The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Government subsidies to loss-making state-owned enterprises (SOEs) surged to $492m during the 2021-2022 fiscal year despite a more than $50m reduction in support for Bahamasair as it returned to the skies.

The Ministry of Finance, unveiling the Government’s fiscal performance for the 12 months to end-June 2022, disclosed that taxpayer support for the likes of the Water & Sewerage Corporation, Broadcasting Corporation of the Bahamas and Hotel Corporation actually rose by $17.5m or 3.7 percent despite the dramatic cut in Bahamasair’s prior year subsidy of $78m-plus.

While stating that the total SOE outlay was bang in-line with projected spending, the ministry said: “Government subsidies, which include transfers to government-owned and/or controlled enterprises that provide commercial goods and services to the public, widened by $17.5m (3.7 percent) to $491.6m, which equalled 99.4 percent of the budget.

“Subsidies to public non-financial corporations were higher by $22m (4.9 percent) at $470.5m. Additional transfers of $33m were disbursed to the Public Hospitals Authority (PHA) as the country further contested the coronavirus pandemic, and $38.7m to Water and Sewerage Corporation development projects. Albeit, notable reductions during the period occurred for Bahamasair ($50.1m).

“Subsidies to private enterprises and other sectors fell by $4.9m (17.5 percent) to $21.1m. Transfers narrowed by $4.5m for salary grants for independent schools owing to COVID-19 support.” This came as the Government’s COVID-related economic and social assistance support fell by 62.6 percent year-over-year in 2021-2022, dropping to $102.3m from $273.3m in the prior fiscal year.

The Ministry of Finance report shows the Government spent $455m in taxpayer funds to prop up the economy and wide Bahamian society at the height of the pandemic, with the outlay spread across three fiscal periods. The largest line item, accounting for 52 percent of total expenditure, was $237m in unemployment benefits paid out to furloughed or terminated workers over the three fiscal years between 2019-2020 and 2021-2022.

A further $53.3m was allocated for public health and safety; $50.8m to support job retention by the private sector; $50.2m for food assistance; and $48.8m in small business assistance loans. “During fiscal year 2021-2022, government continued the process of contracting its COVID-19 related health containment, mitigation and support programmes for impacted families and businesses,” the Ministry of Finance report said.

“These outlays are estimated at $102.3m and, together with past outlays, brings the aggregate spend to approximately $455m or 3.6 percent of GDP.” But, despite the cost of living crisis faced by many Bahamian middle class and low income families, fears of a US and global recession, supply chain disruption and the threat of hurricanes and other climate-related natural disasters, the Ministry of Finance struck a cautiously optimistic tone with its economic outlook.

“Despite reaching the highest change in recent years, local inflation is 1.1 percent below the regional median of 7.7 percent,” it said. “Over the period, fuel commodities rose 7.9 percent month-over-month, with gasoline consumption priced 33.5 percent higher than the prior year. In addition to the high cost of transportation, construction output was hindered by supply shortages, fortifying high prices within the sector.

Drawing comfort from the tourism rebound, the ministry added: “As the nation reopened and COVID-19 containment measures expired, demand for the home rental market persisted potentially indicating visitor preferences for solitude following the pandemic.

“Over the year, Airbnb occupancy averaged 24.3 percent, a 100.8 percent increase compared to the 12.1 percent average of the prior year. Likewise, bookings improved 76.7 percent (60,849 reservations) to 140,186 reservations for the year. The year-over-year growth in home rentals is resultant of the influx of visitor arrivals over the 12 months to end-June 2022.

“Moreover, Airbnb rentals indicated an expansion in Family Island tourism with an incursion of 280 new property listings, totaling 2,322 Family Island listings at end-June 2022 (exclusive of New Providence and Grand Bahama).

Pointing to new investment projects, such as the proposed hospital at Albany catering to recreational and medical tourism, the Ministry of Finance added: “New infrastructure in tandem with the restructuring of the University of the Bahamas College of Tourism Hospitality, Culinary Arts and Leisure Management provides opportunity for growth within the tourism sector over the medium term.

“Furthermore, the elimination of testing requirements for inter-island and international travel, and the removal of mask mandates at hotels/resorts in June 2022, is expected to encourage more arrivals over the coming period. Despite cautious optimism for continued tourism activity, there are risks to sustained sector recovery.

“Increased cases of Monkeypox across the US as well as the threat of new COVID strains pose the threat of another global health pandemic limiting travel. Further obstructions to sector activity are natural disasters, such as hurricanes, and economic downturns in source markets - recession or stagflation in the US.”