State Minister in the Ministry of Finance, Zhivargo Laing, and Inter-American Development Bank (IDB) representative Astrid H. Wynter have signed a $612,000 technical co-operation grant to support strengthening The Bahamas’ fiscal policy.
The resources were provided by the Japan Special Fund to the IDB. Japanese Ambassador to the Bahamas, Jamaica and Belize, Hiroshi Yamaguchi also signed the documents. The government’s contribution to the project is $153,000.
Minister Laing noted that as a general rule The Bahamas “has maintained a record of good economic performance having a high per capita income which is attributed to our sound management of the economy, our political stability, and our close proximity to the USA.”
Over the last twenty years, he said, The Bahamas has had an average growth rate of about 1.3 per cent with a strong spurt that took place between 1993 and 1999.
The 2008/’09 recession “which led to the worse global economic and financial recession since the great depression, significantly and negatively affected our economy with a contraction of some 5.4 per cent in 2009 alone, a contraction which led to critical tax generating tax sectors of our economy being badly affected,” said Mr Laing.
As an example, in 2009 the hotel room expenditure and imports of merchandise dropped by 21 per cent each, “and all of this would have significantly and negatively impacted our revenue collection.
“This negative impact on revenue combined with the fact that the government had to increase expenditure,” said Mr Laing, “caused overall deficit to reach about 4.4 % of gross domestic product.
“Obviously to finance that deficit the government had to grow the public debt so that our debt to GDP ratio would stand around 48 per cent of GDP compared to 29 per cent where it stood just a few years ago.”
The grant facility will support new and existing government programs that are designed to strengthen the framework of fiscal accountability, he said.
“The focus of this technical co-operation aims to support our charge towards fiscal rebalancing though improving our current system of revenue collection with particular emphasis on tax administration and also by strengthening our debt management systems.
“Ours is essentially to modernise and reform our systems so that they are consistent with international best practices,” said Mr Laing.
Recently a debt management committee comprising the Central Bank of The Bahamas, the Treasury Department, and the Ministry of Finance was established expressly to look at debt management on a sustainable basis.
The Japan Special Fund was established in 1988 by the government of Japan to promote social and economic growth by borrowing member countries of the IDB.
“According to our bi-lateral official development aid scheme,” said Ambassador Yamaguchi, “The Bahamas is classified as a rich nation not eligible for receiving even technical assistance through Japan International Co-operation Agency.
“However, our embassy, in consultation with the IDB and our own government have worked very hard to materialise this grant project taking into consideration the unique economic structure of The Bahamas specialising in, among others, tourism maritime and finance.
“I sincerely hope that this project will strongly update the capability of the Bahamian government in strengthening and further developing its economy,” Ambassador Yamaguchi said.
IDB Project team leader Gerardo Reyes-Tagle said the programme will improve the capacity of the tax administration and debt management areas.
“It will strengthen the property tax administration system and will help the government handle fiscal risks and debt portfolio management more effectively,” he said.
The Japan Special Fund is one of the largest trust funds at the IDB, and supports the preparation and implementation of IDB projects, as well as stand-alone projects in line with the IDB’s Country Strategy with each of the borrowing member countries.