By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Coalition for Responsible Taxation’s (CRT) first chairman yesterday said the Bahamas’ downgrade to ‘junk’ status was likely to suck funding away from essential public services, and described business confidence as “appalling”.

Robert Myers, reacting to Standard & Poor’s (S&P) latest downgrade of the Bahamas’ sovereign creditworthiness, warned that the loss of ‘investment grade’ status would force this nation to pay more for its foreign currency borrowings.

Explaining how the downgrade’s reputational damage is likely to affect all Bahamians, Mr Myers told Tribune Business: “The concern is that when you go to ‘junk’, it triggers a series of events where certain institutions are not able to invest in your bonds because of that status.

“When that happens, other institutions and investors are going to demand a premium for that debt. Our debt will cost us considerably more, so we will be spending more money on interest payments (debt servicing costs) than we were.

“That’s the problem; as soon as that starts kicking in, that number is going to go up.”

The S&P action thus threatens to trigger an increase in the annual Budget sums that the Government must allocate to pay interest and principal redemptions on its debt - something that is already costing taxpayers more than $500 million per year.

The added debt servicing costs would suck money away from areas such as national security (Police and Defence Force), social security, education and health, impacting the quality of life for the ‘average’ Bahamian.

Mr Myers, now a principal with the Organisation for Responsible Governance (ORG), said he had been concerned about the Bahamas’ deepening fiscal and economic plight ever since he headed the CRT.

“When we had the last downgrade, you and I had this conversation, and I said that I’m very concerned we’re not correcting or, more importantly, doing anything to correct the negative trends,” he said.

“I was even more concerned then that we’re not hearing anything from the Government on the measures they’re taking. We can’t keep talking about these growth initiatives and they don’t materialise.

“GDP, ease of doing business, they’re not heading in the right direction, and if you ask me as a businessmen, there’s more and more bureaucracy taking place with things like the Business Licence and other activities to the point where they cannot say business confidence is improving,” Mr Myers continued.

“It’s not improving. If you did a poll of Bahamian businesses - they aren’t very good at responding to polls - but from the discussions I’ve had with numerous businessmen, business confidence is appalling and consumer confidence is not much better.”

The S&P downgrade to ‘junk’ status is likely to further exacerbate the uncertainty gripping many Bahamian businesses as the country heads into the pre-general election build-up - a time when locally-owned companies traditionally hold back on growth and investment projects.

Mr Myers, meanwhile, said the Government had yet to take action, or see reforms bear fruit, in areas such as energy reliability and costs; public sector management; and the promised publication of a ‘White Paper’ on a Fiscal Responsibility Act.

“The National Development Plan (NDP) people have picked up on a lot of these things that we’ve said for years,” he told Tribune Business.

“But what the NDP doesn’t do is give us the means to get there; execution, implementation, human capital. Whose going to do this?”

Mr Myers said agencies such as Customs and the Real Property Tax Department, which were both collecting less than 50 per cent of due revenues, were major problems that are also required to be part of the solution.

“We have these significant problems and are not resolving them,” he told Tribune Business. “We have got to create accountability, and separate management from the politicians. We can’t have MPs telling the Ministry of Works who to hire.

“These things are important. It’s how you get your fiscal house in order. It’s not just cutting back on pencils and staplers. There’s got to be zero-sum budgeting, and we have to start using bigger measures to create real change - amending General Orders, and getting the Government more transparent, accountable and efficient. Nothing’s been done on that. Nothing’s been written on that.”