By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Prime Minister last night unveiled a major expansion of the price control regime to 38 extra foods, medicines and other essentials in a bid to combat soaring inflation that has “made life even more unaffordable” for many Bahamians.

Philip Davis KC, in his national address, pledged that the Government is doing more to tackle the country’s cost of living “crisis” as he acknowledged that prices have risen “across the board faster than they have for many decades”.

Emphasising that the price control regime’s expansion is for a six-month trial period, he told Bahamians: “Tonight, I want to announce that we have added 38 new items to be subject to price controls in our country.

“We are limiting the wholesale and retail mark-up of everyday items like diapers, and food like chicken, eggs, bread, bananas, apples, oranges, broccoli, onions and potatoes. These items are being added for at least a six-month period, at which point we will review and evaluate the impact on businesses and consumers.

“We are also reducing the profit margin on price-controlled drugs, providing additional relief to Bahamians. During an inflation emergency it’s important to take the steps we can to improve affordability.” The price control regime’s expansion, which also involves an increase in the number of inspectors, is designed to work in tandem with the minimum wage increase (see other article on 20B) to help further offset inflation’s impact on vulnerable, low income Bahamians.

However, price controls have always been a controversial instrument among the private sector - especially those companies and businesses impacted by them. They were imposed by the Government decades ago to prevent what it viewed as an unscrupulous merchant class from exploiting lower income Bahamians by unreasonably hiking the price of food staples and other essential products, thus placing them out of reach while undermining living standards.

However, opponents argue they are an anachronism that have no place in a modern 21st century economy. The private sector views price controls as an inefficient, distortionary mechanism that creates more unintended consequences than the supposed problems they solve. They can result in product shortages, while retailers and wholesalers have to increase prices and margins on non-price controlled items to compensate for selling these goods as effective “loss leaders”.

With Russia’s invasion of Ukraine further impacting already-high food, energy and commodity prices, Mr Davis last night said: “Just as we started to recover, over this last year a global inflation crisis led to prices rising across the board, faster than they have in many decades.

“I want to emphasise just how big a shock this has been to households and businesses; we haven’t seen double-digit increases in global inflation like this in nearly 40 years. The COVID pandemic caused – and continues to cause – major disruptions in manufacturing and supply chains.....

“The inflation crisis has spared no country, but small island nations like ours, dependent on imports, have been particularly hit hard. The cost of living was already far too high in The Bahamas; this global inflation crisis has made life even more unaffordable.”

The Prime Minister sought to balance giving Bahamians a hard dose of reality, warning that tough economic and financial times lie ahead, with also providing hope for the future that such challenges can be overcome if all work together. He also sought to show he understands, and empathises, with the struggles of many individuals and households to rebound from COVID-19.

“We’re going to have some bumpy moments, too. You won’t always agree with all our decisions. That’s how things go during times of great challenge and disruption,” Mr Davis said. “I don’t just want to attack the symptoms of our hardest problems, I want to attack the sources of them.

“And I want you to know that even though our country is finally moving in the right direction, I understand how hard it is for you still. I see you sitting in your home, your bills in front of you, wondering which one you can’t postpone paying any longer. I see you worrying about how the years out of school have affected your children. I see you wondering whether you’ll ever feel safe again on the streets at night. I know the obstacles we are facing are really big, but so is our people’s capacity to overcome them.”

Elsewhere, Mr Davis said that upon coming to office his administration had paid “significant arrears owed to Bahamian businesses. Doing so injected over $100m into our local economy and rescued many businesses from bankruptcy”.

Turning to investment-related projects, he added: “We will announce before year’s-end our selection of a partner to build a world class airport in Grand Bahama, a crucial component for the island’s rebuilding. In the meantime, we are making the improvements necessary to welcome the tens of thousands of visitors we expect this winter season after increasing airlift directly to that island from Florida, North Carolina, Toronto and Montreal.

“Work on the Exuma International Airport resumes this month. Major new developments totalling hundreds of millions will create good jobs in Eleuthera and Long Island. In fact, just one year into our term, we have more than $1bn of new investments in the pipeline, projects which will create thousands of new jobs across our islands.” The $1bn figure, though, was not broken down by projects and few if any were identified by name.

“The goal can’t simply be to return to the way things used to be because, let’s be honest, there’s never been a time when our economy created enough opportunities for Bahamian advancement and ownership,” Mr Davis added. “Returning to the past economy isn’t the goal. Creating a new, more inclusive economy is the goal. Many Bahamians have achieved remarkable success, but thousands more can and should join them.”

Little was mentioned about the Government’s fiscal position, other than the Revenue Enhancement Unit (REU) seeking to collect some $1bn in tax arrears by giving after high-end property owners delinquent in their obligations. He also sought to link last week’s Moody’s downgrade to climate change and hurricane-related fiscal shocks, even though it was largely driven by fears that The Bahamas’ ability to borrow on the international markets has been squeezed.