Accountants: Bahamas In Financial Crisis

They are also of the view that government must brainstorm ways to diversify the economy beyond tourism and banking.

Winder, the Managing Partner at Deloitte and Touche and D’Aguilar, the outgoing president of the Bahamas Chamber of Commerce who is also trained as an account, were special guests Sunday on the Love 97FM Jones & Co. radio talk show hosted by Wendall Jones.

"I think we are in a fiscal crisis," Mr. D’Aguilar said in response to this question posed by the talk show host. "The level of debt as a percentage of GDP has gone over the threshold of 40 percent and it is now at 43 percent. "We are running horrendous deficits, and we are at a loss on how to realize additional monies."

Mr. D’Aguilar said the government also cannot introduce any new taxes because such a move would drastically affect businesses at a time when they are already hurting.

He noted, however, that there is still a major need for the government to spend money on infrastructure to soften the blow of the economic downturn.

Mr. D’Aguilar added. "There are people who are being thrown out of work and now the government is introducing this unemployment scheme, which in time will bleed them quite significantly. I think that as more people come out of work the demand for social programs to assist them is going to increase and the government is going to find itself in a very difficult position where there is a huge demand for expenditures but there is no additional revenue coming in."

Mr. Winder, who also agreed that the Bahamas was in a fiscal crisis, explained that most of government ‘s revenue is generated when the citizens spend. He said while the average citizen should be more prudent in their spending habits, the government’s revenue base suffers as a result.

"This clearly identifies a hold that has been there for a long time in terms of the taxation system, and when one looks at the situation, it is clear that we cannot continue with the same system because even going forward, if Bahamians do not begin to spend more money we are going to have the same problem even if the economy improves," Mr. Winder said.

"I believe that the average citizen is not going to spend the way they did prior to this [economic] situation, which would mean that the government’s revenue would not be coming in to the extent that it did before this happened."

Mr. D’Aguilar noted that despite the economic downturn, Bahamians must continue to make purchases so that the Bahamas can increase its imports and thus its revenue.

"This is where the vast majority of our money is coming in and people need to buy stuff so that we can import stuff, so that the government can raise revenue," he said, adding that unless the government broadens its tax base, they will continue to find themselves in a "catch 22 situation."

"This is the time for hard decisions and the situation as it is presented allows them [the government] to make hard decisions," Mr. D’Aguilar said.

Mr. Winder, who also commented on the 2009/10 budget communication that was presented in the House of Assembly last week, said he was happy that the government recognized the severity of the economic situation and realized that they could not continue with the same level of salaries, increases and new government programs.

"The fact that the government sought to bring down some of those expenses was a good idea as well as the fact that the government did not put in any real new taxes," he said. "It was also interesting to learn that even though the government had retired so many of our civil servants, it was only saving $29,000 per employee, which says a lot."

Mr. D’Aguilar, on the other hand, said that he was shocked that the government’s revenue was down from its budgeted amount by $260 million.

"I was not expecting it to be quite so severe and I thought it was good for the Prime Minister to bring that to the nation and let us know exactly where we stood. He took a long time explaining the severity of the situation and I think it was good that he let people know that things are tough. We heard it and now it was reflected in the numbers."

The former Chamber chief noted, however, that he was a little disappointed that the prime minister did not really stress the severity of the existing fiscal crisis.

"I would have thought that it would have been a little bit more of ‘we are in a major crisis and this is a war time budget,’" Mr. D’Aguilar said. "I expected a little bit more vision. I expected more cuts in programs that bleed the treasury day in and day out. I would have thought that this was the time [to make these cuts] and the excuse was there to make the necessary cuts that needed to be made in programmes that year after year lose money for the treasury."