Monday, September 11, 2017
By NEIL HARTNELL
Tribune Business Editor
The Deputy Prime Minister yesterday predicted the Bahamas had "dodged a bullet", with Hurricane Irma unlikely to force the Government into emergency borrowing.
K P Turnquest told Tribune Business that while damage assessments have yet to be conducted, there was every indication storm repairs can be financed from contingencies and the repurposing of already-allocated Budget funds.
"It is about what we would have expected," he said of Irma's financial impact. "I don't know if there's anything terribly significant except for Inagua, where we understand Morton Salt suffered some significant damage.
"I think, all in all, we've staved off any major losses and we hope for the best."
Irma continued to pound Grand Bahama and Bimini with tropical storm force winds yesterday as it made its way up the Florida peninsula, sparking a series of tornados on the former island and flooding on the latter.
However, the now-Category Three storm failed to score a direct hit on the Bahamas' major economic and population centres of New Providence and Freeport, unlike Hurricane Matthew in October 2016.
This means Irma is unlikely to force the Government into unplanned, emergency borrowing similar to the $150 million that its Christie administration predecessor was forced to raise in Matthew's aftermath to finance relief efforts and repairs to public infrastructure and buildings.
Mr Turnquest confirmed that the Minnis administration will "probably not" be forced into borrowing beyond the $522 million planned for the 2017-2018 fiscal year, although a final determination will be made following damage assessments due to be conducted today.
"I expect it will be a combination of just redeploying some funds, and the contingency funds, and hopefully that covers it," the Deputy Prime Minister said of the Government's repair and recovery bill.
"This could have been a whole lot worse. We saw what happened in the Caribbean, we saw what happened in Cuba, and are now seeing what's happening in Florida. We have to be thankful we were spared the brunt of the storm and, overall, came out not too bad from what I can see so far."
Many private sector executives and politicians last week expressed fears that the Bahamas would not have been able to absorb a Matthew-type hit from Irma, given its already-struggling economy and precarious fiscal position.
Matthew is estimated to have caused $600-$700 million worth of damage when it travelled north through the Bahamian archipelago, adding to the $100 million bill that Hurricane Joaquin left in its wake in 2015.
Had Irma followed a similar path, it would have had potentially serious implications for the Bahamas' sovereign credit rating.
Moody's has given the Minnis administration 12-18 months to demonstrate it can execute effectively on its fiscal consolidation plan, and referred specifically to the Bahamas' exposure to major hurricanes in placing a 'negative' outlook on this nation.
"The negative outlook reflects potential downside risks to the fiscal consolidation process posed by weaker-than-expected growth, exposure to climate-related shocks in the form of hurricanes, and implementation risks associated with measures to rein in expenditure growth and enhance revenues," said Moody's. "Absent successful fiscal consolidation, the Bahamas' fiscal and credit profile would likely weaken."
Mr Turnquest yesterday acknowledged the Government's relief at avoiding Irma's worst, saying: "Obviously this is a very sensitive time for us, as we try to retain our [financial] strength and credit rating, and control our debt situation. Thank God we've dodged a bullet.
"With Nassau airport (LPIA) reopening, hopefully the tourism product will pick up immediately, business will pick up and we'll recover quickly." The $4.2 billion Baha Mar project will resume full operations tomorrow (Tuesday), having evacuated all pre-Irma guests from New Providence.
Moody's is predicting that the Bahamas' national debt, which already exceeds $7 billion, will peak at a ratio equivalent to 80 per cent of gross domestic product (GDP) in 2017-2018 - provided the Government's fiscal consolidation plan is executed effectively.
Irma would likely have blown a hole in this and other fiscal projections had the Bahamas felt its full wrath, but the Government's finances will nevertheless feel some impact.
James Smith, one of Mr Turnquest's predecessors as minister of finance, told Tribune Business that the Bahamian economy's two-day shutdown to ready for Irma, plus reduced tourism arrivals, would cost the Public Treasury revenue.
"We didn't really get much of a hit, so don't have to replace a lot of infrastructure, except perhaps in the badly hit southern islands," he projected. "I expect the Morton plant in Inagua is covered by insurance to replace their production facilities.
"The greatest impact will be on the lost business. Florida is where we source most of our materials and goods from, and let's go all the way to Houston. The impact of these hurricanes, Harvey and Irma, is going to put a dent in our visitor arrivals."
Florida, together with New York and the north-east US, is the Bahamas' largest source tourist market. With Floridians likely to be more focused on recovery and repairs in the short-term, Mr Smith said this was likely to show up in cancelled Bahamian vacation bookings.
"Over the next several months, we will probably see it in terms of a reduced number of visitors coming from the US," he added. "Because New Providence, where we have most economic activity, is pretty much unaffected the direct impact on the fiscal position is not as severe [as Matthew] but we will feel it."
Mr Smith argued that "the time has come" for the Government to calculate an 'average' for what hurricanes have cost it in recent years, and then include this figure as a contingency 'line item' in the Budget as some kind of 'relief' fund.
"You can no longer ignore it," he told Tribune Business of the hurricane threat. "It's a perennial event."
Mr Smith also warned the Bahamas against self-congratulation at having avoided Irma's worst, given that hurricane season had only just reached its 'peak' and there were several months left.
"This is a chapter in the book of hurricane season," he added.