NASSAU, Bahamas, Thursday, September 27, 2012 – Tax reforms, a mortgage relief programme, and incentives to drive more foreign direct investment are among the new measures that the Bahamas government hopes will jump-start the slowing economy.
These measures among others were outlined in a statement issued Tuesday (September 25) by the Ministry of Finance following the announcement issued by Standard & Poor’s (S&P) the same day that it was revising downward its outlook on Bahamas long-term rating from “stable” to “negative”. However, the US ratings agency maintained its sovereign credit rating for The Bahamas at ‘BBB/A-2’.
The Ministry of Finance stated that the outlook revision by S&P from stable to negative, while unfortunate, was not unexpected.
“As S&P clearly articulates in their statement, this Administration inherited a deteriorating fiscal situation where the deficit target was overshot by a wide margin. This was in addition to the absence of a credible plan for deficit and debt reduction or taxation reform by the former Administration,” read the ministry’s statement.
“Over the last five years the deficit as a percentage GDP as measured by the Government averaged four percent; but as S&P rightly pointed out in their statement, it was actually higher if the sale of government assets were to be categorized as financing as opposed to revenue,” the ministry acknowledged.
The finance ministry revealed that these accumulated deficits would represent a more than US$1 billion increase in the national debt in five years.
The ministry went on to state: “The Government recognises the severity of the situation which has been inherited and has begun the process of fiscal consolidation, without ignoring the fragile social and economic state of the country.
“As a result a number of initiatives have been or will be implemented within this fiscal year. These initiatives include the introduction of White Paper on Tax Reform which would lead to the first major public discourse on the topic and to significant changes in the tax system; the Introduction of a fiscally responsible Mortgage Relief Programme, which is a part of a broader initiative to restart the housing sector; the revitalisation of foreign investment interest in The Bahamas; concrete steps to improve revenue administration and expenditure control.”
The ministry concluded that the Perry Christie administration was confident that with these steps, and other measures announced in the Budget and the Charter for Governance, The Bahamas would return to a stable fiscal outlook and a healthy economy to the benefit of all Bahamians.