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$187m Loss-Makers Match Fiscal Deficit

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The $186.7m in subsidies to loss-making state-owned enterprises (SOEs) over the six months to 2019 year-end almost exactly matches the government's deficit for that period, it was revealed yesterday.

The government's "fiscal snapshot" for the first half of 2019-2020 shows that the $188.7m deficit, which measures by how much the government's spending exceeds its income, would have been virtually eradicated if all SOEs were transformed into "cost recovery" or break even entities.

The Minnis administration has previously stated its objective to achieve just that over a three to five-year period, but the report showed it has seemingly made little headway to-date as total subsidies to non-financial public corporations jumped by 23.2 percent year-over-year.

The Public Hospitals Authority (PHA) continues to be the main consumer of taxpayer financial assistance, with Bahamasair and the Water & Sewerage Corporation too far behind. "Subsidies to public non-financial corporations were boosted to $186.7m from $151.6m in the comparable period of fiscal year 2018-2019," the "fiscal snapshot" revealed.

"Of this total, $120.1m was directed to the Public Hospital Authority (PHA) - an increase of $9.6m over the same period of the last fiscal year, to assist with renovations at the critical care block of the Princess Margaret Hospital (PMH). Subsidies to the national airline carrier and the Water and Sewerage Corporation stood at $11.8m and $24.5m, respectively."

Total subsidies were up by $29m or 17.2 percent year-over-year at $197.8m, with the Government's total expenditure climbing to $1.292bn or 46.7 percent of the full-year budgeted amount due to the cost of relief and recovery efforts associated with Hurricane Dorian.

Salaries and benefits paid to public servants jumped by $27.5m or 7.8 percent year-over-year to $380.2m largely due to the $22.8m lump sum payment made pre-Christmas 2019. "Wages and salaries firmed by $26.5m to $339m, buoyed by the $22.8m lump sum payment awarded to eligible public service employees in December 2019," the report added.

"Higher payments of housing, hardship and other allowances to public staff in the hurricane affected islands boosted allowances by $3.8m (15.5 percent) to $28.6m. In the first six months of fiscal year 2019-2020, the Government settled more than half ($53.7m) of the budgeted $100.9m in arrears payments, which are spread across several expenditure categories.

"Since fiscal year 2018-2019, the Government has extinguished approximately $238.3m in arrears. Public debt interest payments increased by $5.9m (3.7 percent) to $165.4m. Of this total, $94.9m (57.3 percent) was in respect of Bahamian dollar debt, while the remaining $70.6m (42.7 percent) was for foreign currency obligations."

The "fiscal snapshot" also revealed that the Government provided a further $5m in "capital support" to Lucayan Renewal Holdings, the holding vehicle for the Grand Lucayan resort, as sale talks dragged on.

And the two loans made to Bahamas Power & Light (BPL), totalling $30m, which had been due for repayment by year-end 2019 were extended to March 2020 due to the delay in placing the state-owned utility's $580m bond refinancing.

"Over the review period, the Government contributed an additional $13.9m to the sinking funds established to retire future debt obligations," the report said. "As at December 31, 2019, the three arrangements earmarked for scheduled retirement of external bonds held a cumulative value of US$169.3m, while funds set aside for the two local arrangements stood at $11.8m."

K Peter Turnquest, deputy prime minister, said in a statement: "We will work hard to contain discretionary spending so that we do not place undue pressure on our fiscal position and continue investing in our ongoing revenue enhancement initiatives and strategies to promote compliance.

"While we have budgeted for a $667m deficit in our revised forecasts we will remain vigilant and work hard to come in under this sum. We have put in great effort to getting the Revenue Enhancement Unit (REU) up and running, and supporting the roll-out of Click2Clear, the new Custom Electronic Single Window, precisely because these efforts help us to eliminate revenue leakage and improve compliance. It is promising to see how these initiatives are bolstering our revenue performance."

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