The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Total compensation paid to the Bahamian civil service will breach the $1bn mark for the first time in the upcoming 2026-2027 fiscal period, it has been revealed, with its ranks having expanded by 2,342 persons over the past four years.

Budget documents show that the total bill for central government employees is forecast to hit $1.013bn during the 12 months to end-June 2027, all of which will be funded by Bahamian taxpayers. The just-disclosed Fiscal Strategy Report 2026 breaks this figure down into $868.2m in wages and salaries; an additional $96.9m in allowances; and some $47.9m in National Insurance Board (NIB) contributions.

The all-in figure represents a near-$73m, or 7.7 percent, increase on the $940.3m payout forecast for the current fiscal year. And Tribune Business’s review of Budget records shows that the civil service has expanded by more than 11 percent over the past four years, growing from 21,082 total workers in the 2022-2023 period to 23,424 for the upcoming Budget year.

The Davis administration’s projections give the impression of an ever-increasing size of government whose cost burden will have to be funded by Bahamian taxpayers. Total civil service compensation is forecast to grow by almost $300m over the next decade to hit $1.3bn by 2035-2036 - a projection that, if it comes true, will represent a 28.3 percent hike over ten years.

Wages, salaries and NIB contributions on behalf of public officials remain the largest line item in the Government’s recurrent spending Budget, which represents its fixed operating costs for a single Budget period. They are projected to account for 27.2 percent of all recurrent expenditure in 2026-2027, which means more than $1 out of every $4 spent by the Government - or over one-quarter of its fixed costs outlay - will go towards covering personnel related costs.

The next highest recurrent spending item is interest payments totalling $711m, which must be paid to holders of the Government’s existing debt, also representing a new annual record high. This is closely followed by subsidies to loss-making state-owned enterprises (SOEs) to keep them operational and financially solvent, which are forecast at a collective $517m.

Interest payments and subsidies are projected to account for 19.1 percent and 13.9 percent, respectively, of the Government’s total recurrent expenditure for the upcoming fiscal year. Together, they will account for one-third or $1 out of every $3 spent by the Davis administration to cover its fixed costs.

And, when combined with civil service compensation, these three categories will consume 60.2 percent, or more than $6 out of every $10 spent by the Government to meet its fixed costs. They will collectively combine for $2.248bn out of the Government’s total recurrent spending Budget of $3.724bn.

While the Davis administration has been able to contain its total spending, civil service compensation has continued to increase due to a combination of increased wages and benefits from recent industrial agreement signings; promotions; and new hirings. If the 2026-2027 Budget forecast of $868.187m holds true, wages and salaries alone will have jumped by more than $113m in two years, marking a 15 percent rise on the $754.858m paid out in 2024-2025.

The Fiscal Strategy Report 2026, speaking to the outcome of the 2024-2025 fiscal year, said: “Total expenditure rose by $222.2m (6.8 percent) to $3.485bn, with a shift toward increased recurrent expenditure and restrained capital execution. This outcome was $127.8m below the projected $3.613bn and primarily attributed to the under execution of capital spending and lower-than-anticipated expenditures on social assistance and pensions.

“Recurrent expenditure increased by $238.1m (8 percent) to $3.2bn in fiscal year 2024-2025. As a share of nominal GDP, this equates to approximately 19.3 percent compared with the statutory 21 percent ceiling.”

However, the report added: “Compensation of employees expanded by $35.5m, incorporating higher wages, salaries and allowances, and a $7.5m rise in NIB contributions.” A similar trend was reported for the first nine months of the current 2025-2026 fiscal year.

“Total expenditure reached $2.709bn, representing 70.9 percent of the Budget and an increase of $70.9m compared to the same period in the previous year. Disaggregated by economic classification, recurrent expenditure rose by $75.2m (3.2 percent) to $2.438bn (70.7 of Budget appropriations),” the Fiscal Strategy Report said.

“Compensation of employees, the largest single recurrent line item, increased by $35.5m (5.5 percent) to $684.4m, reflecting both wage bill growth and headcount additions, and positioned at 72.8 percent of the Budget.” The Government will likely argue that the increased compensation is critical to boosting civil service morale and productivity, and prevent defections to better-paying jobs in the private sector.

However, some observers will likely contend that the Government is becoming increasingly bloated and challenge whether the public is receiving value for money from this increased compensation package. The ever-increasing costs, which have to be financed by taxes paid by Bahamian citizens and businesses, will also impose a growing burden on taxpayers to fund this expansion.

The growing civil service bill comes as the Government moves to revive long-awaited public sector pension reform in a bid to halt growth in unfunded liabilities that now stand at $3bn. It plans to do this through the creation of a scheme where civil servants will help finance their own retirement.

A so-called ‘white paper’ outlining the latest reform proposals calls for qualifying civil servants to contribute a mandatory 3 percent of their monthly salary to a new defined contribution scheme with the Government injecting a sum equal to 5 percent of their earnings.

The move will ultimately phase-out the existing ‘pay as you go’ civil service pension where public officials pay nothing towards their retirement which, instead, is financed 100 percent by Bahamian taxpayers from the annual Budget. Pension payments to public officials were pegged at $154.434m for the current 2025-2026 fiscal year, with some $113.917 of this amount paid out during the first nine months, and this is forecast to steadily increase over the next three years to hit $166.75m by 2028-2029.

And, with unfunded civil service pension liabilities forecast to increase by another $1.1bn over the next six years to hit $4.1bn by 2032, change is becoming ever-more critical to resolve what Simon Wilson, the Ministry of Finance’s financial secretary, told Tribune Business in an April 5, 2024, interview is “the top risk” to the stability of the Government’s finances and need to be “dealt with as soon as possible”.

“The continued growth in pension liabilities and cash outflows is fiscally unsustainable,” the Government’s ‘white paper’ asserts. “With annual cash outflows of $184m and accrued liabilities for pension benefits estimated at $3bn, and projected to grow to $4.1bn by 2032, the Government’s financial capacity is increasingly strained

“Also, significant deficits within the Government-owned corporations - many of which carry implicit government guarantees - further compound the liability burden with net pension liabilities estimated at $396m.” The latter figure was calculated in 2020-2021, and is likely to have grown significantly since then.