Wednesday, May 16, 2018
By NEIL HARTNELL
Tribune Business Editor
The "enforcement elements" of the Fiscal Responsibility Bill will be incorporated into the 2018-2019 Budget, the Ministry of Finance's top official has confirmed.
Marlon Johnson, the acting financial secretary, told Tribune Business that the Government wants Parliament to pass the Bill by mid-year, thus ensuring its provisions take effect during the new fiscal period.
Acknowledging that this had compressed consultation on the Bill into a narrow two-week period, Mr Johnson said: "The policy desire articulated by the Prime Minister is to ensure the Government's new fiscal Budget has the enforcement element of the Fiscal Responsibility Bill in place.
"The timelines are tight, but we are confident that people will turn around and give us feedback in that timeframe. The desire is not to get too far into the new fiscal year" before the legislation is passed.
Mr Johnson added that the Fiscal Responsibility Bill was "very clear in what it sets out to do", and that persons wanting to compare, benchmark and analyse its provisions against similar legislation in other jurisdictions have the Internet at their disposal.
"The policy consideration is to have this in place by the middle of this year; passed and in place by the middle of the calendar year," he told Tribune Business.
The Fiscal Responsibility Bill is intended to transform the Government's fiscal discipline by locking it into specific deficit targets and longer-term debt ratios, while boosting transparency and accountability in the management of its financial affairs through enhanced public scrutiny.
The latter role will be played by a newly-created Fiscal Responsibility Council, comprised of accounting, legal, financial analyst and business expertise from the private sector, while the legislation also attempts to introduce 'checks' that will prevent a repeat of the Christie administration's pre-2017 general election spending spree.
The Fiscal Responsibility Bill's key targets require the Government to slash the fiscal deficit to 0.5 per cent from 2020-2021 onwards, slashing it from a sum equivalent to 5.8 per cent of GDP in the 2016-2017 Budget year. This means reducing it from near $700 million to around $54 million.
The Bill's 'first schedule' sets out a 'glide path' or 'road map' for achieving this, acknowledging - as the IMF stated - that "significant fiscal adjustments" are needed over the next two Budget years to hit this objective.
To enable the public sector and wider Bahamian economy "to achieve the fiscal objective in an orderly manner", and avoid unnecessary shocks, the Bill calls for 2018-2019 and 2019-2020 deficits that "shall not exceed" 1.8 per cent and 1 per cent of GDP, respectively.
The Bill also sets out a "long-term" target of reducing the Government's direct debt-to-GDP ratio from the current 58 per cent to "no more than 50 per cent". The year by which this target is to be achieved has to be set out in the Government's 'fiscal strategy report', which must be submitted to Parliament no later than the third week of November each year.
The Fiscal Responsibility Bill's content and intent yesterday found favour with long-standing 'fiscal hawks', with one telling Tribune Business: "It's swinging the pendulum in the right direction."
Rick Lowe, an executive with the Nassau Institute, told Tribune Business: "From my first read it looks reasonable enough. I think it's a good starting point. It should force more accountability on government, and puts them more in the position of the private sector of having to be accountable for their actions rather than pile on more debt.
"It makes them take stock of what the position actually is today, and is moving the pendulum in the right direction. If this is the beginning of their changes, it's a good, major first step. They appear to be trying to open up and be more transparent. We'll see in the days, weeks and months ahead how meaningful that will be. Two cheers so far."
Mr Lowe said he was unhappy with "the out" provided by section 13's 'exceptional circumstances' clause, which allows the Government to "temporarily depart" from the Bill's deficit and debt targets "when sudden and unexpected events arising from external shocks, resulting in a significant economic downturn, national security considerations, or natural disasters so require".
Qualifying events would include the likes of the 2008-2009 global recession, plus major hurricanes, and the Bill requires the Government to outline both the measures and timeline needed to get "back on track" with its targets.
"That's a loophole to me that I don't really like," Mr Lowe added, "but at least this has started the process to re-evaluate government debts and deficits. That's where they've been hiding tax increases for decades; in deficits and debt. Instead of coming to the taxpayer and saying: 'We need to add two percentage points to VAT', they add it on to their borrowing."