The Tribune

By NEIL HARTNELL

and FAY SIMMONS

Tribune Business Reporters

“Front-loaded” salary increases for public sector workers were the main driver behind the $36.4m year-over-increase in the Government’s first quarter fixed-cost spending, it was disclosed yesterday.

The Davis administration, unveiling the report on its fiscal performance for the three months to end-September 2023, confirmed that increased compensation bound up with new industrial agreements as well as higher debt servicing and welfare payment were the main factors pushing the Government’s spending higher. Social assistance payments more than doubled to $14m for the three months.

“Recurrent spending was higher by $36.4m (5.9 percent) at $657.7m (21.3 percent of the Budget target),” the report said. “Approximately 42.9 percent of this gain was attributed to programmed front-loaded increases in compensation outlays, 31.7 percent to public debt interest payments and 20.6 percent for social assistance programmes.

“Meanwhile, decreases of smaller magnitudes were registered for the acquisition of goods and services, subsidy payments and grants..... Compensation of employees increased by $15.6m (8.1 percent) to $208.5m, which represented 24.3 percent of the Budget target, and was explained by planned staff promotions, salary adjustments and additional hires.

“Public debt interest payments expanded by $11.5m (11.2 percent) to $114.1m, of which 39.7 percent was on foreign currency obligations... Social benefit payments were higher by $8.7m (17.2 percent) to $59.2m or 25 percent of the Budget. Payments of social assistance benefits increased by $7.5m or 114.7 percent to $14m.”

Elsewhere, the Government’s first quarter report revealed that it drew down $47.4m from the four so-called ‘sinking funds’, set aside to accumulate assets to help repay foreign currency bonds as they mature, to help finance its existing debt obligations.

“At end-September 2023, drawings on the sinking funds totaled $47.4m for the servicing of debt obligations,” it said. “On a cumulative basis the four sinking fund arrangements earmarked for scheduled retirement of external bonds held a value of $304.8m.”

More than one-quarter of this figure, some $93.9m, remained under the February 2022 repurchase agreement with the investment bank, Goldman Sachs, in which external bonds were sold for repurchase in two years. That near-$94m represents the outstanding assets that the Government had yet to repurchase by end-September 2023.

The $47.4m drawdown from the ‘sinking funds’ may also help explain why the Government was able to repay a net $33.7m in debts during the 2023-2024 first quarter while still running a $58m deficit for the period. Some $617.8m in new borrowings were exceeded by $651.5m in repayments, with all new credit obtained in Bahamian dollars.

“Absent of new borrowings, foreign currency transactions resulted in a net repayment of $160m,” the report said. “Redemptions of bank loans totaled $121.7m, and for loans to international development agencies, $38.3m. Approximately 78.7 percent of the latter was earmarked to reduce liabilities to the IMF, 7.8 percent to the CDB, 4.1 percent to the IDB and the balance to the Chinese Export-Import Bank.

“Consequent on these developments, the direct charge on the Government - inclusive of exchange rate adjustments - decreased by $33.7m to an estimated $11.215bn at end-September 2023 for 80.4 percent of GDP, as compared to 82 percent of GDP at end-June 2023.”

Turning to the economy’s performance, the report added that New Providence hotel occupancy rates improved by 1.6 percentage points during the traditionally weakest month of September. “In the first quarter of fiscal year 2023-2024, the Bahamian economy continued to benefit from a strong tourism-led growth trajectory, despite the divergences in global economic performance and accompanying challenges posed by inflation and monetary policy tightening,” the report said.

“Gains in the dominant tourism sector were evidenced by the 22.8 percent quarterly increase in visitor arrivals to 2.2m, which supported improvements in domestic demand and stable employment conditions and revenue performance.”

It continued: “The ongoing resilience of tourism activity, as evidenced by the 22.8 percent hike in visitor arrivals to 2.2m, was largely attributed to gains from US sourced visitors who accounted for 86.8 percent of the visitor pie.

“In other tourism indicators, the major New Providence hotels recorded a 46.6 percent hotel occupancy rate for September 2023, an increase of 1.6 percent compared to the prior year. During the quarter price developments exhibited a moderation in the rise in average consumer prices over the twelve months to 2.2 percent at end-September 2023.”