The Tribune

By Neil Hartnell

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s leader yesterday renewed assertions that the Government is “hiding” several hundred million dollars in liabilities that will burden “future generations of Bahamians” after the International Monetary Fund (IMF) called for “stronger governance” of public-private partnerships (PPPs).

The Fund, in its statement on the latest Article IV consultation with The Bahamas, said that while such structures can help meet this nation’s infrastructure investment needs by unlocking private capital they must also create “public value without creating hidden fiscal liabilities”.

Michael Pintard seized on the IMF’s statement as “exonerating” the Opposition’s concerns that several PPPs touted by the Government, such as the Eleuthera and Exuma roadworks deals with the Bahamas Striping Group of Companies and its affiliates worth a combined $160m, are really structured as “off-the-books” loans designed to keep hundreds of millions of dollars in debt liabilities off the Government’s balance sheet.

Accusing the Government of effectively “hiding” how much spending, borrowing and debt it is incurring, the Opposition leader called on the Davis administration to publish its own PPP policy if it was not going to follow the one introduced by its Minnis-led predecessor - which remains government policy and has never been repealed or replaced.

The IMF statement, released after the December 2-12 consultation with the Government and private sector ended on Friday, used technical language to suggest that it, too, has concerns over whether the so-called PPPs are really structured as such or merely designed to disguise and conceal liabilities so as to contain the $12.5bn national debt and enable fiscal targets to be hit.

“The increased use of public-private partnerships (PPPs) to develop infrastructure should go hand in hand with stronger PPP governance,” the IMF urged.

“PPPs can be useful for meeting the country’s investment needs, including in energy, roads and climate-resilient infrastructure. Ensuring that PPPs deliver public value without creating hidden fiscal liabilities requires clear legal frameworks, transparent procurement, proactive fiscal risk management, and proper budgeting, accounting and reporting standards. An immediate priority should be to improve fiscal reporting and enhance the overall institutional framework for PPPs.”

Mr Pintard told Tribune Business: “We are happy that the IMF and the international agencies are, in fact, taking into account the terrible practice that the Government has, and potentially long-term damaging practice that the Government has, in terms of entering into arrangements that are, in fact, off-the-books loans with the intention of hiding the bills that future generations of Bahamians will have to pay because of their decision to enter these.

“Most of them are ‘no bid’ contracts and they don’t tell the public of the loan terms, inclusive of how much interest Bahamians will have to pay back over the long-term. We are encouraged, and we feel exonerated.”

PPPs are typically designed to reduce the financial stress on cash-strapped governments by contracting the private sector to provide the funding, development and expertise to construct much-needed infrastructure or run public services.

The Government’s cash flow pressures are eased by requiring the private sector to finance the up-front capital costs, with the latter earning a return on investment - and paying back any lender - from the revenue streams generated by infrastructure assets they develop or services provided.

The Opposition has previously argued, though, that several projects touted by the Davis administration as PPPs do not fit this model or meet this criteria. In particular, several sources have pointed to the sudden appearance in the Government’s 2025-2026 Budget, under ‘public debt servicing - interest and other charges - of a $33.93m, ten-year loan due to PPP Investments & Construction Company.

Tribune Business records confirm this is the company that secured a deal with the last Christie administration to construct the Eight Mile Rock government administrative complex in Grand Bahama. The agreement was signed off on May 9, 2017, one day before the general election that brought the Minnis administration and FNM to office.

The arrangement was touted as a PPP, and this newspaper’s archives show PPP Investments & Construction Company sought to raise the necessary financing via a $25m bond placement. A further $9m was obtained from Sygnus Capital, the Jamaican investment house, and the deal was structured as a lease-to-own where the Government would pay back the company and lenders via rental payments.

However, it has now appeared in the Government’s books as a “loan” that has to be repaid by Bahamian taxpayers. Some $2.308m is due to be paid in 2025-2026, with payments of $2.094m and $1.874m due in 2026-2027 and 2027-2028, respectively. Opposition sources suggested this represents a “smoking gun” showing that many projects touted by the Government as PPPs are really “off-the-books” loans designed to keep borrowings, spending and debt from showing up in the public finances for as long as possible.

Mr Pintard yesterday questioned why the Government “has not bothered to make public their position on the PPP policy that was put in place during our time in government”. He added: “The Government is either going to follow the PPP policy that it met in place or introduce one of their own.

“What they should not do is continue entering into a series of very expensive off-the-books loans. Bahamians should be very much concerned because these expose future generations which inherit them…. These are essentially future exposures which are going to come due sooner or later. These are binding agreements they are entering into.”

The Opposition leader also challenged whether the so-called PPP deals create an inaccurate picture of The Bahamas’ true financial position on the basis that several hundred million dollars worth of liabilities, which the Government via Bahamian taxpayers will ultimately have to repay, are being held off its balance sheet.

He also pledged that, if the Free National Movement (FNM) is voted into office at the upcoming general election, the Government will look for “attractive” deals that represent true PPPs.

The IMF, meanwhile, also called on The Bahamas to further pursue diversification with both its tourism and trade source markets, and hinted that this nation should enact competition legislation that has been in draft form for years but never brought to Parliament.

“Expanding import source countries has the potential to reduce import costs and increase resilience. To achieve these potential gains, it will be critical to improve the private sector infrastructure for shipping and logistics and work on the harmonisation of product regulations,” the Fund added.

“To pass on import savings to local consumers, the authorities should promote competition in local goods markets. On the export side, tourist inflows remain highly concentrated (around 80 percent from the US), and further actions should be taken to continue improving airlift connectivity with more source countries.”

The Fund also urged The Bahamas to build on recent reforms to boost its ability to cope with natural disasters, such as hurricanes, to “strengthen the resilience of public assets and address gaps in property insurance”.