The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government suffered a $107.8m reversal to its 2024-2025 fiscal year plans to rebuild the ’sinking funds’ created to finance repayment of future maturing foreign currency bond issues, it has been revealed.

The Ministry of Finance’s report for the full 12-month fiscal year that closed at end-June, released on Friday, reveals that the Davis administration continued to draw down on ‘sinking fund’ assets during the period despite having originally projected it would increase them by a net $46.5m.

Instead, it drew down or used another $61.3m during the 2024-2025 fiscal year, marking a near-$108m reversal from what it had projected in the Budget. This left the ‘sinking funds’ with a combined $114.3m worth of foreign currency assets to meet future bond repayments, valued in the hundreds of millions of dollars and significantly in excess of this sum, as at June 30, 2025.

And the Ministry of Finance report also discloses that almost 83 percent of the remaining assets, some $94.6m off the $114.3m, are still caught in the Goldman Sachs repurchase (repo) deal that the Government agreed with the global investment bank in 2022. ‘Sinking fund’ assets were pledged as security in return for Goldman Sachs extending more than $200m in liquid foreign currency cash to the Davis administration. This means that less than $20m, some $19.7m, of the remaining ‘sinking fund’ assets are free or unencumbered.

“During fiscal year 2024-2025, drawings on the sinking fund for the servicing of debt obligations totalled $61.3m,” the Ministry of Finance’s report said. “The four sinking fund arrangements earmarked for scheduled retirement of external bonds, along with the Goldman Sachs repurchase agreement, held a cumulative value of $114.3m, of which $94.6m is subject to the repurchase agreement.”

Tribune Business has previously reported that the Government has been using ‘sinking fund’ assets, which were supposed to be set aside and built up to cover future international foreign currency bond issues as they mature, to instead help repay current debt obligations and cover/lower its annual fiscal deficit. In effect, it has been using assets supposed to be held for future benefit to cover current needs.

Meanwhile, the Ministry of Finance report also disclosed that the Government “provided short-term advances totalling $87m to 11 government business enterprises (GBEs) during the 2024-2025 fiscal year. The identities of the 11 entities involved, and the sums loaned to each, were not disclosed although the likes of The Bahamas Public Parks and Beaches Authority is almost certainly one of them.

These advances, none of which were budgeted for or projected in the 2024-2025 fiscal year, have been included in the Government’s financing activities for the 12-month period under the heading ‘net acquisition of financial assets’. Labelled as ‘other’, these short-term advances, when married with the $61.3m ‘sinking fund’ draw dawn, produced a net $25.7m gain on the net acquisition of financial assets’.

However, one financial source, speaking on condition of anonymity, challenged how the collective $87m in short-term advances are to be repaid to the central government given that many GBEs or state-owned enterprises (SOEs) are consistent annual loss makers. As a result, they queried whether the Government is disguising subsidies as loans to reduce its spending and keep debts in check.

“It seems they have used more resources than the deficit shows,” the source said of the Government. “The question to be asked is: Are they masking subsidies by treating them as loans so that it doesn’t show up in their spending? Which government entities are in position to pay-off short-term loans. Are they using advances to GBEs to under-state spending?”

“In financing activities, the annual balance under the net acquisition of financial assets tapered to $25.7m, reflecting a net drawdown of sinking funds alongside a net increase in short-term loans. In keeping with scheduled annual debt operations, net liabilities increased by $328m,”the Ministry of Finance said.

Elsewhere, the revenue breakdown released by the Government revealed that the combination of surging cruise passenger numbers, combined with the departure tax increases that took effect for a full-year for the first-time in 2024-2025, resulted in a $100m overshoot of projections for this item. Total departure taxes for the year hit $342.2m compared to the original forecast of $241.3m, beating it by almost 42 percent.

The Passenger Tax Amendment Bill 2023, which accompanied the 2023-2024 Budget, raised the-then $18 per head departure tax to $23 for "every cruise passenger" leaving The Bahamas via Nassau and Freeport, and to $25 per head for all those who exit "by sea from a private island not visiting any other port in The Bahamas".

The revised tax structure imposed departure tax increases of $5 and $7, respectively, equivalent to a 27.8 percent and 38.9 percent rise. A “tourism environmental levy for every cruise ship passenger arriving or leaving The Bahamas" worth $5 per head was also introduced along with a $2 per head "tourism enhancement levy for every passenger arriving in or leaving The Bahamas".

This has coincided with a significant jump in cruise passenger arrivals, which hit 9.5m for the 2024 full calendar year with first-half arrivals for 2025 then exceeding the prior year by 11.6 percent to hit 5.2m. The Government’s income, meanwhile, was also boosted by collecting some $138.5m in Immigration fees, which exceeded the Budget target of $118.4m by some $20m.

And, while real property tax collections of $210m fell some $20m short of the 2024-2025 Budget forecast, they still beat the prior year’s $203.2m - something the Government attributed to its stepped-up enforcement and collection efforts.

“Taxes on property expanded by $6.8m (3.4 percent) to $210m, underpinned by recent enforcement initiatives that contributed to a 16.8 percent upturn in commercial property tax receipts and a 13.4 percent improvement in collections on foreign-owned undeveloped land,” the Ministry of Finance said.  Gaming taxes, though, fell short of target at $47.2m as compared to the forecast $62.3m for the full 2024-2025 fiscal year.

The Ministry of Finance also released the Government’s fiscal performance for July 2025, the first month of its current 2025-2026 fiscal year, which produced an 18.7 percent or just over $10m year-over-year increase in the monthly deficit from $55.5m to $65.9m. 

One month is no indicator of the Government’s likely annual performance, which is forecast to produce a first-ever Budget surplus of $75.5m for the 2025-2026 fiscal year, meaning that revenue income will exceed its spending. The cyclical nature of the Budget means that a substantial deficit will be incurred during the six months to end-December 2025, which is then paid down and sharply reduced by the revenue-rich first four months of the calendar year (the fiscal period’s second half) which coincides with the peak tourism period.

“Preliminary data on the fiscal outturn for July 2025 showed an increase in the estimated deficit to $65.9m from $55.5m in the prior year,” the Ministry of Finance said.

“This outcome reflected an 18 percent ($49.8m) rise in revenue receipts to $326.7m alongside an 18.1 percent ($60.2m) expansion in spending to $392.6m.”

“The $337.3 million in recurrent outlays for the month represented an increase of 13.7 percent ($40.7m). Spending for the use of goods and services grew by $22.7m to $92.1m, amid higher payments for the acquisition of services, operational expenses, and special financial transactions. Other transfers to households, non-financial public enterprises and other entities boosted other payments by $27.1m to $59.8m.”

As for revenue, the Ministry of Finance said of July: “Tax collections rose year-over-year by 16.3 percent ($41.5m) to $296.8m and included the following key contributors. 

“Taxes on international trade and transactions were higher by $24.2m at $86.5m, largely due to improvements in departure taxes and excise duty collections.

“VAT receipts rose by $18.6m to $172.7m, reflecting gains in both the realty and goods and services components.  Non-tax revenue aggregated $29.9m for a 38.2 percent ($8.2m) rise year-over-year, which was supported by Immigration and Customs fees.”

Turning to the debt situation, the Ministry of Finance added: “During the review month, central government’s debt outstanding increased by an estimated $224.3m. 

“The $309.7m in proceeds from borrowings was almost entirely derived from domestic currency sources. Aggregate debt repayment of $85.4m was allocated between domestic (86.9 percent) and foreign (13.1 percent) currency redemptions.”