The Tribune

BY NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

THE OPPOSITION’S chairman yesterday accused the Government of employing “every single trick” to derive its $39.3m Budget surplus after the latter confirmed June’s huge revenue and spending jumps resulted from “offsetting” transactions.

Dr Duane Sands questioned to Tribune Business how loss-making state-owned enterprises (SOEs) were able to declare and pay dividends to the Public Treasury, driving a more than seven-fold year-over-year jump in ‘other’ non-tax revenue to $172.8m in June 2026, when they are already “deep in the red”.

And he also challenged the near-$729m in short-term loans made to multiple government agencies, which rose by $131.7m or 22.1 percent during the recently-closed 2025-2026 fiscal year, according to the Ministry of Finance’s June 2026 report.

Dr Sands argued that these are subsidies disguised as advances, so that the Government can account for them as investments and assets to keep them from adding to its spending, even though the recipients are loss-making entities that generate no income or revenue streams capable of repaying Bahamian taxpayers.

“They have been very creative,” the Opposition’s chairman argued in response to Prime Minister Philip Davis KC’s declaration of the first-ever annual Budget surplus in The Bahamas’ post-Independence history.

”Their so-called subsidies to government corporations that have no way to pay those subsidies back, they are calling them as loans so they don’t have to take it as a hit on the books and so forth. They have used every single trick to come up with this so-called surplus.

“They want the public to believe that for the first time in the history of the sovereign Bahamas the Government has a surplus, and it’s absolute rubbish. It is so laughable that they want to be seen as these wonderful stewards of the public purse despite the fact they have borrowed tens of millions of dollars, have all this off-balance-sheet expenditure, which is likely legal but probably not appropriate, all to come up with this $39m surplus,” he added.

“It is an absolute fiction. It’s a figment of their imagination. Am I impressed? No, I’m, not in the slightest.” Dr Sands’ Free National Movement (FNM) colleagues have already challenged the Government’s much-touted surplus on the basis that the fiscal figures do not include the near-$311m said to have been spent from accounts bearing the name of the National Investment Fund.

They are arguing that the nature of the Fund’s spending, as disclosed by Michael Halkitis, minister of finance, on airports, roads, water systems and court complexes, is exactly the same as the capital expenditure normally included in the Budget figures. And, given that the Ministry of Finance had control of the accounts, the Opposition is asserting this spending should be consolidated into the numbers.

Besides the controversy over whether the National Investment Fund spending should be included in the 2025-2026 figures, and not stripped out, which would turn the $39.3m surplus into a near-$270m deficit based on the $311m disclosure, the Government also engaged in a series of “offsetting” transactions with its state-owned enterprises (SOEs) to produce the June numbers.

“Movements in both revenue and expenditure included significant reciprocal offsets of receivables and payables between the Government and statutory bodies, together with sizeable dividend receipts,” the Ministry of Finance report for the month revealed.

This signals that the Government netted off what its ministries, departments and agencies owed to the likes of Bahamas Power & Light (BPL) and the Water & Sewerage Corporation, against what was due from these utilities to it. And, after paying down arrears owed to these state-owned enterprises (SOEs), they likely reimbursed the Government via dividend payments.

“Payments for the use of goods and services rose more than two-fold, by $193.3m, being associated with higher outlays for utilities and communications,” the Ministry of Finance’s report said, which likely refers to the effect of the “offsetting” payables and receivables transactions.

“Non-tax revenue more than doubled, by $159.8m to $206.6m,” the June 2026 monthly report added. “This outcome included significant gains in dividend income from several public entities, a significant portion of which was used to settle the Government’s payment arrears.”

Dr Sands, in response, asserted yesterday: “How you can declare a dividend when you are deep in the red is beyond” belief. He added: “You cannot meet your basic expenses, yet you are declaring a dividend. How does that work? I guess the Board of Directors felt it appropriate to declare a dividend. It’s a game; it’s nothing more than a game.

“Unfortunately, there will be some people that believe this rubbish, but nobody in the international rating agencies, nobody in finance, nobody who understands accounting will buy this nonsense.”

The Ministry of Finance’s report for June 2026, which also includes the full-year figures, shows that the $39.3m annual figure was ultimately achieved by a more than five-fold increase in the Budget surplus for that month - from $25.4m in 2025 to $130.7m this time around.

The increased June surplus was driven by major jumps in both revenues and spending. The Government’s total tax income more than doubled for the month, increasing by 116.7 percent or $307.2m year-over-year to hit $570.5m, while non-tax revenue more than quadrupled by $159.8m to hit $206.6m as opposed to just $46.8m in 2025.

Revenues, though, grew at a faster rate than the Government’s fixed-cost, or recurrent, spending on civil service wages, rents and debt servicing, which also more than doubled in June to increase by 103.8 percent or $279m to hit $547.6m. Capital expenditure also surged, expanding by $82.7m year-over-year to hit $98.7m for June 2026.

The nine-figure, and double-digit, increases in both revenue and spending in June were not explained in-depth in the Ministry of Finance’s report. The revenue surge, it said, was driven by a combination of VAT more than doubling, growing by 119.6 percent to $248.3m on the back of enforcement to likely set a monthly record, plus $68.6m collected from the new 15 percent corporate tax.

The final boost came from what the Ministry of Finance described as “significant gains in dividend income from several public entities” whose identities were not revealed. This produced a more than seven-fold jump in ‘other’ non-tax revenue from $23.3m in June 2025 to $172.8m.

On the spending side, the Government’s outlay on goods and services increased more than four-fold in June 2026, rising year-over-year from $61.8m to $255.1m due to increased spending on “utilities and communications”.

However, Gowon Bowe, Fidelity Bank (Bahamas) chief executive, said the controversy over the Budget surplus and fiscal numbers should not be allowed to “over shadow” the more positive developments surrounding the Government’s debt.

He added that short-term Central Bank advances to the Government have been paid down, while the Davis administration’s ability to finance its borrowings in the domestic Bahamian dollar market is reducing its exposure to foreign currency and US interest rate increases.

However, Mr Bowe said the $68.6m in revenue earned from the Government’s new 15 percent corporate tax, or Domestic Minimum Top-Up tax, was almost 50 percent less than originally projected in the 2025-2026 Budget forecast.