The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian taxpayers are owed half-a-billion dollars in outstanding loans by loss-making state-owned enterprises (SOEs), it has been revealed, with nine key government entities collectively plunging into “negative equity” with debt liabilities exceeding their assets.

The Government’s just-published Fiscal Strategy Report 2026, which accompanies the Budget, again highlighted the fiscal risks and drag posed by SOEs after a so-called “health check” on nine of the most prominent ones revealed they had suffered “a sharp deterioration in” their combined solvency during the 2023-2024 period.

The combined debt-to-asset ratio for the nine, who are Bahamas Power & Light (BPL), Bahamasair, the Water & Sewerage Corporation, the National Insurance Board (NIB), Airport Authority, Bahamas Development Bank, National Health Insurance Authority (NHIA), Bahamas Maritime Authority (BMA) and National Art Gallery of The Bahamas (NAGB), rose from 46-49 percent between 2020 to 2022 to more than 100 percent in 2023 to 2024.

This signalled that, collectively, their combined debts were greater than their total assets, which financial analysts universally agree is a warning of potential imminent insolvency. And the same tipping point was reached on the nine’s combined debt-to-equity ratio, which turned negative in 2023 and 2024, thus indicating that liabilities exceed assets - a sure sign of financial distress and challenges in meeting debt service obligations.

The Davis administration, which has signalled it intends to place increasing focus and emphasis on dealing with the potential threat posed by loss-making SOE to the public finances, singled out Bahamasair and the Airport Authority, in particular, as two entities facing particular cash flow and liquidity challenges because their liquid assets - such as cash on hand and bank deposits - are dwarfed by near-term liabilities set to become due for payment.

The Fiscal Strategy Report also highlighted that the Bahamas Electricity Corporation (BEC), BPL’s parent or holding company, faces a similar - albeit less pronounced - predicament with liquid assets of around $300m exceeded by current liabilities slightly in excess of that figure.

For these reasons, the report ranks BPL/BEC and Bahamasair as the two ‘Category Five’ entities out of the nine as they represent the “highest risk” to the stability of this country’s public finances. The Airport Authority and Bahamas Development Bank were ranked one notch below, at ‘Category Four’, on a five-tier risk scale, with all others rated as ‘Category Two’ apart from the NHI Authority, which was ranked as posing the least potential threat in ‘Category One’.

Noting that The Bahamas has 32 SOEs in total, the Fiscal Strategy Report 2026 conceded that they are “a key driver” of unpaid invoices and arrears, accounting for $181.4m or 75 percent (three-quarters) of the total $241.8m in due bills and payment arrears listed in the recent 2025-2026 mid-year Budget. And short-term loans extended to these 32 entities by the Government totalled almost $500m at end-March 2026 to further expose their dependence on Bahamian taxpayers.

The Ministry of Finance said it had used tools developed by the International Monetary Fund (IMF) to assess the financial health and performance of BPL/BEC and the other nine entities, employing their audited and management accounts to determine key indicators such as net profit margin, return on assets and cost recovery mechanisms.

Focusing on the nine’s collective debt-to-asset and debt-to-equity ratios, the Fiscal Strategy Report said: “In years 2020–2022, the ratios were relatively stable - debt-to-assets at 46–49 percent, and debt-to- equity at 0.85–0.96.

“In 2023–2024, debt-to-assets rose above 100 percent and debt-to-equity turned negative, implying liabilities exceeded assets (negative equity) and signalling a sharp deterioration in the portfolio’s solvency position.” This appears to have coincided with when the Government started providing significant financial support to BPL in a bid to cover the $110m unpaid fuel bill owed to Shell after the latter’s hedging structure put in place by the Minnis administration was allowed to unravel.

Turning to comparisons between the nine SOEs’ liquid assets and liabilities, the report added: “The results suggest that both Bahamasair and the Airport Authority have relatively high liabilities compared with liquid assets, indicating heightened short-term liquidity pressure.”

