…his calling for a debt to GDP ratio of 65% for the government, is one area that I do disagree with him.
Basically that's where the country's debt level is now and it's creating no end of fiscal problems.
According to Trading Economics GDP is projected to be about $8.4 Billion for 2014. With debt at about $5.2 Billion (and climbing as this Bahamas Debt Clock above shows), and if we add contingent liabilities, it appears we're close or above 65% now.
Of course these figures are fluid and government never tells the entire story with its fiscal matters, so often we're left guessing, but we do know from all the talk of tax reform, i.e. increasing taxes, (note fiscal/spending reform is never discussed in any meaningful way), the country is on very precarious grounds.
So while I agree few, if any, of the political class want to hold themselves to a fixed debt to GDP ratio, making demands that they hold themselves to current levels will not improve the country's fiscal decline. Accordingly a debt to GDP target of 45% would make for a more reasonable outcome. And this would ultimately place less strain on the taxpayer and bode well for economic growth.
After all, unlike entrepreneurs, the political class lose nothing for their public policy failures, they just increase the burden for taxpayers.
In the final Mr. D'Aguilar is correct the debt to GDP should be restricted, I just think 65% provides far too much leeway to spendthrift politicians.
Question for Rick.. Does the Bahamas National Debt clock reflect the recent $300 million borrowing by our near broke government?? I not sure but don’t believe so..
May I ask how is Mr. D’Aguilar qualified to make an economic assessment that a 65 percent debt to GDP ratio is acceptable.. This is no time for comic book economics and guess what I just heard the VAT coordinator say type of thinking or lack of thinking.. You take your choice as to what is acceptable creditability..
Debt levels and targets are basically meaningless when comparing different national economies.. The real issue is a nation’s Debt Service Capacity and the country’s specific economic stability criteria.. The Bahamas does not score very high as its two principle economic sectors are rather volatile and somewhat unpredictable..
Debt, Deficits and a Declining Dollar are the result of government imposed policies that are destroying the underlying Bahamian economy.. Given the economy’s precarious position, debt creating deficits must be halted in order to hopefully avoid an economic collapse.. For a country such as ours it is foolish to talk about debt to GNP ratios.. Compare Japan (over 200% debt to GDP) to Norway which has no debt, surplus budgets and a strong currency.. Japan is a diversified economic powerhouse and can adequately service its debt.. With Norway its obviously not an issue..
Now is the time for the Bahamas to return to a posture of financial and economic prudence.. VAT is not the answer and will only dig us deeper into the hole of financial crisis.. Only through the return to fiscal policies based on financial prudence can the Bahamas ever hope to get out of this mess.. As the example of Noway proves no debt creates no deficits and yields a sounder and stronger currency..
Time to be more like Norway and not like Japan.. Real growth and not spending is our only answer to the economic predicament we now find ourselves in confronting a more questionable and uncertain future..