By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition last night charged that “the Bahamian economy has never performed so aggressively as to wipe out a $300m shortfall” after the Government unveiled a deficit over five times’ its full-year target.

Dr Duane Sands, the Free National Movement’s (FNM) chairman, told Tribune Business that Bahamians should “not hold our breath” that the forecast $69.8m full-year target for 2024-2025 will be met after the Ministry of Finance unveiled a $356.5m fiscal deficit for the five months to end-November.

That figure, which is some 410.7 percent or more than five-fold higher than the full-year goal, is also near-double or 92.3 percent greater than the $185.4m in ‘red ink’ incurred at the same end-November point in the previous 2023-2024 fiscal year.

And, if the Government repeats December 2023’s monthly deficit of $65.9m, it will likely face a half-year deficit of more than $400m when it unveils the mid-year Budget next Wednesday in the House of Assembly. If this comes true, the Davis administration will need to generate a staggering surplus of around $330m during the fiscal year’s second half to reverse this trend and come close to the full-year deficit target..

Michael Halkitis, minister of economic affairs, did not respond to Tribune Business’s message seeking comment before press time last night. However, Dr Sands voiced scepticism that the Government will be able to make up all the lost ground during the 2024-2025 fiscal year’s second half even though it has begun to generate Budget surpluses - where tax and revenue income exceeds its spending - during this period.

The Davis administration produced a $92m surplus during the six months to end-June last year, which many suspect was at least partially achieved by delaying payment of outstanding bills and payables until the current fiscal period, but it will likely need to achieve a four times’ greater sum this time around to come in close to projections.

The Ministry of Finance, in its November 2024 report, revealed that month’s deficit expanded by 18.5 percent or $12.9m year-over-year, growing from $69.6m the year before to $85.5m. The data shows this was driven entirely by spending increases that exceeded improved revenue collections driven primarily by higher real property and international trade transactions.

Total spending jumped by $61.4m to hit $335.5m as opposed to $274.1m in November 2023, representing a 22.4 percent increase year-over-year. Recurrent spending, which covers the Government’s fixed costs such as civil service salaries, rents and supplies of goods and services, rose by $39.9m or 16.5 percent year-over-year to $281.9m as compared to the prior year’s $242m.

And capital expenditure on infrastructure projects and such like surged by $21.6m, or 67.5 percent, to $53.6m for November 2024 as compared to the year before’s $32m. Revenue, meanwhile, continued to beat prior year targets at $253.1m - a 21.3 percent or $44.5m jump over November 2023’s $208.6m, but this was insufficient to offset the growth in spending.

“I wonder how they are going to claw back that amount,” Dr Sands challenged last night, pointing to the near-$300m difference between the 2024-2025 full-year target and deficit through the five months to end-November. “I don’t know how they are planning to make that up.

“I don’t think we’ve ever seen the economy perform so aggressively as to wipe out a $300m shortfall in the second half of the fiscal year. For this administration to clam on one hand that it will meet its Budget deficit target this year, but on the other be off not just one or two times’, but five times’ off its predicted fiscal deficit at a point when traditionally they ought to be further along than they are raises some questions about their connection with reality.”

And, acknowledging that the 2024-2025 fiscal year’s deficit target is supposed to be the stepping stone to a $448.2m surplus in the following 2025-2026 fiscal period, Dr Sands asserted that “I wouldn’t hold our breath” that this will be achieved.

The Government will likely counter that the Budget’s cyclical nature makes it impossible to predict the full-year outcome until all the numbers are in. This is because the Government typically earns the bulk of its income during the revenue-rich second half of the fiscal year, which is the period The Bahamas is now in.

This coincides with peak winter tourism and economic activity, as well as the payment of Business Licence fees, the bulk of real property taxes, commercial vehicle licensing and increased cruise ship passenger fees.

But Dr Sands argued: “I think we should be very concerned when we look at what has become a structural delay in payment to the Government’s vendors. There’s a consistent pattern where the Government of The Bahamas is late or very late in paying its bills except those that they feel are politically advantageous to them. I ask whether this government is being frank about its ability to keep up with its budgeted expenses.”

