By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government must summon “the courage to change the status quo” when it comes to efficient cash flow management, a leading private sector executive yesterday warning this was especially “crucial” given the Bahamas’ $5.8 billion national debt.

Gowon Bowe, the Coalition for Responsible Taxation’s chairman, told Tribune Business that the Government had to avoid “haphazard” borrowing, and use of more expensive overdraft and other short-term facilities, to fill gaps between its revenue and spending.

Reacting to yesterday’s Tribune Business revelations that potentially $136 million, or 10 per cent, of the Government’s annual borrowing would be “unnecessary” if there was better matching of cash flows to spending commitments, Mr Bowe said it emphasised the need for a proper debt management structure.

The PricewaterhouseCoopers (PwC) accountant and partner said the findings, detailed in an Inter-American Development Bank (IDB) report, showed that the Bahamas was “reactive” in its debt management, as opposed to mapping spending commitments and the cash flows needed to service them in advance.

And Mr Bowe said it “makes no sense” for different ministries to buy the same product, at different prices and from different suppliers, because it meant the Government was “leaving money on the table” when it needed to save every cent it could.

While a ‘decentralised’ approach to public procurement might make for more responsive government, the Coalition co-chair said the Bahamas’ dire fiscal circumstances meant centralised debt management had to be the priority.

The IDB report had likely touched on many issues already known, both inside and outside government, with Mr Bowe suggesting they had likely existed for decades - highlighting the Bahamas’ failure to implement necessary reforms.

“We just haven’t had the courage to change the status quo,” he told Tribune Business. “There has to be the courage to change the status quo. We cannot keep on doing the same thing and expecting the same results.”

Mr Bowe said he had been aware of the IDB report’s existence for some time, although had not seen its contents.

He added that it showed the absence of debt management systems and structures within the Government, “particularly how we manage cash resources and minimise interest expense”.

The IDB report, using the 2013-2014 fiscal year as a base, said proposed reforms it will help finance and implement could have slashed the Government’s $1.03 billion borrowing for that period by 13 per cent, or $136 million.

It also said the Treasurer, Eugenia Cartwright, and her team had indicated during a June 4 meeting this year that between 5-10 per cent of the Government’s annual borrowings would be “unnecessary” if there was “good and proactive cash flow management”.

Mr Bowe said he was in “full agreement” with the IDB report’s contents, adding that with the Bahamas’ national debt approaching $6 billion, it needed to develop a short, medium and long-term strategy to “minimise debt costs”.

He added that “most sophisticated businesses and governments” created committees to match assets/liabilities, suggesting that the Bahamas needed to do similar by predicting upcoming spending commitments and eliminating the use of high interest overdrafts to meet them.

“We must know where the funds are coming from, as too often there is the haphazard raising of funds through Bahamas Government Registered Stock, Treasury Bills and now short-term notes,” said Mr Bowe.

“It’s more reactive as opposed to predicting what expenditure is likely to be, and borrowing at a cheaper rate by predicting our cash needs.”

The Coalition chair said the report also highlighted the need for better financial reporting within the Government, adding that the reliance on a cash-based accounting system - rather than the accrual method - was also making it harder to predict/plan spending commitments.

Acknowledging that there were numerous fiscal issues competing for the Government’s attention, Mr Bowe suggested several matters that it needed to “prioritise”.

He added that the Government was “spending a lot of money writing cheques”, rather than providing for wire transfers, credit card payments certified cheques and reducing the reliance on cash.

Mr Bowe said moving to a ‘cashless’ system would help “close the leakage points”, as persons were being taxed but the funds were “not getting into the Government’s coffers”.

Other priorities identified by Mr Bowe were the “unfair” taxing of legitimate businesses when “rogues are not paying their fair share”.

Better fiscal management, and more transparency and accountability, were also essentials on the Coalition chief’s list.

“We are now at debt levels where it becomes crucial that we know when [government] payment periods are, and not having to raise new securities,” Mr Bowe said.

“It has to be a more scientific focus; what’s coming next year, in five to 10 years, and what income we need to cover it.

“We must sit down and start looking at how we can manage our debt, our limited cash resources. A centralised approach to keeping all cash and assets in one place to maximise Treasury funds is important.”

Meanwhile, Tribune Business also revealed that the IDB report believes planned reforms could save the Bahamas $13.1 million in annual procurement costs.

Blaming a ‘decentralised’ approach, where individual Ministries and agencies have largely been left to do as they please, the IDB found the Ministry of Works was paying a price 15.29 per cent higher than the Ministry of Education for the same product. The ministries were using different suppliers, thus negating potential cost savings from their buying power.

“That makes no sense,” Mr Bowe told Tribune Business. “I know the IDB is working on a project where there is e-procurement, making it electronic, which will support the Government.

“That’s one of the missing elements. The Government shouldn’t be leaving money on the table because of a lack of co-ordination between ministries, departments and agencies.”