July 30, 2016
According to news reports, The Bahamas has been put on notice that its sovereign debt is likely to be downgraded probably to junk bond status very soon. This has caused some concern in the government because if that were to occur most of our current lenders would no longer be willing to do business with us, or would only lend us money at very high interest rates, which would put a severe strain on our country's financial resources.
Additionally, most foreign investors would no longer be willing to invest in our country, which to a very large extent is still dependent on foreign investment.
In short, this kind of occurrence puts a country on a downward path to financial ruin. We see examples of this in Jamaica, Barbados and Greece. The governments of all of these countries placed them on the very same path that our governments have put us on by doing the very same thing that they did: consistently spending more than they received in taxes and borrowing the difference.
It is such a stupid thing to do that I will not spend any time analyzing the mentality of people who will do this to their own country. Suffice it to say, this is what has been going on ever since black majority rule in 1967. However, in the last 10 years our national debt has grown more than in all of the previous years combined. Prior to the introduction of VAT, the Christie administration told us that all VAT receipts would go towards paying off the national debt.
I was encouraged somewhat by this until we learned in January 2016 or thereabout that all VAT monies were being diverted into the consolidated fund. That is the bottomless pit of government revenue. The full effect of that decision is that instead of VAT reducing the national debt, all it did was give the government more money to spend. And so the spending and borrowing continued apace, resulting in the proverbial knocking on the door by Moody's and Standard and Poors.
In response to the bad news, the government held meetings with the aforementioned international credit-ratings agencies last week in an attempt to persuade them that the state of our country's finances are not as bad as they think it is. In other words, the government attempted to "flam" them just as it attempts to and often succeeds in flaming the Bahamian people. While our country stands weighed in the balance, Moody's and Standard and Poors are now deliberating, so to speak, and will soon announce their decision.
I believe that The Bahamas is going to be downgraded. I believe this because I know that the technocrats who perform national assessments at Standard and Poors and Moody's are professionals who conduct thorough, objective analysis before making any pronouncements concerning their findings or intentions.
They have been doing this kind of work for decades and they know what they are doing.
They have members on staff whose job it is to very closely monitor The Bahamas with regard to its finances.
So, the reasons why I believe the government will fail in its attempt to dissuade Standard and Poors and Moody's from their intended action is because I'm certain their staff monitors are aware of the following:
1. That over the past two years the government wasted an accumulated $20 million on an ill-advised street festival (carnival) with nothing to show for it in terms of revenue.
2. That the construction of the building on JFK drive, which houses the Attorney General's Office was originally to cost $5 million but ended up costing more than $20 million.
3. That the government suffered a $2.5 million loss when a building at BAMSI, North Andros was destroyed by fire because the PLP connected contractor there failed to purchase the necessary contractor risks insurance policy, and the government was negligent in ensuring that he did so.
4. That the government proposes to re-construct a new and improved version of the same building now at cost of $5 million.
5. That the government continues to pour down the drain scores of millions of dollars on loss-making entities like the Water & Sewerage Corporation and ZNS, both of which should have been sold off to the private sector years ago.
6. Ditto for Bahamasair, but much worse. The government very recently borrowed $100 million to purchase new airplanes for this airline, which has never ever made a profit; but to the contrary, has accumulated losses totaling more than half a billion dollars since its inception, and the government has had to cover all of those losses.
The public service consume around 70 percent of all government revenue, mainly because both governments have used it as an employment agency for political reasons; consequently, we are now borrowing to pay salaries.
8. That a few years ago as our debt-to-GDP ratio edged continuously closer to the internationally recognized danger point of 70 percent, rather than rein in its profligate spending, our government boasted that creditors were still willing to lend us money.
9. That as our debt-to-GDP exceeded 70 percent our government simply went silent on the pending catastrophe that could result from it.
10. That over the last two years when the government knew that our economy was in recession it failed to inform the Bahamian people; but worse, presented budgets with projected revenues based on an expanding economy.
11. That in spite of all of the above, our government continues to spend millions of dollars flying large delegations around the world to this or that meeting or conference.
12. That in spite of all of the above, our government has steadfastly refused to commit itself to a fiscal responsibility act or any specific program with measurable, objective guidelines aimed at balancing the budget.
Because of these and perhaps more factors, which I'm certain are privy to Standard and Poors and Moody's, I'm relatively certain that notwithstanding the great eloquence of our minister of finance, our country's sovereign debt will be downgraded with all of the attendant misery it will bring to Bahamians.
It seems that we're in for a rough ride indeed. The future does not look bright. Perhaps this is the net result when a country has imposed on it for years without end finance ministers who are attorneys-at-law rather than accountants, economists or successful business persons. This country desperately needs change.
- Roosevelt "Welly" Forbes
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