By NEIL HARTNELL

and FAY SIMMONS

Tribune Business Reporters

A Cabinet minister yesterday said the bulk of the last-minute revisions to the Government’s 2024-2025 spending and deficit figures resulted from advice by the International Monetary Fund (IMF).

Michael Halkitis, minister of economic affairs, told the Office of the Prime Minister’s weekly media briefing that most of the $37.3m in spending and deficit adjustments for the five months between July and November 2024 resulted from $25m being reclassified from an ‘expense’ to an ‘investment’.

He added that the $25m allocated to finance The Bahamas’ bid to become a shareholder in the Development Bank of Latin America and the Caribbean (CAF) was initially recorded as an expense. However, following a review by the IMF, the Government was advised to classify the transaction “below the line” as an investment.

The minister added that this adjustment accounted for the bulk of a $37.3m revision to the Government’s fiscal figures, with the remaining amount made up of smaller, miscellaneous changes.

“You might recall that The Bahamas joined the Development Bank of Latin America and the Caribbean (CAF) during the past year. Part of joining the CAF, we subscribe $25m to become a shareholder in the bank,” Mr Halkitis said.

“When we initially did it, we classified that as an expenditure. When the IMF came in and did their review, they sat with us and they said: ‘Listen, this is rightfully an investment. It doesn’t need to be expenditure. So we removed that $25m from expenditure and put it below the line; it’s an investment.

“I think the entire figure was about $37m. Twenty-five million dollars of that was for CAF, and then the rest was just a combination of other minor revisions. Revisions are not unusual, and that is why a lot of times when we release figures, we say preliminary figures, meaning not final. And I would just encourage all to bear that in mind.”

The Bahamas’ total subscription for CAF shares is just shy of $50m, and is split into two tranches of around $25m - one that was to be paid by end-September 2024, and another by end-September 2025. Tribune Business research showed that both appeared to be included in the Ministry of Finance’s capital budgets for both 2024-2025 and 2025-2026 as “capital subscriptions to international agencies”.

Mr Halkitis emphasised that fluctuations in the Budget figures are a normal part of fiscal management, and warned against drawing definitive conclusions based solely on monthly fiscal reports. He added that the Government’s finances are dynamic, and figures often undergo changes as more accurate data becomes available and reclassifications are made in consultation with external agencies such as the IMF.

“We release monthly reports, we release quarterly reports, and then we release the annual report. And, unfortunately, sometimes there tends to be an over-reaction. When you see a monthly report, you see something, ‘oh, the deficit has gone up’. And we have to come out and say, ‘it’s just one month, we got this’,” said Mr Halkitis.

He warned that monthly reports, while important for tracking short-term trends, do not provide a complete picture of the country’s fiscal position. He argued that these reports should be viewed within the broader context of quarterly and annual reporting, which capture the cumulative effect of revenue collection, spending adjustments and investment decisions over time.

The Opposition’s chairman, though, was yesterday far from convinced by Mr Halkitis’ explanation as he accused the Government of achieving “an orchestrated or choreographed outcome” for its 2024-2025 full-year deficit, and asserted: “They’ve cooked the books.”

Dr Duane Sands told Tribune Business that there is “no question” that the Davis administration produced a contrived outcome, with the $78.9m deficit for the full-year to end-June 2026 only overshooting its Budget target by $9.1m or 13 percent, due to last-minute revisions that cut a combined $37.3m from spending and deficit figures given for months earlier in the period.

“I think this is an orchestrated or choreographed outcome,” he blasted. “If you look at the predicted, or anticipated, revenue, other than duties they were off pretty much on all counts. When you look at how they got close to the predicted outcome, they said they would meet it because of superior revenue performance etc, etc.

“Now, the only way they could do that is by reducing spending, which they did. They have cooked the books. The reality on the ground reflects that. Nobody should be impressed. The [fiscal] numbers are certainly inconsistent with the jobs report, the palpable sense of despair on the street, and just the state of affairs that exists.”

