The outlook for the Bahamian economy is "stretched" and reminiscent of an "election budget", according to a retired banker.
Al Jarrett, who has also served as the chairman of the Bahamas Electricity Corporation (BEC), said any gross domestic product (GDP) growth this year will be negligible based on high inflation, plummeting foreign reserves and a national debt spiraling out of control.
The assertion stands in contrast to projections made by Zhivargo Laing, the state minister of finance, who told Guardian Business at the 21st annual Bahamas Business Outlook that the Bahamian economy will grow 2.5 to 2.8 percent this year.
"We further expect to sustain our growth trajectory with 2.4 percent in 2013 and 2.3 percent in 2014, barring no unforeseen circumstances," Laing said.
According to Jarrett, the government has already contracted more than $330 million in new debt since it was pegged at $3.7 billion in September 2011.
The new debt, announced in November and December, relates to the road works, the Princess Margaret Hospital, and water and sewerage, among others.
"This will increase the total direct debt in the first quarter of 2012 (representing the third quarter of the current budget) to over $4 billion when these debts will be drawn down," Jarrett argued. "The government's budgeted debt is $3.77 billion for the entire fiscal year ending June 30, 2012. This would suggest that they are running $220 million in excess of this target. When you combine the $220 million excess debt with the deficit of $480 million, you are looking at an increase in borrowings of $700 million over the current budget for 2012, taking the total direct debt to $4.5 billion."
Combined with government guarantees of $500 million, the retired banker claims this would create a national debt of $5 billion between June and July 2012.
In response, Laing told Guardian Business that numbers such as $5 billion in debt is "speculative". "While the government knows there are additional expenditures on the table, it does not mean they must be taken on during this fiscal year. We said the government "cannot borrow a single dime" without coming to Parliament.
The state minister of finance upheld his projections on GDP growth.
Jarrett also felt the prime minister had made a "fatal mistake" by underestimating the price of oil and the inflation rate.
"He made a further mistake in assuming unrealistic inflation rates of 2 percent in 2011 and 1.4 percent in 2012. Instead of being a statesman, he chose to produce an election budget, which he knew would put the country's fiscal status in further jeopardy and create greater hardship for the Bahamian people and a possible further downgrade," Jarrett said.
Meanwhile, the retired banker next pointed to the latest statistics on the country's foreign reserves position.
As of Jan 2012, foreign reserves sit at $880 million, according to the Central Bank. In April 2011, it hit a high of 1.140 billion, but has continued to drop.
"This is a piece of bad news each consumer should know," Jarrett said.
Laing felt there are a number of things that can influence GDP growth, but foreign reserves are not one of them. He said the government does not have any major concerns that threaten GDP projections, other than oil prices, which could "temper growth".
The retired banker went on to describe the prospects for the retail business sector and the financial services sector as "gloomy". Tourism stopovers, especially air arrivals, took a hit in 2011, although thus far, according to leading hoteliers, 2012 has seen some positive numbers.
In sum, Jarrett said the GDP growth projections are entirely unrealistic for The Bahamas.
Laing, during his speech earlier this year at the Outlook, defended his position by highlighting the rise of more construction activity in the private sector, such as Baha Mar and Albany, adding that "there needs to be continuing robust public sector investment".
Unemployment, he added, will likely remain in the double digits.
He called the government's approach to dealing with the economy the most dramatic and comprehensive in recent times.
"In the process of supporting the economy and our people, we could take a long range view that would mean laying the foundation for a more resilient, robust and dynamic economy and society in the years to come, by strategically spending the necessary significant borrowing we would have to do," Laing said.

Click here to read more at The Nassau Guardian