[Opinion column written by Larry Burchall]
Several years ago, in Seattle, I attended a lecture on economics given by a Czech economist. He used the term “zombie economics”.
From all that I see and hear in my Bermuda, I reckon that we are almost practicing a form of “zombie economics”.
In horror movies, zombies are depicted as ugly big-eyed, grey-faced, stiff-armed ghouls staggering and stumbling their way towards some desolate desecrated destination.
We’re different. Everyone is well-dressed. Looks well-fed. Lively eyes in pretty and handsome faces. Beautiful people on a beautiful Island. Not grey-faced. Instead, beautiful skin-tones ranging from ebony through mahogany to pinky-white.
GDP per capita still over $80,000 [US] keeps us in the top fifteen in the world. Average annual incomes still over $50,000 [US] keeps us well above people struggling on incomes of $2 [US] a day – $730 [US] a year.
In 2013, Bob Richards borrowed $800 million. He stuffed that big fat $800m cushion under our national posteriors. In his February 2014 Budget Statement, Bob told us that he had a three year plan: “…the Ministry is setting an ambitious target of cost savings on current account expenditure of 15%, in real terms, to be achieved by the end of three years.”
On 26th January 2015, Bob told us that he would be going back to the foreign lenders before March 2016. A whole year earlier than projected!
He indicated that unexpected expenditures combining with revenue shortfalls had deflated his $800m cushion. He acknowledged a 12% increase in the deficit for 2014/15 which rose from $267.3m to $299.9m. He increased the projected deficits for 2015/16, 2016/17, and 2017/18.
In February 2015, Bob projected that over the next three years, he would spend a whopping $403 million [$125m + $151m + $127m] to cover those three more consecutive deficits. This $403m would be borrowed.
And this is where the ‘zombies’ emerge.
If Bob borrows before March 2016, he puts all 50,000 of us beautiful Bermudians on the same path, doing the same thing. We’ll all be zombie walking towards an inevitable and unpleasant end.
The end will unfold like this.
Act One. When we go back for “more”, the Rating Agencies will commence downgrading us. There are five financial years and five more credit ratings between now and 20th July 2020.
That sets up Act Two where interest rates demanded from us by lenders will rise.
Which leads to Act Three, wherein Nanci rises and rises, continually eroding the amount of Government Revenue that is left over for Personnel, Operations, and Capital.
On to Act Four where all Government employees are forced to accept major pay cuts or major layoffs and all Government services get major cut backs.
Act Five opens with an Island, once beautiful, starting to suffer, and suffer visibly, from infrastructure deterioration.
The play closes in Act Six, when 20th July 2020 arrives. On that day, Bermuda begins facing a bundle of bonds that aggregate to $1.915 billion but which will have been increased by the $403m borrowed between 2016 and March 2018; and by another $500m or so borrowed between April 2018 and March 2020, to payoff $180m due in 2019 as well as cover three more deficits in 2018/19, 2019/20, and 2020/21.
Simply, Bermuda will start Act Six owing about $2.8 billion [or more] with Nanci likely to be around or over $250 million a year – and heading higher as we re-finance the $500m, $140m, $475m, and $750m bond bundles that become due for repayment between 20th July 2020 and December 2023.
All 50,000 of us Bermudians – probably less, because many will have emigrated – will have been zombie-walked into Act Six. We’ll be shuffling and stumbling in a graveyard Bermuda where Government Revenue has stagnated around $1,000 million – if we’re lucky. But Nanci will still be gobbling up $250 million of that – and Nanci will still be growing.
Minister Bob, do not borrow before March 2016.
Find or get – if necessary, from a forty of Black Seal – the courage to make and implement the right decisions. Go to a six-month Budget. Talk and explain to the beautiful people of this Island – or step aside and let someone else talk and explain.
Do not become the Chief Zombie, zombie-walking us all into a desolate place.
Do not borrow. Do not borrow. Face your problem. Get Nanci under control.
- Larry Burchall
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