Cable Bahamas Series 9 Cable Bahamas Series 10 Colina Holdings Class A Commonwealth Bank Class E Commonwealth Bank Class J Commonwealth Bank Class K Commonwealth Bank Class L Commonwealth Bank Class M Commonwealth Bank Class N Fidelity Bank Class A Focol Class B

CORPORATE DEBT - (percentage pricing) 52WK HI 100.00 100.00

52WK LOW 100.00 100.00

SYMBOL AML APD BPF BWL BOB BBL CAB CIB CHL CBL CBB CWCB DHS EMAB FAM FBB FIN FCL JSJ CAB6 CAB8 CAB9 CAB10 CHLA CBLE CBLJ CBLK CBLL CBLM CBLN FBBA FCLB

SECURITY Fidelity Bank Note 18 (Series E) + Fidelity Bank Note 22 (Series B) +

SYMBOL FBB18 FBB22

Bahamas Note 6.95 (2029) BGS: 2015-1-3Y BGS: 2014-12-5Y BGS: 2015-1-5Y BGS: 2014-12-7Y BGS: 2015-1-7Y BGS: 2014-12-30Y BGS: 2015-1-30Y BGS: 2015-6-3Y BGS: 2015-6-5Y BGS: 2015-6-7Y BGS: 2015-6-30Y BGS: 2015-10-3Y BGS: 2015-10-5Y BGS: 2015-10-7Y

BAH29 BG0203 BG0105 BG0205 BG0107 BG0207 BG0130 BG0230 BG0303 BG0305 BG0307 BG0330 BG0403 BG0405 BG0407

BAHAMAS GOVERNMENT STOCK - (percentage pricing) 115.92 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

104.79 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

MUTUAL FUNDS 52WK HI 2.13 4.14 1.99 178.69 153.40 1.55 1.70 1.62 1.10 6.99 8.54 6.15 10.52 11.46 10.46

52WK LOW 1.67 3.04 1.68 164.74 116.70 1.48 1.62 1.57 1.04 6.41 7.62 5.66 8.65 10.54 9.57

LAST CLOSE 4.40 17.43 9.09 3.35 1.00 0.18 3.35 8.89 6.10 3.85 10.05 2.78 1.60 7.69 6.10 10.44 6.43 4.20 12.51

CLOSE 4.40 17.43 9.09 3.35 1.00 0.18 3.35 8.89 6.10 3.82 10.05 2.61 1.60 7.68 6.10 10.44 6.43 4.20 12.51

CHANGE 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.03 0.00 -0.17 0.00 -0.01 0.00 0.00 0.00 0.00 0.00

1000.00 1000.00 1000.00 1000.00 1.00 100.00 100.00 100.40 100.00 100.00 100.00 10.00 1.00

1000.00 1000.00 1000.00 1000.00 1.00 100.00 100.00 100.40 100.00 100.00 100.00 10.00 1.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

CLOSE 100.00 100.00

CHANGE 0.00 0.00

109.49 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

LAST SALE 100.00 100.00 109.49 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

FUND CFAL Bond Fund CFAL Balanced Fund CFAL Money Market Fund CFAL Global Bond Fund CFAL Global Equity Fund FG Financial Preferred Income Fund FG Financial Growth Fund FG Financial Diversified Fund FG Financial Global USD Bond Fund Royal Fidelity Bahamas Opportunities Fund - Secured Balanced Fund Royal Fidelity Bahamas Opportunities Fund - Targeted Equity Fund Royal Fidelity Bahamas Opportunities Fund - Prime Income Fund Royal Fidelity Int'l Fund - Equities Sub Fund Royal Fidelity Int'l Fund - High Yield Fund Royal Fidelity Int'l Fund - Alternative Strategies Fund

VOLUME

300 1,770

200

100

VOLUME

EPS$ 0.361 0.932 -0.306 0.281 -1.133 0.000 -1.465 0.638 0.573 0.171 0.631 0.102 0.330 0.000 1.129 0.679 0.610 0.293 0.543

DIV$ 0.080 1.130 0.000 0.230 0.000 0.000 0.000 0.320 0.220 0.120 0.620 0.060 0.050 0.084 0.320 0.500 0.200 0.120 0.580

P/E 12.2 18.7 N/M 11.9 N/M N/M -2.3 13.9 10.6 22.3 15.9 25.6 4.8 N/M 5.4 15.4 10.5 14.3 23.0

YIELD 1.82% 6.48% 0.00% 6.87% 0.00% 0.00% 0.00% 3.60% 3.61% 3.14% 6.17% 2.30% 3.13% 1.09% 5.25% 4.79% 3.11% 2.86% 4.64%

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.00% 0.00% 0.00% 0.00% 6.25% 6.25% 6.25% 6.25% 6.25% 6.25% 6.25% 7.00% 6.50%

INTEREST 6.00% Prime + 1.75% 6.95% 4.00% 4.25% 4.25% 4.50% 4.50% 6.25% 6.25% 4.00% 4.25% 4.50% 6.25% 3.50% 3.88% 4.25%

