By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Bahamas will need to invest more than $450m annually from 2030 onwards to address critical “infrastructure gaps” although it stands to benefit from “one of the Caribbean’s least-risky environments” for private financing.

The Inter-American Development Bank (IDB), in its latest quarterly bulletin, said this nation’s “considerable financing needs” in sectors such as energy, communications and water and sanitation will have to be met through a combination of public-private partnerships (PPPs) that unlock private financing as well as government-guaranteed loans.

While acknowledging that the availability of critical data proved challenging, the multilateral lender forecast that The Bahamas will need to consistently invest sums amounting to 3 percent of gross domestic product (GDP) - $453m based on 2025-2026 Budget data - on an annual basis to maintain and enhance infrastructure vital to underpinning economic growth.“Recognising the limitations of public financing in a high-debt environment, the Government is increasingly turning to public-private partnerships (PPPs) to mobilize capital and expertise,” the IDB said, citing the $1.2bn investment in ongoing energy reforms as an example.

“A key driver of this shift is the recognition of persistent infrastructure gaps, particularly in sectors such as water and sanitation, telecommunications and energy. According to IDB estimates, addressing these gaps will require yearly investments exceeding 3 percent of GDP by 2030, even before accounting for climate resilience and sustainability enhancements. 

“The 2024 energy sector reform, which mobilized over $1.2bn in PPP commitments, exemplifies the scale and ambition of this new approach. By embedding PPPs into its broader development strategy, The Bahamas is not only addressing critical infrastructure deficits but also laying the foundation for a more resilient, climate smart and investment-ready economy.”

Conceding that external borrowing costs and terms might remain “tight” for The Bahamas, the IDB added that major infrastructure projects will have to “ be increasingly financed through PPPs and government-guaranteed loans rather than direct government revenues”.

It said: “In the case of The Bahamas, data availability and related issues meant that the investment needs of several sectors and sub-sectors could not be assessed, including the wastewater treatment sub-sector of the water and sanitation sector, as well as the electricity and transportation sectors.

“Nevertheless, available data in two key sectors suggest appreciable investment needs, particularly with respect to both new infrastructure as well as maintenance and replacement needs of existing infrastructure, totaling over 3 percent of GDP - based on 2019 real GDP - by 2030. 

“While this certainly represents a lower bound, it points to considerable financing needs that might be supported by appropriately designed and contracted private participation. The IDBs Infrascope tool, which benchmarks the ability of countries to implement sustainable and efficient PPPs in key utility and infrastructure sectors, ranked The Bahamas 17th out of 26 nations in Latin America and the Caribbean in 2023-2024 with a score of 38.5 out of 100.

“The Bahamas PPP policy established in 2018 provides primary guidance for PPP execution,” the IDB report said. “However, according to the Infrascope assessment, as of 2022 implementation of the policy remained incomplete, including aspects related to organizational management, interaction between agencies and formulation of a PPP unit. Up until recently, PPP initiatives were overseen by government ministries rather than by established ministries or dedicated project teams.

“In terms of its performance on the Infrascope assessments, The Bahamas has seen a 4.5-point increase in its overall score since the 2021-2022 report, owing mainly to the new 2023 procurement legislation that has improved the fairness and openness of contract changes. Notably, the country also launched two airport PPPs in 2023 and continues to increase its use of sustainable financing for PPPs.

“In terms of strengths, The Bahamas boasts one of the region’s least-risky environments when it comes to government actions against the private-sector PPP partners such as expropriation, payment default, price revision, contract termination or bureaucratic risk,” the IDB added. “The country’s PPP policy also establishes relatively comprehensive regulations around bidding, contract changes and arbitration, which provides a solid foundation for future PPP engagements.

“On the institutional side, despite having a solid regulatory foundation in its PPP policy, The Bahamas struggles with the implementation of key institutions such as the PPP operational unit as well as a dedicated agency and registry to define clear rules and responsibilities. This points to the need for continued efforts to close the gap between policy intentions and practical execution.”

Pointing to other concerns, the IDB said: “On the technical side, as with its peers in the Caribbean, The Bahamas lacks certain support mechanisms, including project preparation facilities and project development funds, which would support the development and execution of PPPs in the future. 

“The Infrascope 2023/24 report also highlights the need for robust pre-feasibility and feasibility studies. In addition, the country faces difficulties in evaluating the performance and impact of PPP projects, which undermines accountability and the ability to measure outcomes.

“On the financing side, while financial instruments for PPPs are beginning to emerge, there is a pressing need for greater awareness and learning of how these structures function - particularly in areas such as project bonds, sustainable finance and institutional investment. Recent examples of private sector investment, especially investments financed through local equity, offer promising models for expanding domestic financing.”

The IDB report urged The Bahamas to “adequately staff” its PPP unit and provide training for personnel, as well as establish a PPP steering committee and operational unit as mandated by the 2018 policy. It also called for the Government to “enhance transparency” by creating a PPP registry.

“The existing public tender registry could be enhanced by improving the availability of information about PPPs. Clearly incorporating PPPs into this registry or implementing a dedicated PPP registry would help enhance transparency,” it added. 

“Like other countries across the Caribbean, The Bahamas faces considerable infrastructure investment needs, against a backdrop of limited fiscal space and borrowing capacity. Attracting more private investment for resilient infrastructure is thus a priority for all countries, and PPPs are increasingly proving to be an efficient and effective means of catalyzing both expertise and capital for high-priority projects. 

“In this context, The Bahamas displays many strengths, including one of the region’s least- risky environments for PPPs and a PPP policy that establishes comprehensive regulations on bidding that provides a solid foundation for future PPPs.”