The IMF warns in the Aide-Memoire quoted by Prime Minister Perry Christie in his recent budget communication to parliament that “care will be needed to contain fiscal pressures from infrastructure spending or tax concessions” related to the I-Group and Ginn projects.
These “fiscal pressures,” the IMF says, “could result in higher direct, guaranteed or contingent debt.”
According to Opposition Senate Leader Tommy Turnquest, the government is not telling the Bahamian people everything of value said in the IMF Aide-Memoire, but is instead “blowing smoke about the positives and ignoring the negatives” included in that document.
Mr. Turnquest on Monday ripped into the government over the way only some portions of the Memoire have not been spoken about. He stated his intention to “hold them accountable for the entire document, not just the few lines that they want the public to hear.”
Mr. Turnquest gave an example, noting that while the IMF stated that the government appeared likely to meet the GFS deficit goal, the international body added that the stronger revenue would be offset by an increase in the wage bill resulting from public sector wage settlements, transfers to finance hurricane relief, airport reconstruction and losses of public companies.
“The IMF was also not complimentary to the government on their fiscal policies,” he claimed. “From a review of the memoire, it clearly states that the PLP government’s stated policy objectives and their actual performance are totally different.”
Quoting from the memoire again, Mr. Turnquest said “the mission estimates that new fiscal measures yielding about one half percent of GDP will be needed (to reduce the deficit below 2 percent of GDP), which could include a number of policy steps that are already under consideration.”
Among those steps the IMF says are “under consideration:” a reduction in customs duty exemptions, hikes in business licenses for offshore firms, higher excise taxes for tobacco and liquor and increasing the ceiling for property taxes.
“A well-articulated action plan to introduce these measures would be very useful,” Mr. Turnquest, quoted the memoire as saying.
The IMF stated that the economy continued to recover in 2005. In addition, however, IMF reported, among other things, that “construction-related imports and an additional increase in the oil import bill are projected to lead to a further widening of the external current account deficit in 2006.”
Also in the IMF memoire is an encouragement for the government to “assess the possibility of efficiency gains in the management of public enterprises and the fiscal implications of its strategy to provide tax concessions and growth incentives.”
“Bahamasair and the Water and Sewerage Corporation incur losses to a large extent covered by the government. Further efforts to reduce costs and adopt sound commercial practices in these enterprises would provide room for well-targeted subsidies,” the memoire reads.
While cautioning care regarding the fiscal management of the I-Group and Ginn developments, among other things, the IMF “welcomed” plans to encourage infrastructure and resort development while minimizing public expenditure.
“The IMF has also urged caution with the proposed national health insurance scheme,” Mr. Turnquest noted. “The IMF did say some good things, but they were also very critical of the government’s fiscal policies.”
By: Quincy Parker, The Bahama Journal