NAV 2.14 4.13 2.00 179.39 135.02 1.55 1.68 1.63 1.09 7.15 8.14 6.41 11.26 11.68 10.24

YTD% 12 MTH% 0.31% 4.30% 0.16% 5.93% 0.17% 2.36% 4.66% 3.89% 5.58% 6.65% 1.04% 4.26% -1.06% 2.15% 0.58% 3.61% -0.48% 4.84% -1.08% 1.77% -5.96% -3.05% 1.90% 4.59% 7.24% 11.96% 2.77% 3.88% 3.94% 4.69%

MATURITY 31-May-2018 19-Oct-2022 20-Nov-2029 30-Jul-2018 16-Dec-2019 30-Jul-2020 15-Dec-2021 30-Jul-2022 15-Dec-2044 30-Jul-2045 26-Jun-2018 26-Jun-2020 26-Jun-2022 26-Jun-2045 15-Oct-2018 15-Oct-2020 15-Oct-2022 NAV Date 31-Mar-2018 31-Mar-2018 30-Mar-2018 31-Mar-2018 31-Mar-2018 31-Mar-2018 31-Mar-2018 31-Mar-2018 31-Mar-2018 30-Apr-2018 30-Apr-2018 30-Apr-2018 30-Apr-2018 30-Apr-2018 30-Apr-2018

MARKET TERMS BISX ALL SHARE INDEX - 19 Dec 02 = 1,000.00 52wk-Hi - Highest closing price in last 52 weeks 52wk-Low - Lowest closing price in last 52 weeks Previous Close - Previous day's weighted price for daily volume Today's Close - Current day's weighted price for daily volume Change - Change in closing price from day to day Daily Vol. - Number of total shares traded today DIV $ - Dividends per share paid in the last 12 months P/E - Closing price divided by the last 12 month earnings

YIELD - last 12 month dividends divided by closing price Bid $ - Buying price of Colina and Fidelity Ask $ - Selling price of Colina and fidelity Last Price - Last traded over-the-counter price Weekly Vol. - Trading volume of the prior week EPS $ - A company's reported earnings per share for the last 12 mths NAV - Net Asset Value N/M - Not Meaningful

TO TRADE CALL: CFAL 242-502-7010 | ROYALFIDELITY 242-356-7764 | FG CAPITAL MARKETS 242-396-4000 | COLONIAL 242-502-7525 | LENO 242-396-3225

equipment to Iran and North Korea in violation of US sanctions. ZTE agreed to plead guilty and pay about $1bn in fines.

Last month, Commerce accused ZTE of violating the agreement and blocked ZTE from importing American components for seven years. The department said ZTE had misled regulators: Instead of disciplining all employees involved in the sanctions violations, Commerce said, ZTE paid some of them full bonuses and then lied about it.

The seven-year ban was tantamount to a death sentence for ZTE. “It was basically going to put them out of business,” Dollar said. “They rely on American technology.”

Last week, the company announced that it was halting operations.

Early this month, a high-level US delegation — including treasury secretary Steven Mnuchin, commerce secretary Wilbur Ross, top American trade negotiator Robert Lighthizer and White House adviser Peter Navarro — traveled to Beijing to address the trade dispute. There, they heard an outcry about US regulators putting ZTE out of business.

“They were a little bit blindsided,” said Paul Triolo, a technology specialist at the Eurasia Group consultancy. “The Chinese

reaction was pretty vociferous. ... The US government shooting down the No two telecommunications supplier in China at this sensitive time — it didn’t look good.”

Now, analysts see the outlines of a potential deal: In return for Trump’s lifeline to ZTE, Beijing might agree to buy more US products or take other steps to shrink America’s gaping trade deficit with China — $337bn last year.

The Wall Street Journal reported yesterday that the two countries were in talks about such a potential swap: The US would spare ZTE, and Beijing would drop plans to impose tariffs on US farm products. Neither the White House nor the Commerce Department would comment.

The ZTE case also drives home how entwined the US and Chinese economies are.

The Commerce sanctions didn’t just imperil ZTE; they also hurt the American companies that sell components to the Chinese company.

And so investors breathed a sigh of relief after Trump’s tweet, buying stock yesterday in Maynard, Massachusetts-based optical components maker Acacia Communications, which last year collected 30 percent of its revenue from ZTE; San Jose-based optical communications company Oclaro; and Sunnyvale, Californiabased fiber optic cable manufacturer Finisar.

Still, critics charged that Trump shouldn’t have intervened in the legal case against ZTE. “This would be a truly awful deal for the US,” Derek Scissors, a China specialist at the conservative American Enterprise Institute, wrote in a blog post. “If the accusations last year and last month are accurate, ZTE violated Iran sanctions, then further attempted to deceive the US government.”

Xi “would be using barriers against American agriculture to blackmail the Trump administration into accepting ZTE’s behavior”, Scissors said.

Trump has thrust trade policy to the center of his agenda. In addition to sparring with China, his team is in talks to rewrite the North America Free Trade Agreement with Mexico and Canada.