Pointing to “garbage piling up at hospitals and healthcare facilities” as one alleged consequences of purported vendor payment delays, he added: “While we’ve had unprecedented levels of tax collection we’ve also had unprecedented levels of discretionary and other spending. If we continue to spend, spend, spend, there’s no way you’re going right-size the fiscal position of The Bahamas.”

Continuing to question whether the increased tourism arrivals numbers are “making it to the average man and woman on the street”, Dr Sands said: “They are certainly not reflected in the fiscal position of the Government. What I’m hoping to hear [in the mid-year Budget] is a full-throated, honest assessment of the position we are in.

“Let’s hope this administration stops playing politics, comes clean with the Bahamian people and let’s us know what the contingencies are. The cost of money may increase, the availability of money may decrease and many of the things we are spending money on are not essential. There’s only so many cheques we can put in the draw or hide under the table given we have cash-based accounting.”

Dr Sands, reiterating The Bahamas’ vulnerability to external shocks and hurricanes, said this nation’s fiscal weakness leaves it especially exposed to the uncertainties stemming from Donald Trump’s economic, trade and tariff policies that some are speculating could trigger trade wars and even a global recession if fully implemented.

“I think we should be concerned. We really should be concerned,” he added. “The Government is picking figures and saying everything is wonderful. Why not take some responsibility for what this administration does with its spending and signal to the Bahamian people - I don’t want to use a swear word like austerity - but the counter-cyclical approach to the challenges we’ve seen over the years, we’ve got to be watching our pennies as opposed to spending in an environment where we don’t know where the next dollar is coming from.

“This ought not to be electioneering, although I’m sure they will promise a chicken in every pot to brighten their prospects and to hell with where the money is going to come from. Let’s get elected and we’ll worry where the money is coming from on the other side.”

The expanding deficit is also ill-timed for the Government given that a general election has to be called within the next 19 months, as it would typically - in common with many of its predecessors - look to prime the spending pump around now to create a voting climate more favourable for its prospects.

It is also unclear why the Government would choose to release the monthly fiscal report for November 2024 now given that the mid-year Budget is due to be presented in the House of Assembly next week Wednesday, although observers yesterday again suggested it was likely to be “taking the sting” out of potentially difficult news and managing public expectations.

And the Government may have revenue-generating measures of its own to announce such as the long-promised blue carbon credits created from monetising this nation’s seagrass meadows and mangroves. Still, it is also likely that the latest fiscal figures may attract scrutiny from the credit rating agencies, Moody’s and Standard & Poor’s (S&P).

Revenues, though, continue to beat prior year numbers. “Tax collections improved year-over-year by 25.7 percent ($47.1m) to $230.5m,” the Ministry of Finance said yesterday of November 2024. “Property taxes rose by $14m to $21.1m, underpinned by gains in the commercial and foreign-owned undeveloped property components.

“International trade and transactions taxes were higher by $23.5m at $85.3m due to growth in excise duty and departure tax yields. Non-tax revenue aggregated $22.6m for a 7.1 percent ($1.5m) year-over-year increase that was largely associated with Immigration and port fees.

“During the review month, revenue receipts totaled $253.1m, a 23.7 percent improvement from the prior year, with the tax component higher by $47.1m at $230.5m.”

As for government spending, the Ministry of Finance added: “The $281.9m in recurrent outlays for the month represented an increase of 16.5 percent ($39.9m) from the corresponding period in the prior year. Use of goods and services increased by $16.7m to $60.9m, mainly on account of payment for utilities, acquisition of various services and special financial transactions.

“Subsidies grew by $10.1m to $42m due to higher transfers to public non-financial corporations. Capital expenditures widened by $21.6m to $53.6m. The bulk was expended for capital transfers (52.6 percent), and the remaining 47.4 percent represented the acquisition of non-financial assets.”

Turning to the impact of all this on the Government’s debt position, the Ministry of Finance added: “During the review month, central government’s debt outstanding advanced by an estimated $40.4m.

“The $432.3m in proceeds from borrowings was derived from foreign currency (69.4 percent) and domestic currency sources (30.6 percent). Aggregate debt repayment of $392m was allocated between domestic (23.4 percent) and foreign (76.6 percent) currency components.”