Thursday, May 29, 2025
By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
A Bahamian banker was yesterday “struggling to understand” how the Government will achieve a near-18 percent increase in its forecast 2025-2026 revenues amid the present tax and economic climate.
Gowon Bowe, Fidelity Bank (Bahamas) chief executive, and a former Fiscal Responsibility Council member, told Tribune Business that the Davis administration is targeting $3.887bn in revenues for the upcoming fiscal year that starts on July 1 even though it appears unlikely to hit its goal for the current 2024-2025 Budget period.
Based on the $2.5bn in taxes and other revenues collected during the nine months to end-March 2025, he explained that the Government is on track to generate around $3.3bn in total income for the 2024-20255 full-year - an outcome that would be around 6.7 percent, or $237m, off the $3.537bn target.
Should this become reality, Mr Bowe told this newspaper that the Davis administration would have to increase its revenue income by around 20 percent year-over-year to hit the 2025-2026 target. And it would have to achieve this against the likelihood, which the Government acknowledged yesterday, of a US and global economic slowdown sparked by uncertainty surrounding Donald Trump’s tariff policies.
Any US woes will inevitably impact Bahamian economic activity and economic growth, which is the key driver of the Government’s revenues. Should its 2024-2025 full-year income come in at $3.3bn, it will need to increase revenues by 17.8 percent or $537m - more than half-a-billion dollars - to hit next year’s fiscal targets.
“There are significant sensitivities that are not discussed at this point,” Mr Bowe said of yesterday’s Budget. “The revenue for 2025-2026 jumping to $3.9bn... If you extrapolate from the first nine months [of 2024-2025], they are on target for $3.3bn. If they are likely to come in around $3.3bn, that is a 20 percent increase.
“That’s not to say that’s not achievable, but if you spoke about a potential economic slowdown in the US, that will impact GDP and GDP growth in the country” and cause a possible reduction in economic activity and the Government’s tax revenues.
And, with no major revenues unveiled by the Government in the form of new and/or increased taxes, Mr Bowe said: “I have difficulty in understanding how we get to the higher revenue numbers. The [Budget] surplus is heavily contingent on achieving that revenue target.
“The one thing I do know in government finances is that the expenditure is never predicated as a percentage. It’s always hard numbers. Each ministry or agency says this is what they want to spend. On the expenditure side, very rarely do you see under-budgeting. That only comes with revenue. The revenue side is the one that has sensitivity.”
The Prime Minister, in unveiling yesterday’s Budget, asserted that the Government’s strong second-half performance had continued into April with the $352.7m in collected revenue aligned with historical trends showing that around 12 percent of its income is collected in this month. He added that April had generated a $135.4m monthly surplus, meaning the Government’s revenues had exceeded spending.
But, while Philip Davis KC said April’s performance suggested the final three months of the 2024-2025 fiscal year “will be very strong as well”, Mr Bowe noted that less than 70 percent of the full-year revenue total had been collected as at end-March. This, he said, suggested that the Government is not likely to hit its full-year revenue goal with three-quarters or nine months of 2024-2025 already completed.
“It indicates it’s unlikely to hit 100 percent because the bulk of the revenues are not in April-June,” the Fidelity Bank (Bahamas) chief told Tribune Business, the revenue rich third quarter having closed. “Why? There may be plausible reasons. There’s still a fair amount of information that still needs to be laid.”
Mr Davis, meanwhile, set out several economic indicators that the Government is targeting to achieve its ambition of returning The Bahamas to ‘investment grade’ status with the international credit rating agencies, Moody’s, Standard & Poor’s (S&P) and Fitch, within three years by the 2028-2029 fiscal year.
These include a 13.1 percent, or $5,100, increase in Bahamian per capita gross domestic product (GDP) to $44,000 by 2029, plus a more than 50 percent reduction - in percentage terms - in the Government’s debt interest expense as a percentage of GDP within the same timeframe.
Mr Davis, adding that the Government also expects to be “near” its 50 percent debt-to-GDP target by the 2028-2029 fiscal year, some two years ahead of its 2030-2031 goal, said: “This administration remains resolute in its commitment to securing an investment grade credit rating within the next three years, starting in the upcoming fiscal year, 2025-2026.
“Achieving this milestone by fiscal year 2028-2029 is not merely symbolic; it is a strategic imperative that will unlock greater economic opportunity, reduce borrowing costs and enhance investor confidence in our nation’s future....
“With our GDP projections expected to fully capture economic activity within the next three years, we have confidently set the following targets to reach ‘investment grade’ status. GDP per capita has risen by 27.7 percent, increasing from $30,400 in 2021 to $38,900 in 2024. On a year-over-year basis, it grew by 2.7 percent, up from $37,900 in 2023,” he added.
“Based on regional benchmarks, long-term growth prospects and the current economic environment, we are targeting an annual GDP per capita of approximately $44,000 by 2029.” The Bahamas is presently some four notches below ‘investment grade’ status with the rating agencies, having been marooned in ‘junk’ status for some years.
Mr Davis, identifying the Government’s revenue-to-GDP ratio, or its percentage of economic output, as another targeted indicator, said: “Revenue-to-GDP has also improved significantly, rising from 17 percent in fiscal year 2020-2021 to 19.7 percent in fiscal year 2023-2024. For the current fiscal year, as previously planned, we had set a target of 22.1 percent.
“To meet the requirements of an investment grade rating we must continue to enhance our revenue mobilisation efforts. Accordingly, we project that total revenue will reach 23.5 percent of GDP in fiscal year 2025-2026 and increase to 25 percent thereafter.”
The Prime Minister added that “international best practices” showed a country’s debt should not exceed half its economic output or GDP. The Bahamas’ debt-to-GDP ratio stood at 72.4 percent at end-June 2024, and Mr Davis added: “The Fiscal Strategy Report 2025 outlines our commitment to reducing the central government debt-to-GDP ratio to 50 percent by fiscal year 2030-2031.
“Based on internal estimates and expected policy changes, we expect to be near this target by fiscal year 2028-2029. In addition to reducing the size of our debt, we are also focusing on reducing the cost of carrying it.
“In fiscal year 2020-2021, interest expense accounted for approximately 22.1 percent of total government revenue, decreasing to 20 percent in fiscal year 2023-2024. Our objective is to further reduce this ratio to 10 percent by fiscal year 2028-2029.”
Comments
Porcupine says...
Bankers, lawyers and thieves.
Posted 30 May 2025, 6:37 a.m. Suggest removal
rodentos says...
‘Hard to understand’ how Gov’t will strike $3.9bn revenue goal? Easy: they won't. Just pathological liars
Posted 30 May 2025, 9:48 a.m. Suggest removal
ThisIsOurs says...
The same way they got a 3.7% growth rate. Paper is lie down
Posted 30 May 2025, 10:49 a.m. Suggest removal
rodentos says...
they meant -37%
Posted 30 May 2025, 1:58 p.m. Suggest removal
ThisIsOurs says...
That's even better news! Who knew the plan was working so well?
Posted 31 May 2025, 4:04 a.m. Suggest removal
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