Caribbean & Central America - June 2017 (ISSN 1741-4458)

*** NEW BAHAMAS GOVERNMENT SAYS “CUPBOARD LEFT BARE”. The new Bahamas Free National Movement (FNM) government has made some unwelcome discoveries about the nation’s finances since its landslide victory over the Progressive Liberal Party (PLP) in the 10 May general election.

Speaking in the House of Assembly on 31 May, Minister of Finance Peter Turnquest said: “Our predecessor’s literally left us with a cupboard that is bare.” He said that while the previous government had forecast a fiscal deficit of $100m (the Bahamian dollar is pegged to the US dollar on a one-to-one basis), the outcome for the current fiscal year was going to be more like $500m. As Turnquest put it: “That is an astonishing five times the budget forecast of only 12 months ago.” The Bahamas fiscal year runs from 1 July to 30 June.

Turnquest was only exaggerating slightly, and it appears that projected revenue is likely to be down on budget by $216m, recurrent expenditure up by $137m, and capital expenditure up by $68m. The government has been forced to borrow $400m to finance the 2016/17 shortfall, and it has borrowed a further $322.4m for the 2017/18 fiscal year. Total government debt for the end of 2016/17 is expected to be $6.5bn, which is 71.5% of GDP. To add insult to injury, Turnquest says that the PLP government left behind more than $300m of unpaid bills.

No doubt the FNM is right to point to incompetence, but bad luck also played its part in the PLP’s dismal record. In 2012, it inherited an economy growing at 3.1% annually, but this dropped to zero in 2013 and there then followed two years of recession (-0.5% in 2014, and -0.7% in 2015). The marginal return to growth in 2016 was then hit by the effects of Hurricane Matthew, which struck in October 2016 and curtailed economic activity. With an election due in May 2017, it would have taken singular determination on behalf of the PLP government to maintain fiscal discipline during its last year in office.

Not surprisingly, the new government has gone silent on its campaign pledge to reduce or remove VAT on necessities.

*** ST LUCIA SEES PROGRESS ON UNEMPLOYMENT. The United Workers’ Party (UWP) government led by Prime Minister Allan Chastanet has now been in power for almost exactly a year. Over the past decade unemployment has become the biggest economic and social issue for St Lucia, climbing from 14% in 2007 to over 20%. The UWP government has set itself the relatively modest goal of getting unemployment down to 15% by 2021, and on the evidence of the first quarter of 2017 it is making a little progress.

According to the latest figures from the Department of Statistics, unemployment has dropped from 22.1% in the first quarter of 2016 to 20.1% in the same period this year. But given how serious youth unemployment, particularly male youth unemployment remains, there is little cause for celebration.

The prime minister said: “The government is equally concerned about the latest figures as it relates to young men with the youth unemployment rate rising among males in the first quarter from 35.3% in 2016 to 41.6% in 2017.” The position for young women is slightly better, with the rate decreasing from 39.2% in Q1 2016 to 35.6% in Q1 2017.

Chastanet promised: “We are currently working on a comprehensive incentives package which will create employment within the private sector and provide much needed support to businesses within St Lucia.”