FRIDAY, JULY 15, 2016
business@tribunemedia.net
IMF: Deficit will be $100m above forecast By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net
Tells Govt: ‘You’re too optimistic’ on fiscal figures
THE International Monetary Fund (IMF) has warned the Government that its fiscal consolidation projections are “too optimistic”, and that the deficit for the just-closed 2015-2016 year will be around $100 million higher than forecast. The Fund, in its full Article IV report on the Bahamas that was released this week, warned that “weaker than expected” economic growth meant the Christie administration was likely to achieve its fiscal objectives at “a more gradual pace” than it is forecasting. In particular, it suggested that the GFS fiscal deficit for 20152016 will be some 1.3 percentage points of GDP higher than Prime Minister Perry Christie
Says debt yet to peak, countering PM’s projection
IMF urges Govt: ‘Stand firm’ against such proposals
But debt profile ‘low to moderate on heat map’
FNM chief’s idea would lose 10% of VAT monies
forecast in his recent Budget address. Mr Christie expressed confidence that the deficit for the fiscal year that ended on June 30, 2016, would come in at $150 million or 1.7 per cent of GDP, slightly higher than the original $141 million projection. However, given that 1 per cent of Bahamian GDP is roughly equivalent to $80 million, the IMF’s 3 per cent deficit forecast suggests the 2015-2016 GFS def-
icit will come in around $240$250 million. “Authorities expect that strong VAT collection, together with reforms to enhance revenue administration raising additional revenue of up to 2.5 per cent of GDP, will contribute to significant consolidation in the near-term,” the IMF’s Article IV report said. “However, with weaker than expected growth weighing on See PG B4
Govt’s $2.2bn pension liabilities represent ‘major’ fiscal risk By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net
IMF warns public sector, NIB reforms ‘inevitable’
THE Government’s unfunded $2.2 billion pension liabilities are “a significant fiscal risk” that could undermine efforts to get the public finances back on a sustainable footing, the International Monetary Fund (IMF) is warning. The Fund, in its just-released full Article IV report on the Bahamas, said it was “inevitable” that the Government would have to reform both public sector pensions and the National Insurance Board (NIB) to defuse a potential social timebomb. It warned that unless corrective action was taken, both schemes would become an unsustainable burden on the Bahamian taxpayer and society, with ageing populations and a reduced workforce exacerbating the problem. “Fiscal risks emanating from public entities and the public pension system are significant, and could further exacerbate the debt path if they materialise,” the IMF warned of the potential impact on the Government’s fiscal consolidation efforts.
Says NIB’s ‘implicit debt’ at 49% of GDP Public corporations subsidies total $117m “The unfunded pension liabilities of the public pension system, amounts to around $2.2 billion (about 26.2 percent of GDP), and in addition to the implicit debt of the social security system [NIB], estimated at about 50 per cent of GDP in 2015, are projected to grow further in the next decades due to population aging.” Neither issue is new, and successive governments have been warned repeatedly by Bahamian financial services professionals of the devastating consequences if nothing is done, However, both PLP and FNM administrations have, to-date, both preferred to ‘kick the can down the See PG B5
Bar to ‘determine once and for all’ liberalise stance By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE Bar Association will “determine once and for all” its position on the free mo vement o f labo ur, its president pledged yesterday, after a gro up o f attorneys bro ught legal ‘liberalisation’ to the fore again. Elsworth Jo hnson ackno wledged that the pro fession was split on whether to allo w specialist foreign attorneys and law firms to practice in the Bahamas, in a bid to attract more financial services business to this nation. While no t directly expressing his opinion, Mr Jo hnson indicated he was against such an opening up, telling Tribune Business that “something has to be fundamentally wrong and flawed with the system o f legal education in the Bahamas” if this nation was unable to pro duce eno ugh attorneys to meet the demands o f its ‘second economic pillar’. Suggesting that such ‘liberalisation’ co uld also undermine Bahamian o wnership in the legal pro fession, the Bar president said he had told go vernment ministers that the issue was one for them to decide via Immigration law and policy. Mr Jo hnson was speaking after a gro up o f Bahamian attorneys, specialising in financial services-related legal work, recently raised the issue o f legal pro fession ‘liberalisation’ again. The Financial Services
Minnis’ VAT exemption plan to cost Govt $60m
Financial services attorneys raise issue again Approach Council to survey all members Gro up, which is a Bar Association committee, wro te to the Bar Co uncil on June 20, 2016, proposing a survey be conducted o f all member attorneys to determine their views on whether the sector sho uld be opened to ‘ free mo vement’ o f specialist foreign attorneys. See PG B5
$4.05 $4.06 $4.06
$4.06
Govt has ‘substantial room’ to raise more revenue By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net
PERRY Christie’s projections have now been challenged by the IMF.
Bahamian economy performing $200m below potential By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE Bahamian economy is performing $200 million below potential, the IMF has warned, and is not expected to close this gap until 2019 at earliest. The Fund, in its just-released full Article IV consultation report on the Bahamas, also warned that this nation’s economic competitiveness was “is weaker than suggested by fundamentals and desirable policy settings”. In particular, it said that all measurements and economic models showed the Bahamas faced “lower potential growth and a still sizeable output gap” for at least the next three years. The IMF said the Bahamas’ ‘output gap’, which measures how far short its current economic performance is short of its true potential, was equiva-
IMF: Output gap won’t be closed until 2019 Capital, labour impacts falling since 2000 Potential growth fall earlier, larger than Caribbean lent to 2.5 per cent of gross domestic product (GDP). Given that Bahamian GDP is around $8 billion in total, this implies that the country is some $200 million short of fulfilling its true economic potential. “Potential growth has declined significantly over the See PG B6
THE International Monetary Fund (IMF) has again shredded plans by Opposition leader, Dr Hubert Minnis, to introduce numerous Value-Added Tax (VAT) exemptions if elected to office, warning these could cost the Government some $60 million in revenues. The Fund, in its full 2016 Article IV report on the Bahamas, which was released quietly earlier this DR HUBERT week, warned that MINNIS Dr Minnis’s proposals would undermine the integrity of the broad-based VAT model and its “efficiency”. “Staff called for standing firm against pressures to weaken the VAT’s efficiency through introducing exemptions to items such as food, medical and insurance services, which could amount to an estimated three-quarter per cent of GDP in revenue losses,” the Article IV report said. “Social concerns should instead be addressed by targeted adjustments to the safety net.” This amounts to a comprehensive rejection of Dr Minnis’s proposal, repeated again as he launched his bid to retain leadership of the Free National Movement (FNM), to introduce a wave of VAT ‘exemptions’ if elected to office. Given that Bahamian gross domestic product (GDP) is estimated to be around $8 billion, the revenue lost from Dr Minnis’s plan would be around $60 million - a sum around 10 per cent of the Government’s annual VAT revenue. See PG B4