Explaining the ‘risk rating scale’, with ‘Category One’ suggesting a lower financial risk threat and ‘Category Five’ posing the greatest risk based on a combination of profitability, liquidity and solvency ratios, the Fiscal Strategy Report 2026 said: “The results suggest that larger SOEs, particularly BEC and the Airport Authority, tend to have higher risk ratings.

“BEC (BPL) is a clear outlier with the largest liabilities among the entities reviewed, increasing its fiscal risk profile. NHI Authority records one of the lowest risk ratings, but this should be interpreted with caution, as sustained growth in health service demand could increase its liabilities and risk exposure.

“The Bahamas Development Bank also records a high-risk rating, likely reflecting its funding structure and operations similar to that of a public corporation. The rating should be interpreted considering the SOE health check tool’s limitations for public financial corporations, although BDB also functions as a government policy instrument.”

Turning to the overall 32-strong SOE portfolio, the Fiscal Strategy Report added that the group is a major contributor to both unpaid invoices and government payments that are in arrears, while also requiring strong and consistent support from Bahamian taxpayers and the Public Treasury to remain viable.

“In the broader context, obligations to SOEs represent 2.6 percent of the total expenditure budget in fiscal year 2025-2026 and are a key driver of unpaid invoices totalling $181.4m according to the mid-year Budget report,” the report added.

“In addition, most of these selected entities also rely on short-term loans from the Government, with outstanding balances at end-March 2026 amounting to $499.9m, an increase of $6.65m (1.3 percent) from end-June 2025, further underscoring their dependence on public financial support.” Unlike subsidies, which are allocated to SOEs in the Budget, these loans represent obligations that should be paid back to the Government and, by extension, Bahamian taxpayers.

The Opposition, though, has previously voiced concern that many of these debts are unlikely to be repaid because the recipient SOEs have never previously generated a profit - the likes of the Bahamas Public Parks and Beaches Authority; Education Loan Authority; Bahamas Agricultural and Industrial Corporation (BAIC); Broadcasting Corporation of The Bahamas; and Bahamas National Sports Authority.

It has instead argued that, by using loans instead of subsidies, the Government is able to treat the financial support as an investment or financial asset and keep it from adding to the deficit and national debt.

The Fiscal Strategy Report, meanwhile, acknowledged the critical importance of improving SOE governance and the timeliness and accuracy of their financial reporting, together with enhanced Ministry of Finance oversight.

“Given this high level of obligations and exposure, timely, complete and audited annual financial statements from SOEs are essential for credible fiscal risk analysis and effective oversight,” the report said.

“They enable the Government to assess profitability, liquidity and solvency trends, detect emerging pressures such as arrears and debt service constraints, and better anticipate potential calls on subsidies, capital injections and guarantees.

“When annual financial statements are delayed or incomplete, risks can accumulate unnoticed by the Ministry. Consequently, budget decisions may be made without a clear view of SOE financing needs. Regular submission of audited accounts strengthens transparency, improves accountability and supports earlier, better-targeted corrective action,” the Fiscal Strategy Report.

“Given the importance of financial statements to risk identification and assessment, the Government is currently working toward enforcing submissions of financial statements from the various SOEs in compliance with the Public Financial Management Act to improve oversight of the various public entities.”

Expanding further on the risk posed by SOEs, the Fiscal Strategy Report 2026 added: “Public corporations represent a significant source of fiscal risk, given their role in delivering essential services and their financial linkages to the central government.

“These entities may generate fiscal pressures where operational inefficiencies, revenue shortfalls or high debt burdens necessitate transfers, subsidies or other forms of Government support. In some cases, liabilities associated with public corporations may also give rise to contingent obligations for the Government.

“Public corporations are assessed as having a high potential fiscal impact and a possible likelihood of realisation, reflecting the scale of their operations and their close integration with the central government. This assessment also reflects the sensitivity of these entities to broader macroeconomic conditions, including fluctuations in demand, input costs and financing conditions.

“The Government continues to strengthen oversight and risk management through enhanced financial monitoring and reporting. Ongoing efforts include the regular review of financial performance indicators, improved data collection and transparency, and the application of policy frameworks aimed at strengthening governance and financial discipline across public corporations. These measures support early identification of fiscal risks and promote more sustainable operational outcomes.”