By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s finance spokesman is accusing the Government of “making a mockery” of The Bahamas’ fiscal responsibility laws by seeking to change revenue and spending targets “on a whim”.

Kwasi Thompson, former minister of state for finance under the Minnis administration, told Tribune Business that the Davis administration’s plans to adjust its revenue and expenditure targets, as a percentage of gross domestic product (GDP), for the 2025-2026 Budget cycle threaten to undermine the very purpose of restrictions imposed in the Public Finance Management Act.

Warning that it threatens to “set a precedent”, where any future administration could simply go to Parliament and use its majority to amend these goals to suit its policy objectives, or if the fiscal indicators are moving in the wrong direction, he reiterated that adjustments should only occur in an “unforeseen or urgent” emergency such as Hurricane Dorian and the COVID-19 pandemic.

And, before such changes are approved, Mr Thompson told this newspaper that the law requires the Government to explain to Parliament and the Bahamian people what corrective actions it is taking to bring its finances back into line with the fiscal targets.

The Davis administration, in the legislation accompanying the 2025-2026 Budget, is seeking to adjust the Public Finance Management Act’s schedule four which sets targets of a 25 percent revenue-to-GDP (gross domestic product) ratio that must be achieved in the upcoming fiscal year, plus a 20 percent recurrent spending-to-GDP ratio.

The Prime Minister justified the move on the basis of the higher-than-expected 3.4 percent GDP growth figure for 2024, recently unveiled by the Bahamas National Statistical Institute, and the greater difficulty this imposes on the Government to achieve its revenue ratio targets.

As a result, the revenue-to-GDP tar5get is being adjusted to 23.6 percent for the 2025-2026 fiscal year, then to 25 percent thereafter, while the recurrent spending ratio is also being raised to  21 percent “through the medium term” - a move that will enable the Government to increase spending.

“More troubling is that they have sought to reduce the revenue targets in a way where it makes a mockery of the fiscal responsibility laws,” Mr Thompson blasted to Tribune Business. “Those fiscal objectives were put into legislation to govern how the Government spends its money and how the Government is able to project its revenues.

“The targets were put into the law so it mandates what the Government must do. What was also put into the law was, if you wish to change those objectives, there was a mechanism upon which you should do so. It has to be unforeseen or urgent matters, such as a hurricane or pandemic, and then if you are able to change it you must say what steps you would take to get it back to target.

“To put it very simply, the Government is seeking to reduce the amount of revenue the target said it should receive, and increase the amount of spending the target says it should support,” Mr Thompson added. “They are doing it in a way where they are simply going to Parliament and changing those targets.

“The law was not intended that the Government goes to Parliament and just changes those targets. It makes a mockery of those fiscal responsibility laws. If this government gets away with it, it sets a precedent that any future government can go to Parliament and change the targets. That, again, is contrary to the entire intention of having fiscal targets placed into law.”

Mr Thompson, in a statement sent to this newspaper, reiterated: “The most serious concern is that this PLP government has completely undermined the purpose of the fiscal responsibility law - a law the FNM put in place to bring discipline to the Budget and reduce the country’s debt.

“That law was meant to keep the Government honest by setting clear financial targets that couldn’t be changed on a whim. But the PLP has now abandoned that commitment. Just as the Opposition warned, the government moved the preparation of the Fiscal Strategy to line up with the Budget. Why? So they could quietly change the fiscal targets they had already published and agreed to without explaining why.”

He continued: “They did this by seeking to amend the Public Financial Management Act, specifically the first schedule for 2025. But this goes against Section 25 of the law, which requires the Government to clearly explain what urgent reason caused them to break from the targets they set themselves.

“No explanation has been given. This is not responsible budgeting. It is a clear sign that the Government is breaking its own rules, and that it no longer takes fiscal responsibility seriously. The 2025 Fiscal Strategy Report proves exactly why the Opposition has always been – and still is – against the Government releasing the report at the same time as the Budget.

“Before the PLP changed the law, the Fiscal Strategy Report was required to be published before the annual Budget. That made sense, because the Fiscal Strategy Report is supposed to set out the Government’s medium-term fiscal targets and help guide the decisions made in the Budget,” Mr Thompson explained.

“But now the Fiscal Strategy Report comes after the Budget has already been prepared. Instead of setting targets and shaping fiscal decisions, the report is simply being used to justify what the Government has already decided to do. This completely defeats the purpose of the Fiscal Strategy Report. It is supposed to lead the Budget process, not follow it.”