Globalization has basically removed boundaries that separate nations creating a global village in which countries are effectively connected to one another. While the increased interdependency and interconnectedness of countries has fostered better relations and unity in the world, it has also created vulnerabilities of significant proportions.
At the center of the movement towards more integration of our economies and systems are international agencies such as the World Trade Organization (WTO), the World Bank (WB) and International Monetary Fund (IMF). These agencies play pivotal roles in shaping the economies and financial systems of countries around the world. The relevance and prominence of these entities have been further enhanced in the aftermath of the recent Great Recession - the most significant financial crisis since the Great Depression. In addition to the aforesaid international bodies, regional bodies with similar mandates have emerged and international rating agencies have assumed a prominent role in determining the fortunes of countries. In this piece, we take a brief look at the pronunciations made on The Bahamas in recent times by these bodies and whether there is consistency in the positions taken.
International Monetary Fund
The IMF had expressed concerns with The Bahamas' debt-to-GDP ratio and level of growth of the same. This was in the aftermath of the agency's conclusion that we had weathered the financial crisis better than our regional peers. It was further noted that this country's economic growth rate has a direct correlation with the recovery of the United States.
The government was encouraged by the IMF to implement a combination of spending and revenue reforms in order to get its fiscal house in order. Additional recommendations also entail debt management, review of the subsidy program and going beyond the implementation of VAT to the introduction of corporate income tax as well. This was following comments that The Bahamas has to double economic growth over the next five years in order to reduce the unemployment rate by 50 percent.
Moody's
Moody's had highlighted the fact that The Bahamas was faring much better than its regional counterparts with specific reference to the slight growth and the attraction of investments to our shores. Following the release of the government's 2013/14 budget, an analyst from Moody's was quoted as saying that the budget "hit a lot of the right notes" and should ensure that the country's debt is brought under control.
In essence, Moody's commended the government's effort to control The Bahamas' public finances and address the fiscal crisis confronting our nation. Noting that the government's agenda and time frame to correct the structural deficit is ambitious, Moody's acknowledged the effort to enhance revenue and prevent further worsening of the country's financial position.
In a subsequent report, the rating agency noted the importance of an overall fiscal strategy which includes prudence by the government on the expenditure side. In the same token, Moody's acknowledged the difficulty associated with drastic reduction in public spending due to the impact on employment and social welfare programs. Moody's, while recognizing the importance of broadening our revenue base, also outlined the challenges associated with the implementation of value-added tax (VAT) in The Bahamas.
Standard & Poor's
Over one year ago, S&P raised its short-term foreign currency rating on The Bahamas from A-3 to A-2 due to a change in criteria, but was quick to state that the change was not a reflection of our short-term creditworthiness. The Bahamas' BBB long-term issuer rating was confirmed at that time as well with the cautionary note that our rating may come under pressure if this nation's fiscal deterioration persists and the economic base erodes more severely.
S&P opined that the ratings could be raised if the government takes a more proactive policy response to reduce debt or if economic prospects strengthen to improve the country's external balance sheet. More recently, S&P suggested that The Bahamas' credit rating may be downgraded within the next nine months if the government does not follow through on VAT implementation or an alternative reform of its revenue structure in the 2014/15 budget. This assertion was further reiterated in stronger terms with the statement that The Bahamas rating may be downgraded to the "junk" territory if important reforms are not undertaken by the government. S&P avoided endorsing VAT exclusively as the panacea for our fiscal issues but it was clear that the rating agency expects a significant overhaul of our tax system if The Bahamas is to maintain its rating.
New revelations?
The limitation imposed by space does not permit an in-depth analysis of the various utterances made in relation to The Bahamas and the Bahamian economy by the various international agencies and international rating agencies in the aftermath of the global financial crisis. However, a quick look at the synopsis above will show that the themes are similar.
The fundamental question is whether we are being apprised of any new information which we were unaware of until the proclamations. While the comments made by these agencies highlight the urgency of rectifying the financial situation we find ourselves in as a people, they cannot be classified as revelations and/or recommendations that should drastically change the strategies that have been proposed by Bahamian economists, financial experts and commentators over the years. More importantly, they are generally not at odds with the proposals put forward by our policymakers. The fiscal consolidation plan, control of government expenditure, review of benefits received from subsidies and concessions, tax reform and revenue enhancement measures proposed by the government mirror for the most part the recommendations summarized above.
Moving forward
We welcome the thoughts, recommendations and assistance of international experts aimed at helping us build a better country. It is important, however, that the comments do not send mixed signals or create unnecessary anxiety. Additionally, international agencies should continuously acknowledge the prudent efforts of governments and corrective actions being implemented. More focus should be placed on constructive dialogue over the proliferation of hysteria in the local and international press.
The discourse on the role of international rating agencies and the part they played in the lead-up to the recent financial crisis has been blamed on the more rigorous and proactive approach they now take with respect to the assignment of ratings. However, international rating agencies must also be mindful of the level of reliance that investors and lenders place on their reports
and findings. In this vein, the principle of proportionality must be applied. A review of the efforts being undertaken by the government will show that their recommendations have been considered and the feasible ones are being implemented.
Moreover, The Bahamas must seek to develop its own body of economic advisors, researchers, academics and commentators who are more in tune with the local and regional landscape, whose findings would either support or rebut in part or whole the writings of the various international bodies. The formal or informal development and emergence of this group of individuals/professionals will bode well for economic and political development in The Bahamas rather than relying solely upon all economic challenges being solved by the various arms of government.
In the final analysis, the government is accountable to the people and must implement policies that are in their best interest. Political leaders are servants of the people and serve at their pleasure; consequently, they must face consequences of the decisions they make on their behalf.

o Arinthia S. Komolafe is an attorney-at-law. Comments on this article can be directed to a.s.komolafe510@gmail.com.

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