Key revenue streams such as VAT and real property tax under-shot projections for the 2024-2025 fiscal year by 5 percent and 9 percent, respectively.

The Ministry of Finance disclosed that VAT collections missed their target by $77.6m as they closed at $1.438bn - a sum representing 94.9 percent of the $1.516bn full-year target. However, the $1.438bn received was some $85m higher than the prior Budget year’s collections.

Meanwhile, real property tax revenues came in some $20m below the $230m forecast to account for 91.3 percent of Budget estimates. The $210m collected, though, was slightly higher than the prior year’s $203.4m when property tax revenues beat the 2023-2024 Budget’s target.

For the 2024-2025 fiscal year, the only revenue source to exceed target was “taxes on international trade and transactions” - largely meaning Customs duties imposed at the border which totalled $871.7m - a sum 5 percent higher than the forecast $830.5m

Total revenues missed Budget forecasts by $147.3m, totalling $3.396bn compared to the projected $3.543bn, to stand at 95.8 percent of target. Total tax revenues were off from target by $116.2m, standing at $3.026bn or 96.3 percent of projected collections which were $3.143bn.

The revenue misses, though, were balanced by the Government’s spending coming in 3.8 percent below forecast at $3.475bn compared to $3.613bn projected. Recurrent spending, which covers the Government’s fixed costs such as civil service salaries and rents, was almost $80m less than forecast at $3.189bn compared to Budget forecasts of $3.269bn.

Dr Sands, meanwhile, pointed to the Central Bank’s report on monthly economic developments for August which, while showing that total visitor arrivals are up for the seven months to end-July 2025, also acknowledged that higher-spending stopover visitors are off year-over-year by 1.3 percent for the same period.

“What you have to ask is are those numbers consistent with the numbers on the ground?” he added. “Clearly, they are not. The component in tourism that makes a difference in the lives of ordinary Bahamians continues to drop. Certainly, the far more plausible explanation... is that Finance has contrived the numbers to achieve an outcome that would be palatable to the Bahamian public.

“If they think we are going to be impressed by that then carry on smartly. I am certainly not impressed. This is all about smoke and mirrors, this is all about public relations, this is all about spin.” The Opposition’s chairman also renewed his previous call for the Government to complete the long-promised transition to accrual-based accounting across the public sector.

“It’s certainly legal,” he argued of the Government’s current cash-based accounting system, “but there are limitations and the public needs to understand these limitations. Advocates for accrual-based accounting have argued that such a switch will give a true and accurate picture of the Government’s financial position.

This compares to the current “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.

Mr Halkitis, though, hit back at what he described as politically-motivated misrepresentations of The Bahamas’ fiscal performance. He argued that isolated data points from preliminary reports are sometimes used out of context to create an exaggerated sense of economic instability.

“It’s unfortunate that, politically, some seek to take advantage of it to paint a worse picture of the finances of the country than they are. And. unfortunately, it takes external people to come and do the analysis and say ‘this is the true picture’,” said Mr Halkitis

Addressing his political opponents directly, Mr Halkitis criticised what he described as “hysterical” commentary made for political gain, warning that such statements are monitored internationally and could damage the country’s financial credibility.

He suggested that such actions not only mislead the public but may also undermine confidence among international financial institutions, who rely on accurate and balanced assessments when evaluating The Bahamas’ fiscal credibility.

“And just one last shot to the politicians out there, because I imagine you know this might ramp up, is that when you take these shots and get a little hysterical, when you see these things and put out these hysterical statements, it’s not only consumed here in The Bahamas; it’s consumed internationally, and so then we have to go out and sit with financial institutions and explain to them what the true picture is, doing damage control, so to speak,” said Mr Halkitis.

“I’ll leave with this. We’re in a democracy, so anybody’s free to say what they want, but particularly when it comes to the financial well-being of the country, of course, ask, of course demand accountability, but particularly aimed at the politicians out there who seek to score points. Let’s be a little more measured in our statement.”