Friday, October 11, 2019
By NEIL HARTNELL
Tribune Business Editor
The Bahamas must not be “aggressive and spend money before we need to” on Hurricane Dorian restoration, a former Chamber of Commerce chairman warned yesterday.
Gowon Bowe told Tribune Business it needed to craft a recovery strategy that minimised disruption to its long-term fiscal strategy while still permitting the rebuilding of communities devastated by the category five storm.
He added that the $436m deficit shock unveiled by K Peter Turnquest, deputy prime minister, represented where The Bahamas ultimately needed to reach but argued that the sums unveiled did not have to be spent all at once.
“The one element that I’ve shared with the deputy prime minister, and have said repeatedly, is I think we have to be very strategic in looking at the numbers,” Mr Bowe explained.
“When he speaks to the spending that needs to happen in terms of restoring infrastructure, restoration of government services, medical facilities, we have to be careful we don’t be aggressive and spend money before we need to.
“That’s not saying don’t have a deliberate action to cause affected communities to restore to normalcy as quickly as possible. It’s saying it’s important to appreciate the restoration effort is not six to 12 months to the end of the fiscal year, but a more multi-year project.”
Mr Bowe said the Government needed to deploy sufficient resources in proportion to the needs of, and what was happening in, the Dorian-impacted areas. Given that many areas of Abaco, in particular, had already depopulated he suggested it made no sense to immediately offer a full menu of government services.
“We must be deliberate,” he reiterated. “It’s not spending over the next six months; it’s over the next three to five years to restore these places to where they were before.” Mr Bowe suggested The Bahamas adopt the approach the US followed in Hurricane Katrina’s aftermath, where communities, businesses and infrastructure were restored in a phased, systematic way.
“You have to make sure you balance the distribution of funds with what’s in those locations,” Mr Bowe told Tribune Business. “There’s recognition of that. The numbers should be seen as what we have to do, and we have to develop a strategy to create least disruption to fiscal performance.”
Mr Turnquest told the House of Assembly that the Ministry of Finance’s preliminary estimates forecast a more-than-quadrupling of the 2019-2020 fiscal deficit compared to Budget projections back in May.
He said Dorian was now likely to wipe out $215m, or eight percent, of full-year revenues while extra spending to rebuild utility infrastructure, public health clinics, temporary housing and to deliver government services in the impacted areas was pegged at just over $222m.
While Abaco, at 6.4 percent, and Grand Bahama at 7.3 percent, collectively accounted for 13.7 percent of total government revenues in the 2018-2019 fiscal year, Mr Turnquest said the two islands’ contributions had “always been an important component for delivering on the government’s overall budgetary projections”.
He added: “Early estimates prepared by the Ministry of Finance point to a revenue shortfall of nearly $215m, or eight percent of the overall revenue projected for fiscal year 2019-2020 as a direct result of Hurricane Dorian.
“When it comes to spending, initial estimates show we will need to spend an additional $222.4m, with a split of $80.9m for recurrent spending and $141.5m for capital. These funds will primarily be used for rebuilding critical infrastructure on Abaco and Grand Bahama, including electricity and water services, the reconstruction of affected medical facilities, the construction of temporary housing and the delivery of targeted Government services and assistance to affected populations.”
Totalling up the extent of the damage, Mr Turnquest told the House: “Given that our revised projected revenue will be in the region of $2.414bn, and expenditure at $2.988bn as a result of Hurricane Dorian, the fiscal deficit for fiscal year 2019-2020 is likely to be nearly $573.4m, or an elevated 4.5 percent of GDP.
“This exceeds the $137m, or 1 percent fiscal target, as prescribed by the Fiscal Responsibility Act.” The Act requires the Government to present a fiscal adjustment plan as a result of this miss, detailing the measures it will take to get its consolidation plan back on track and estimates of how long it will take to do so.