The Bahamas government is looking at a mix of caution and capital expenditure to mitigate the effects of the global financial crisis on the island nation's economy, though some opposition and business leaders have called for more extensive relief to assist the private sector and the disadvantaged in the community.
Prime Minister Hubert Ingraham addressed the nation on November 10, outlining his government's response to what he described as a "critical situation". In response to falling tourism revenues - the backbone of the country's economy - and to challenges to the Bahamas' financial services sector, the premier announced that the government would accelerate its capital investment programme to focus on projects that could provide employment.
These include the redevelopment of the Lynden Pindling International Airport, the construction of a number of new state buildings and work on developments aimed at boosting the tourism trade, such as the building of an arts and crafts market.
The government also plans to step up the construction of state housing developments and is considering implementing a temporary unemployment assistance scheme, to be administered by the National Insurance Board, the prime minister said.
While the government will increase spending on infrastructure as well as provide relief for the unemployed and others disadvantaged by the economic downturn, Ingraham stressed that the state will exercise care in raising loans to fund these projects, saying international markets and institutions are also suffering from the global financial turmoil. However, as a direct response to the current crisis, government borrowings will appreciably increase, he said, though he did not provide details on the levels of capital the state was considering raising, nor the sources for the funds.
While the Bahamas enjoys the advantages of low tax rates and a ratio of government debt to Gross Domestic Product (GDP) that is the lowest in the region, the prime minister said recovery would be a step-by-step process, one that depended heavily on the US economy's return to health.
"It should be obvious that there can be no broad single-stroke response to this global crisis but, rather, measured and incremental response as the crisis develops," he said.
Ingraham also urged Bahamians to show restraint in their personal spending, especially in the days leading up to the Christmas holiday season, citing rising levels of bad loans held by banks as evidence of the current weakness of the economy.
According to the prime minister, there has been a 40% increase in non-performing loans, as well as a more general rise in the ratio of loans for which repayments are behind schedule - up to 10.4% of the total compared to 8.6% in 2007.
"At this time, it is vitally important for each and every Bahamian to live within his or her means; debts should be minimised and consolidated and new borrowings should be kept within prudent limits," he said.
Though the government has committed itself to increasing expenditure to ease fallout from the economic crisis, not all are convinced that enough is being done.
Opposition Progressive Liberal Party (PLP) leader Perry Christie said the government's programme was short on details of how it planned to cope with the crisis, saying many of the infrastructure projects announced have already been on hold since his party lost office in mid-2007.
"Some of these projects left in place were subjected to undue delay by the present administration. If they had been allowed to continue they could have provided some cushion from the effects of the economic slowdown," Christie told a press conference on November 12.
There should also be emergency measures put in place to support homeowners and small business owners as well as assistance to keep people employed in the hotel sector, he said.
The calls for help for the tourism industry are likely to get louder after Kerzner International Bahamas Limited announced on November 12 that it was laying off some 800 of its staff, roughly 10% of its local workforce due to low occupancy rates at its Atlantis resort.
Though the government plans to prime the economy with increased spending, these projects will take time to get under way, as will the proposed unemployment relief scheme. Additionally, there may be a time lapse before the state can access resources to fund these projects. While help is on the way, many Bahamians may have to heed the prime minister's advice and tighten their belts until it arrives.