The International Monetary Fund (IMF) team visited The Bahamas
from March 9–20 to conduct discussions for the 2015 Article IV consultations.
Their press release stated several key factors about the current state of The
Bahamian economy. Perfunctory duties.
Organizations like the IMF have a duty to compile data and
information on the economies of all countries, particularly the financial
positions of economies. Their main role is part advisory and part public
relations with respect to reporting on activities of one country to
their partnering countries. With that being said, it is not unusual for staff
reports and consultation reports to be as diplomatic as possible, because
negative reports not only affect the country being examined, but the countries
that do business with the country under examination.
What is important to state after reading this latest consultation
article is that it appeared to be very modest in it's approach, which may
seem as if it is couched in diplomatic code, but it said nothing new or
provided no special insight into key methods or tools used to bolster any claim
made in their assessment.
We would have thought that after all of this time, some more
fruit would have been born out by these consultative meetings and assessments.
For the mere fact that there are experienced persons sent to conduct them, I'm
certain that more information and in detail could have been shared if only on
an experienced based factor.
Of course, no one wants to make things up that are not there. So we
can only take the reports in the broad strokes they are presented in. Also,
coupled with the fact that they can only make assessments on the information
provided, we can only suggest that this is what it is and what is said to be
getting done is in fact getting done.
Take for example an excerpt of the first notable, if not the
obligatory and most repetitive note of these assessments is with regard to
structural unemployment and support for SME's:
“The
Bahamas faces several challenges in boosting its growth potential. First, it
needs to attract sufficient tourist demand to fill the large impending increase
in capacity. Second, evidence of significant structural unemployment suggests
the existence of impediments to job creation and proper functioning of the
labor market. Third, small- and medium-sized enterprises (SMEs) face
significant impediments to the growth. Fourth, as noted by the 2015 World Bank
Doing Business Indicators, general constraints to investment persist"
Of course, it sounds very sexy, alluring and provocative to
suggest these things. But what is strikingly missing, and we hope is born out
through another more in depth assessment note, is with regard to the policies
being implemented to address these issues and how far is the government with
regard to the reforms to address the issues.
The point of the matter is these open ended, blanket and
glittering generalities on topics that they are on the one hand supposed to
have in depth technical expertise on assessing, but furthermore are supposed to
know the mechanics of the way an economy is supposed to work, both large and
small is just not cutting it at this stage of the game.
To provide a solution to the SME and unemployment issues The
Bahamas faces, the IMF suggested that:
“...the
mission urges the authorities to finalize and implement the National
Development Plan (NDP), with assistance from the IDB. The NDP would assess the
country’s macroeconomic performance, institutions and governance, and propose
strategies to accelerate economic, institutional, and social development over
the medium term and long run. "
In entertainment terms we would classify this as canned
applause.This reverse inductive reasoning from a pre-prepared premise
that this would be the solution to the problem of SME underdevelopment and
unemployment is a little too thin, for two main reasons.
The first reason is that a plan, within itself, does not
solve a problem. What the National Development Plan would address is the
initial phase of providing information on the macro-economic potential of The
Bahamas, providing that this is in fact the tone and direction that the plan is
following.
Thus far we have not heard much about the data and information
being collected, collated and analysed that would solve any issue, let alone
the structural deficiencies with SME development
and unemployment that the IMF assessment report states would be
as a result of the finalization of the plan.
Furthermore, the plan needs to be implemented. The execution
template, format and personnel need to be in place. So, even before we have the
plan completed, we have to have a notion that the plan will, in fact, solve the
deficiencies as represented; the plan will have executable initiatives for the
deficiencies; and be in fact implemented in an orderly and sustainable manner.
Another
seemingly modest approach with regard to detailing the economy of The Bahamas
presented in the IMF assessment is in their attempt to make note of the fiscal
consolidation efforts underway:
"Commendably,
the authorities continue to be on track in implementing their strong fiscal
consolidation program to rebuild fiscal buffers eroded in the aftermath of the
global crisis and reverse recent significant increases in public debt. The
fiscal deficit in FY 2013/14 (July to June) is estimated to have narrowed to
3.3 percent of GDP (from 5.4 percent). The mission commends the authorities for
the introduction of a broad-based VAT on January 1, 2015."
What's important to note that while the macro-statistics speak to
one particular scenario, equally as important is the methods to which these
goals are achieved and if they line up with recent information as presented.
For example, the estimates on the fiscal deficit as estimated are
inconsistent with the trajectory of the deficit presented in the mid-term
budget and the current economic factors on the ground.
The deficit, as stated in the mid term budget presented in
February, 2015 actually increased over the period from the last mid-term
budget. The GFS deficit for the mid-term budget presented in February, 2014 was
$238 million. The current GFS deficit for the fiscal mid-budget year, 2015 is
$273 million. An increase of $35 million.
The reason why highlighting the current estimate provided via the
mid-term budget as opposed to using a methodology of using the revised final
budget estimates of 2013/2014 and the projected final estimates of 2014/2015,
is that one major issue is at play: The opening of the Baha Mar Resort.
The Baha Mar Resort, when fully opened, will comprise of
approximately 30 to 40% of room capacity in our hotel inventory. Without
Baha Mar being opened, it means that tourism receipts will be weak. With tourism
accounting for 60% of gross domestic product, it means that anywhere from 20 to
25% of government revenue will have to be adjusted to account for the
budget shortfall as a result.
The Baha Mar Resort was scheduled to open on March, 27th, 2015.
But that has been delayed to May 1st, 2015 with the expectation that it may not
be a full opening for the month of May.
Of course, the IMF mission would have been concluded before the
announcement that the opening of Baha Mar was delayed. But for them neglecting
the possibility that it may be delayed and that the delay may cause
significant shortfall is something we should note, very clearly.
Just as important as making provisions for economic activity on
the ground to bolster the macro-statistics, the actual method of the fiscal
consolidation is also important.
On the one hand, the IMF praises the government with regard to
stacking up fiscal buffers. In other terms, stacking up the money in the event
of a fiscal collapse brought on as a result of the economic meltdown of
2008. Which means, in short terms, the government has increased their savings
efforts for a rainy day.
However, this was not reconciled with the glaring fact that the
deficit increased from last year, as previously indicated. So, on the one hand,
the IMF says that the deficit decreased and is set to further decrease (not) on
the one hand through their projected estimates, but on the other we have made
strides in our fiscal consolidation efforts by suring up fiscal buffers.
Something just does not compute.
In addition, how this was done, where the money/savings are
stashed and the used methods and if methods used were optimal simply
just advances the chains down the field, so to speak. I think most of the
Bahamian public are way beyond accepting information based on say-so without
measurable verification.
The report goes on to reiterate the same lines from previous
conventional wisdom; i.e., end state owned enterprises, and be mindful of
foreign reserve buffers, etc. We can forgo further analysis based on that.
In short, I'm not saying that I like this latest IMF
assessment or that I don't like it, but they need to flesh out a few more
realistic details with regard to the entire Bahamian economic picture. Doing so
helps us all. Youri Aramin Kemp, is
President and CEO of "KEMP GLOBAL", a Management Consultancy firm, based
in the Bahamas which serves all markets. Our core competencies are:
Business and Project Planning and Design; Project Execution; Market
Researchn and Analysis; and Operations Development. Through our
affiliates, we offer Construction Services; Public Relations Services;
and IT and back office support to small and medium sized businesses.
Email: globalviewtoday@gmail.com
Disclaimer:
The views expressed here are solely those of the author in his/her
private capacity and do not in any way represent the views of
TheBahamasWeekly.com