By KHRISNA RUSSELL
Tribune Chief Reporter
THE Minnis administration’s request for additional borrowing is not for idle purposes, Finance Minister Peter Turnquest insisted yesterday. He told Parliament the country’s insufficient resources led government to seek more money following Hurricane Dorian.
While national resources remain “significantly” less than what is needed, the deputy prime minister reiterated that there will be no new taxes and no increase of existing levies to cover costs associated with the damage done by Dorian.
New and “necessary” financing requirements amount to $540.7m but there is only $32.8m in offsetting income, Mr Turnquest explained.
He said finance officials were also looking at the possibility of gross domestic product shrinking by one percentage point as a result of the hurricane.
Mr Turnquest made the remarks as Parliament debated the 2019/20 supplementary budget. There is currently a resolution in the House for government to borrow $587.9m.
“Unfortunately, the government has very few immediate and realistic options to offset the legitimate obligations…” he said yesterday.
“We received a $12.8m payout from our Caribbean Catastrophic Risk Insurance Facility as a result of a restructured policy, which I am proud to say we pioneered. In the past, insuring with the CCRIF had unfortunately become politically charged. Not everyone was convinced the insurance scheme was meeting our needs as an archipelagic nation.
“We successfully renegotiated a better deal for the Bahamas, tailoring the policy to separate the archipelago into three geographic zones with unique parametric triggers for each region. Rather than throwing the baby out with the bathwater, we recognised that flexible insurance that allows for tailored coverage is essential to our multi-layered approach to disaster risk management and for meeting our country-specific disaster needs.
“Aside from the CCRIF, we amended the law to allow funds transferred from the expired Dormant Accounts at the Central Bank to be used for disaster relief. The government earmarked $20m from this fund: $10m of which is to support micro, small and medium-sized enterprises capital grants and credit programmes.
“If you look at the math, it speaks for itself: we have $540.7m in new and necessary financing requirements and only $32.8 million in offsetting income. We are also looking at the possibility of GDP shrinking by one percentage point as a result of Hurricane Dorian.”
Mr Turnquest said as for donations, these are far less than what the public perceives, adding many of the public pledges reported were actually in-kind and not yet received, and many of them are actually donations to private sector organisations and not the government.
According to the National Emergency Management Agency, which receives donations on behalf of government, as at January 31, approximately $9.4 million was received as actual cash donations, and another $2.8m in-kind, the East Grand Bahama MP said. He said the latter may have changed slightly as of yesterday.
Mr Turnquest said: “While this is certainly appreciated and has helped to cover costs associated with the acquisition of recreational vehicles (RV) for volunteers and staff that are on the ground working in Abaco and Grand Bahama, as well as with the temporary dome structures that are currently being erected in Spring City, Abaco, it simply is not enough to cover the greater cost of recovery of Hurricane Dorian. When you compare $9m in donated funding to cover over $400m in Dorian expenses and revenue losses, it is plain to see that our own resources are not enough for this massive response.
“Faced with this reality, the government decided that it will not impose additional tax burdens on Bahamians to cover the cost of recovery. More taxes could slow down the already strained economy as people would consume less given the need to pay more in taxes. Although we have a large budget gap to close in the immediate term, this is not a viable option.
“Therefore, the government will not be increasing taxes, or introducing any new taxes, to cover the cost of Hurricane Dorian.
“So, what are our alternative options? Well, we could slash spending by a few hundred million, but that means starving the economy of job opportunities and commercial activities by way of reduced capital and other major projects.
“Large spending cuts would also reduce the resources available to assist the vulnerable with social assistance benefits and other recurrent programmes. To balance the budget in one swoop, we would have to cut total expenditure, across the board, by over 20 percent, based on spending estimates at the time of the National Budget. Indiscriminate cuts like this would affect everyone, and not just in the storm affected islands. This is not an option.
“The operations of the government must continue to function. Again, the government realised that an economy of our size facing a $3bn hit would be further impacted negatively by massive cutbacks in public expenditure.”
While government is departing temporarily from its original fiscal consolidation plan and given the options to either raise taxes higher or to cut spending drastically, the government took a “prudent decision to raise the necessary resources through increased borrowing - and to focus this borrowing largely to fix the infrastructure and provide direct support for persons most impacted by Dorian,” Mr Turnquest said yesterday.