The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Subsidies to loss-making state-owned enterprises (SOEs) increased by more than $25m during the nine months to end-March 2022 despite an even greater drop in taxpayer support for Bahamasair.

The Government’s increased outlay, which accounted for 90 percent of the total sum provided for in the 2021-2022 Budget with three months of the fiscal year still left, came even though the national flag carrier consumed $31.5m less due to its return to a more normal flying schedule post-COVID.

The Ministry of Finance’s nine-month report, indicating that SOE subsidies will again exceed their Budget allocation, said: “Government subsidies, which include transfers to government-owned and/or controlled enterprises that provide commercial goods and services to the public, widened by $21.3m (6.5 percent) to $351.3m, which equalled 90 percent of the Budget.

“Subsidies to public non-financial corporations were higher by $25.3m (8.1 percent) at $335.9m. Additional transfers of $36.1m were disbursed to the Public Hospital Authority (PHA) as the country further contests the coronavirus pandemic; $14.2m to Water and Sewerage; $8.2m to National Health Insurance. Albeit, notable reductions during the period occurred for Bahamasair ($31.5m).

“Subsidies to private enterprises and other sectors fell by $4m (20.7 percent) to $15.4m. Transfers narrowed by $4.7m for salary grants for independent schools owing to COVID-19 support and $1.6m for small business support.”

The $408.749m in direct subsidies allocated in the 2022-2023 Budget are equivalent to 13.6 percent of the Government’s total planned $2.997bn recurrent expenditure for the 12 months to end-June 30 next year, providing further insight into how loss-making SOEs continue to bleed Bahamian taxpayers at a time when every $1 spent must generate value for money.

Together with the $588.988m allocated for debt service payments (interest) in the upcoming 2022-2023 fiscal year, total SOE subsidies of $457.183m equal $1.046bn. This is equivalent to almost 35 percent, or more than $1 out of every $3, in the government recurrent spending.

Tribune Business reported previously how the Government has temporarily shelved plans to slash subsidies to SOEs as it seeks Parliamentary approval to borrow $251.4m for clearing unpaid bills prior to the 2021-2022 fiscal year-end.

Simon Wilson, the Ministry of Finance’s financial secretary, said then that cutting annual subsidies to the likes of Bahamasair and the Water & Sewerage Corporation “remains a priority” even though this collective sum is set to increase by almost $31m year-over-year in the upcoming 2022-2023 Budget year.

The Davis administration’s Fiscal Strategy Report, released just four months prior in January 2022, had committed the Government to pursuing plans left in place by its predecessor that were targeting a $100m cut in these subsidies “over the medium-term horizon”.

However, with the Government unveiling its second “supplementary Budget” in just eight-and-a-half months since it took office on September 16, Mr Wilson said it had no choice but to address the “huge overhang” of unfunded liabilities generated by the likes of the Water & Sewerage Corporation.

Prime Minister Philip Davis QC, unveiling the 2022-2023 Budget in the House of Assembly, said an additional $251.4m in borrowing will raise the 2021-2022 fiscal deficit to $758.6m - a sum equivalent to 6 percent of Bahamian gross domestic product (GDP).

When this is added to the $564m deficit forecast for the upcoming 2022-2023 fiscal year, and those incurred during the two years covered by Hurricane Dorian and the COVID-19 pandemic, The Bahamas will have added $3.47bn to its national debt in just four years. That latter sum represents almost 30 percent of the Government’s projected $11.609bn direct debt at June 30,2013.

Loss-making SOEs have been one factor driving this annual debt decrease, and the Davis administration is increasing total taxpayer subsidies to them in the upcoming 2022-2023 fiscal year by 7 percent to $457.183m compared to the $426.202m forecast for the current Budget cycle. Of the latter figure, some $398.251m had already been advanced as at end-March 2022.

Taxpayer funding is thus going in the opposite direction to the cost savings drive pledged in the Fiscal Strategy Report. Most of the increase is directed to three agencies: The Public Hospitals Authority ($9m to $232.456m); the Bahamas Public Parks and Beaches Authority ($8.8m to $24m); and the Water & Sewerage Corporation ($8m to $32m).