By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government overshot its 2024-2025 full-year deficit target by just $9.1m thanks to last-minute revisions that cut its first-half ‘red ink’ by $37.3m and enabled it to hit Budget goals.

The Ministry of Finance, yesterday unveiling the Government’s fiscal performance for June and the full Budget year, revealed that the fiscal deficit only exceeded initial projections by 13 percent to close at $78.9m compared to the originally-targeted $69.8m.

“For fiscal year 2024-2025, the deficit stands at an estimated 0.5 percent of GDP (gross domestic product), which remains firmly within the targeted range of 0.3 to 0.7 percent of GDP,” the Ministry of Finance asserted. That range also aligns with the prediction given by Prime Minister Philip Davis KC in presenting the 2025-2026 Budget, signalling that the Government has hit a key fiscal goal.

However, a closer inspection of the figures - particularly a comparison of the Ministry of Finance’s May and June fiscal reports - discloses that the Government only came so close to its target because of last-minute changes to monthly expenditure and deficit figures for the first four months of the 2024-2025 fiscal year.

The May 2025 fiscal report, released just over one month ago towards the end of August, revealed a $141.5m deficit for the first 11 months of the 2024-2025 fiscal year. To reduce that to $78.9m would have required the Government to generate a $62.6m surplus in June, which is traditionally a month when heavy deficit spending is incurred, but yesterday’s report showed just a $25.4m surplus for June.

That would have taken the full-year deficit for 2024-2025 to $116.1m, some $37.2m above the end-June number of $78.9m. A Tribune Business analysis found that the difference, or gap, can be explained by last-minute government revisions to its spending and deficit figures for the first four months of the 2024-2025 fiscal year.

This covers the four months from July to November. In particular, November’s monthly deficit, which was shown in the May fiscal report as standing at $82.8m, ended up being cut by $25.9m or 31.3 percent to $56.9m in the June fiscal report that was released yesterday.

The revised November 2024 deficit figure resulted from a downwards revision to total government spending, which was cut from $336m in the May 2025 report to $310.1m in the latest publication. The near-$26m, or 8.4 percent, reduction resulted largely from a $22.9m drop in capital spending - from $53.7m in the May 2025 report to just $30.8m in its June equivalent.

In particular, November 2024’s ‘transfers N.E.C’, which stands for ‘transfers not elsewhere classified’, were cut from $28.3m in the May 2025 report to just $5.4m one month later in the June report. No explanation was provided for such a substantial, late revision that favours the Government by bringing it in close to its 2024-2025 deficit target.

Smaller revisions, according to Tribune Business’s analysis, also occurred for the Government’s monthly spending and deficit revisions for July 2024 through October 2024. The deficits shown in the May 20205 fiscal report were subsequently revised downwards by $4.6m for July; $0.7m for August; a $3.9m reduction for September; and a $2.2m drop for October.

When added to the November changes, these last-minute revisions for the June and year-end 2024-2025 fiscal report cut the deficit by a combined $37.3m compared to previous monthly reports. This, together with the May and June Budget surpluses, meaning revenue income exceeds the Government’s spending, is what enabled it to come so close to the full-year deficit target.

Simon Wilson, the Ministry of Finance’s financial secretary, did not respond to Tribune Business phone calls and messages seeking comment before press time last night.

The Davis administration will likely argue that the near-miss, coming within $10m of its full-year deficit projection, will further boost its credibility with international investors and capital markets especially following The Bahamas’ first credit rating upgrade for more than a decade by Standard & Poor’s (S&P) last week.

However, one financial source, speaking on condition of anonymity, told Tribune Business that the scale of the November swing and late revisions to the deficit and spending numbers “demands an explanation” from the Government as to the cause so that it quashes any suggestion that the fiscal numbers are being “fudged”.

They added that ‘transfers N.E.C.’ refers to spending that does not fall into “general categories” such as subsidies to state-owned enterprises (SOEs).

“That is truly, truly inexplicable,” the source said of the November 2024 deficit and spending revisions. “You’d expect to see movement of only a couple of million dollars up and down. These are significant, massive swings that should have an explanation to them. I think they have some explanation to do on the backward revisions. It would be interesting to know what caused them to revise expenditure.”

They suggested that the revisions may represent payables owed to suppliers and vendors, which the Government kicked into the 2024-2025 fiscal year to ensure it came close to the 2023-2024 deficit projection, being taken out and put back to June 2024 “where they belonged” and payments incurred.

“Were any of those expenditure revisions revised back to the prior year? That’s a key question,” the source said, noting that the Government has more control of its spending, which makes the scale of the changes - particularly for November - more surprising. 

While acknowledging that the revisions may have resulted from some government spending being incorrectly posted or misclassified, they added: “Such downward revisions in expenditure mean something was misplaced in a material way. It demands an explanation.”

The Ministry of Finance’s June report and accompanying release had, as of last night, only been posted on the website dedicated to international investors. They have yet to appear on the Government’s Budget website, which is targeted mainly at Bahamians, and were back-dated with a release date of September 26 although they only appeared yesterday.

The timing of the release is likely to have been chosen to coincide with The Bahamas’ sovereign credit rating upgrade by S&P, with the rating agency likely viewing the Government’s latest fiscal numbers as key to its positive conclusions.

However, the last-minute spending and deficit revisions, and the absence of any explanation for far, are again likely to provoke calls for the Government to complete the long-promised transition to accrual-based accounting across the public sector so that a true picture of its financial position is presented.

The Ministry of Finance’s monthly fiscal reports affirm that the figures and data presented are based on “a modified cash basis of accounting” that is guided by International Public Sector Accounting Standards (IPSAS). This makes clear “revenue is recognised when received and not when earned”, and that “expenditure is recorded in the period in which it is paid”.

While there is nothing wrong with this, such a form of accounting does not recognise spending commitments made, or bills that are owing such as those due to the Government’s vendors. Accrual-based accounting would record, and expose, such commitments and payables, but under the present system these do not show up in the revenue and expenditure figures.

There is also likely to be scepticism over June’s $25.4m surplus given that this has traditionally been a month when the Government’s spending far exceeds revenues due to government agencies, departments and ministries presenting the Ministry of Finance with bills for payment prior to fiscal year-end that it knows nothing about.

The Opposition charged that last year’s moderate June surplus was achieved by the Government kicking its payables over into the 2024-2025 fiscal year, as it is allowed to do under cash-based accounting, to enable it to hit the deficit target. There have long been suggestions that the Government is suffering liquidity and cash flow challenges due to delays in paying its suppliers and vendors.

However, in its 2025-2026 Fiscal Strategy Report, the Government said it had cut vendor arrears as a percentage of GDP to 1.7 percent of nominal GDP at end-2024 compared to 2.1 percent of nominal GDP 12 months prior.