By ROGAN SMITH
The Bahamas is in a "deep financial hole" and will need at least five years to get out of the financial "mess" it is in, according to veteran banker, Al Jarrett who responded to the International Monetary Fund's (IMF) recent prediction that The Bahamas' recession recovery will not be as robust as the Caribbean's.
In an interview with the Bahama Journal recently Mr. Jarrett said as a result of the $1.56 billion worth of cumulative deficit that the government has created in the last two-and-a-half years, The Bahamas’ economy would have to grow by five per cent per annum for five consecutive years just to match its 2007 or 2008 numbers.
"The IMF will tell you that the 2008/2009 numbers came in with a negative GDP of five per cent and if we continue on this same course we’re going to have another -5 per cent GDP growth based on the six-month numbers," he said.
"We have some serious problems. Even if we grow we’re still not going to recover quickly. If they [the IMF] are talking about five years I’m talking about five or 10 years because we’ve overborrowed excessively and we’re now paying the price for it. So the normal growth is not going to do it."
Mr. Jarrett said The Bahamas will have to experience growth, strong tourism and foreign direct investment numbers combined in order to get back to its figures in 2007 and 2008.
"That’s how bad it is," he said.
The IMF’s World Economic Outlook (WEO) and Global Financial Stability Report, which was released last week, noted that Gross Domestic Product (GDP) or total output in the Caribbean is expected to increase by nearly 4.3 per cent next year following a sluggish 1.5 per cent anticipated this year and 0.4 per cent experienced in 2009.
However, the Fund said recovery was less likely to be strong in commodity-importing economies in the Caribbean region that have large tourism sectors, like The Bahamas, Barbados, Antigua and Barbuda and St. Lucia.
"Weak external demand for tourism from North America and Europe is impeding growth in a number of economies in the region, especially in the Caribbean, whereas lower remittances are affecting many Latin American/Caribbean (LAC) economies," the report said.
Mr. Jarrett said he was not at all surprised by the IMF’s report.
"The IMF is saying what I’m saying. We’ve got ourselves in a very deep hole in terms of our debt. As a matter of fact, another reason we’re going to have problems is because they (the IMF) don’t know that the prime minister understated the debt’s picture in 2009 by $300 million. As a result, our direct debt-to-GDP as we speak is about 48 per cent. He was talking about it being 43 per cent in June," he said.
"Our national debt is about 53 per cent right now. So, we’re not going to be able to grow ourselves out of this with growths of one or two per cent. The government has something dramatic to do in the next half of this year."
He explained what the government can do in the coming months to help speed up growth.
"The BTC (Bahamas Telecommunications Corporation) sale could help. The Baha Mar project could help; the government may have a sale for some property for Baha Mar. The government has to cut back. The budget was too rosy for two years in a row. And the spending was too ambitious," he said.
"We’ve already borrowed close to $1.1 billion already and we’ve only been in a recession for 16 months. Could you imagine that? We just started this recession in the latter part of 2008. America was in its recession from December 2007, but it would have had three consecutive quarters of growth in GDP, from September and December and the end of March. So they have what you would call a slow job recovery."
He added "We are not looking good. It’s going to take us at least five years to get out of the mess we’re in and unless something dramatic happens right now we’re looking at another negative growth of five per cent this year. So, you’re looking at 10 per cent in two years."
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