By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A well-known banker is challenging why the Government appears to be "cherry picking" certain assets and accounting treatmaents in the last-minute revisions to its 2024-2025 spending and deficit numbers.

Gowon Bowe, Fidelity Bank (Bahamas) chief executive, told Tribune Business that the Davis administration had not provided a "significantly fulsome explanation" for why The Bahamas' investment in the Development Bank of Latin America and the Caribbean (CAF) alone was deemed worthy of being shifted from an 'expense' to a below-the-line 'investment'.

Questioning the "uniqueness" of this outlay, and why other assets were not subjected to similarly revised accounting treatments, he added that the International Monetary Fund (IMF) would have advised the Government to switch to full accrual-based accounting as opposed to using this method "piecemeal".

Michael Halkitis, minister of economic affairs, last week said the IMF had supported the Government reclassifying the $25m CAF investment it made in November 2024 from an 'expense' to an 'investment'. This enabled the Davis administration to remove this sum, which accounted for the majority of the $37.3m eliminated from its year-end spending and deficit figures, off its balance sheet.

Mr Bowe, though, argued that The Bahamas "must be very careful" that, as a sovereign nation, it is not giving the impression that the Washington DC-based fund is "dictating" its fiscal accounting treatments. And he also queried why the IMF's advice is now being treated as "Gospel" by the Government when, in the recent past, the two have disagreed over The Bahamas' economic growth and fiscal forecasts.

"There are many expenditures by the Government that could 'qualify' as an investment," the Fidelity Bank (Bahamas) chief told Tribune Business. "All capital expenditure in theory is investment; any monies spent on road development, and particularly various infrastructure in the Family Islands.

"The question would be what is the uniqueness of this expenditure [the CAF subscription] notwithstanding the purpose for it and the long-term benefits of it, which qualifies it as an asset." Mr Bowe also queried why the accrual-based accounting method appeared to have been applied to the CAF expenditure, but for others the Government had reverted back to its traditional cash-based accounting.

"Ultimately, why cherry pick on this particular one?" he asked. "The IMF would be advocating for full accrual-based accounting as opposed to piecemeal.... We also have to be very careful to say the IMF is not dictating our accounting practices.

"The one thing we must do is apply accounting practices consistently and, if we are changing accounting practices, we must disclose that and say we're doing it across all similar transactions. We have to be very careful with saying, in one breath, that we are following the advice of external parties and then, in the next breath, say we don't agree with the external parties and will do it our way.

"Why, in this particular instance, is the Government minded to say we are getting advice from the IMF and it's gospel? We have to be more genuine in our communications as opposed to punch line responses saying 'the boogeyman made me do it'," Mr Bowe continued.

"We should not be seen to be cherry-picking accrual versus cash-based accounting and throwing it on external parties. The Bahamas is a sovereign jurisdiction. It makes its own choices." He also queried why the likes of subsidies and transfers by the Government to state-owned enterprises (SOEs) were not treated the same as the CAF loan as it could be argued that they, too, were investments.

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”.

Other financial sources, speaking on condition of anonymity, queried why the changed accounting treatment for the CAF loan - which they acknowledged could be justified - as well as the other adjustments making up the $37.3m worth of revisions were not made and disclosed earlier given that they all occurred between seven to 11 months earlier.

They added that the timing of the revisions, coming at the 2024-2025 fiscal year's end in June, suggested that the Government had scoured its books at the last minute to find ways to cut spending and come in closer to its $69.8m deficit target. Others added that the CAF subscription remained an expenditure and should not alter, adding of the change: "It makes no sense."

Mr Halkitis, explaining the revisions last week, said: "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.

“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.”

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

The Ministry of Finance, 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.