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Breaking News:

IMF recommends lower wage bill, self-sustaining public corporations

  • International Monetary Fund headquarters in Washington, D.C.

CHESTER ROBARDS
Senior Business Reporter
chester@nasguard.com

Published: Sep 18, 2017

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The International Monetary Fund (IMF) Executive Board, in its consultation with The Bahamas, recommended the country, as a top priority, restore fiscal sustainability by cutting current expenditures. The government's wage bill was a top focus for the organization, as well as making public corporations self-sustaining, which has been a continuing issue for the government of The Bahamas.

The IMF, in a summary paper released last week, lauded the government's move to tighten up on government spending and waste. In its latest executive board paper, the IMF encouraged the government to “adhere to their fiscal consolidation plan to reduce the public debt burden and strengthen external buffers".

It also underscored that “reforming the National Insurance Board and the civil servants’ pension system should support fiscal adjustment and reduce long‑term fiscal risks”.

The statement added, "Directors commended the authorities’ efforts to strengthen fiscal revenues."

The IMF continued with its suggestion that The Bahamas introduce a low rate income tax over the medium‑term. The organization insists this would "help make the system more progressive and protect the needed infrastructure and social spending".

However, Minister of Finance and Deputy Prime Minister Peter Turnquest said the government had no plan to introduce a new tax in The Bahamas, but would look at the IMF's suggestion. He said the government was under no obligation to adhere to the IMF’s suggestions.

IMF directors cautioned the government against introducing exemptions from value-added tax (VAT) and "instead recommended taking advantage of the planned expenditure review to create space for better targeted tools to protect vulnerable households".

Since coming to power in May, the government has taken a strong stance for the improved collection of taxes with a focus on efficiency and reform. It is likely the government will continue to place its focus on VAT collection.

"Directors noted that adopting a fiscal rule, as part of a medium‑term fiscal framework, should enhance fiscal discipline," the IMF Executive Board stated.

"To further strengthen fiscal and economic resilience, directors also recommended integrating into the fiscal framework a well‑designed savings arrangement as an additional buffer against recurring natural disaster shocks."

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