By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government needs to regain its fiscal credibility by publishing a “detailed analysis” explaining why its $314.2 million first half deficit was so high, the Chamber of Commerce’s chairman has urged.

Gowon Bowe told Tribune Business that both Bahamians and the international credit rating agencies had “lost confidence” in the Christie administration’s fiscal forecasts, given that Budget projections were frequently missed by nine-figure margins.

Disclosing that the 2016-2017 first half deficit was “higher than what I would have anticipated”, Mr Bowe called on the Government to explain why it had overshot so much, notwithstanding Hurricane Matthew’s impact.

He added that it also needed to produce detailed forecasts for the fiscal year’s second half, plus accurate estimates of the full-year performance, warning that there will be “no forgiveness” for projections that turn out to be wildly optimistic.

With the Christie administration forced into emergency borrowing worth $130-$150 million to deal with Matthew’s immediate impact, Mr Bowe said that based on a full-year deficit projection of $100 million, most observers had anticipated a first-half deficit of around $250 million in a ‘worst case scenario’.

However, the Central Bank’s January economic developments report revealed the ‘red ink’ was much more, something that will cause Moody’s and Standard & Poor’s (S&P) to start asking questions.

“I think it still is higher than what I would have anticipated,” Mr Bowe told Tribune Business of the $314.2 million deficit incurred over the six months to-end December 2016.

“We need to improve the confidence levels in the projections, as we’ve had several years of rosy forecasts that have not been achieved.”

The Chamber chairman said both credit rating agencies would now likely be asking how the Bahamas had “got to $314 million already”, given the calculations stemming from the $100 million full-year projection and emergency Matthew borrowing.

“There needs to be a very clear statement from the Government as to where they see the full year deficit coming in,” Mr Bowe said. “Are they looking for the second half to be a surplus, to hold the deficit where it stands now or for the deficit to expand further?

“Unfortunately, and this goes back many years, we’ve missed fiscal targets and there’s been no thorough analysis why; just general statements. We haven’t said these are the reasons why, and what we’re doing to correct it.

“This is why the rating agencies have lost confidence in the Government’s numbers, and are projecting their own,” he added.

“The rating agencies have taken it upon themselves to make projections, which is an indictment on the Government numbers being forecast.”

The Chamber chairman added that the Bahamas needed “to respect that the outside world is looking for detailed analysis”, especially the rating agencies, and hard data and statistics that explain this nation’s fiscal performance.

“Moody’s put out a projection that it would be $300 million,” Mr Bowe said of the 2016-2017 full-year deficit, “and if you exceeded it in the first six months, that’s certainly going to lead them to pick up the phone and ask questions.

“The Government should be in a position to explain it, not only to them but to the Bahamian people. It [the first half deficit] has raised a lot of questions, and people are concerned.”

Besides blaming Hurricanes Joaquin and Matthew for the significant deficit overshoots, the Christie administration will likely retort that the fiscal cycle means the 2016-2017 second half performance will be better.

This is because it coincides with the winter tourism season peak and associated spike in economic activity, thus representing the period when the Government normally earns the bulk of its annual revenues. The payment of certain taxes, such as Business License fees, also falls due within this particular period.

Mr Bowe, though, warned that expectations of a second half revenue upswing “doesn’t necessarily translate into a surplus or holding your spending lower”, especially this year.

“We know there’s a distinct danger in the run-up to an election, as the Government tries to sweeten the pot for its constituent base,” he told Tribune Business.

Mr Bowe said that what the Bahamas required was “not a placating statement that we expect more revenues in the second half; it has to be fairly detailed analysis: ‘This is where we sit, these are the items in the pipeline, and this is where we expect the second half outturn to be”.

Warning that numerous eyes were fixed upon the Bahamas, he added: “It [the analysis] had better be accurate, as there will be no forgiveness by external observers for inaccuracies.”

Mr Bowe said such an analysis needed to be provided by the Ministry of Finance’s technical team, rather than policymakers at the political level.

It is unclear whether the Government plans to give the regular mid-year Budget presentation in the House of Assembly, where the performance over the fiscal year’s first six months is debated.

Time is running out for this, given the impending general election, and failing to hold it will likely raise further questions as to the Government’s commitment to fiscal accountability and transparency.

Mr Bowe, though, said the mid-year Budget had yet to prove a useful mechanism for analysing the Government’s fiscal performance.

“To be honest, the quality of the Budget debates still leaves a lot to be desired,” he added. “It’s more a narrative of whose to blame, rather than what the numbers say. The debate itself has never created any significant amount of confidence.”

The Chamber chairman also urged Bahamians to “stop this fallacy that the Government is not a business; it is a business”.

He said the Cabinet was akin to a company’s Board of Directors; senior civil servants were the equivalent of management; and the shareholders - in the case of the Government - were the Bahamian people.

Questioning what happened to a private company’s Board and management if it kept missing financial forecasts and provided inaccurate information, Mr Bowe said: “If you are not able to provide accurate information, there’s ultimately a change in the management and Board of Directors.”

The fiscal misses have been numerous over the last five years, with the Christie administration having initially forecast it would achieve a ‘balanced’ Budget and zero GFS deficit by 2015-2016.

It has not come remotely close to achieving this, with Simon Wilson, the Ministry of Finance’s financial secretary, telling a Chamber of Commerce forum last month that the Government now expected to achieve ‘fiscal balance’ within the next four years - meaning by the 2020-2021 fiscal year.

Projections for individual fiscal years have been just as overly-optimistic. The 2014-2015 deficit came in at $381 million, almost double the Government’s initial projection of $196 million.

The following year is forecast to have produced a similar result, with the International Monetary Fund (IMF) and Moody’s both projecting a $250-$300 million deficit for 2015-2016, compared to the Government’s revised $150 million estimate.

As for the current fiscal year, the half-year deficit is already triple what the Government had projected for the full-year.

While some of this is doubtless attributable to Hurricane Matthew, the Central Bank’s analysis made clear this was only part of the story. It pointed to a $50 million-plus increase in recurrent spending, due to increased expenditure on programmes such as National Health Insurance (NHI).