The Tribune

BY NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

THE GOVERNMENT has quietly made last-minute multi-million dollar changes to its fiscal forecasts for two successive Budget years including slashing the size of a projected surplus by more than 56 percent.

The Davis administration, via revisions unveiled after the House of Assembly had completed its May Budget debate, lowered the size of the predicted surplus for the recently-closed 2025-2026 fiscal year by some $42.8m in a signal that it is likely to miss the original $75.5m target. The move trimmed the forecast surplus, which measures by how much tax and other revenue income exceeds public spending, to some $32.7m.

The narrowed surplus, which would still be a positive achievement if attained, is forecast to result from $239.2m in additional total government spending not factored into the original 2025-2026 Budget. The extra $185.6m in recurrent or fixed-cost expenditure, plus a further $53.6m in unanticipated capital spending, is projected to exceed the extra $196.5m in revenues which will take the Government’s annual income beyond the $4bn mark and beat its original tax target.

However, while the 2025-2026 changes were disclosed, this occurred after the Budget debate had ended thus giving the Opposition little time to assess and challenge them. No explanation for the revisions was provided, and the alterations were not brought to the Bahamian people’s attention, although a 2025-2026 supplementary Budget was posted on the Government’s fiscal website absent any announcement on its release.

This, though, has been compounded by the Government’s move to also adjust projections for the current 2026-2027 fiscal year just one month after the initial forecasts were first revealed by Michael Halkitis, minister of finance, in the aftermath of his end-May Budget presentation.

Research by Tribune Business shows that the Davis administration has increased the Budget surplus projected for the present fiscal year by 30.6 percent, or $68.3m, to $291.4m as compared to the initial $223.1m. This positive outcome is forecast to be achieved despite a less optimistic revenue outturn, with the Government’s total income falling by $103.1m from the initial $4.357bn outturn to $4.254bn, due to a greater drop in public spending.

Recurrent expenditure is now forecast to fall below 2025-2026 levels, hitting $3.58bn as opposed to the now-prior year’s $3.63bn, and representing a $144m reduction from the $3.724bn first predicted for 2026-2027. Capital spending, which is typically dedicated to the Government’s public infrastructure projects, is now pegged at $382.9m - a figure below both the prior year’s revised $420.8m and the $410m originally eyed for 2026-2027.

This newspaper understands that, while the 2025-2026 changes were belatedly disclosed near the end of House of Assembly Budget proceedings, those for the 2026-2027 period were not revealed at all. Their emergence now will spark fresh questions over the Government’s commitment to transparency and disclosure, especially on fiscal affairs, and whether it is seeking to shield itself from Opposition and public scrutiny.

The full extent of the Government’s budgetary adjustments have only been exposed by the Fiscal Responsibility Council, the independent watchdog, via its just-published report on the 2026-2027 Budget in which it calls on the Davis administration to both publicly explain the reasons for the alterations and how these will impact achievement of its fiscal consolidation objectives.

“On June 30, 2026, the Ministry of Finance published a supplementary Budget which revised the draft estimates of revenue and expenditure for fiscal year 2025-2026,” the Fiscal Responsibility Council report said.

“These revisions included an expected increase in recurrent revenue of $196.5m for the fiscal year ending June 2026 - from the initial forecast of $3.887bn to $4.084bn - against a planned $239.2m increase in total spending.

The Council added that the latter included “increases in recurrent expenditure of $185.6m and capital expenditure of $53.6m. The revisions raise the respective totals from the initially budgeted amounts of $3.445bn and $376.3m to $3.63bn and $430m”.

“Correspondingly, these projections raise the forecasted measures as a percentage of GDP, including revenue of 23.2 percent (from 22 percent), recurrent expenditure of 20.6 percent (from 19.5 percent) and capital expenditure of 2.4 percent (from 2.1 percent) bringing these projected indicators closer to their respective fiscal objective targets,” the Council said.

“The projected result would be a narrower $32.7m overall fiscal surplus (0.2 percent of GDP) compared to the earlier projection of $75.5m (0.4 percent). The revisions also produced a moderated primary balance of $700.7m (4.4 percent of GDP) from $743.5m (4.2 percent), but the surplus position is retained.” A primary surplus means the Government’s tax and revenue income exceeds all its recurrent spending minus debt servicing or interest costs.

Criticising the manner in which the 2025-2026 fiscal forecasts were altered, the Council said: “The 2025-2026 supplementary Budget draft estimates of revenue and expenditure was published by the Government at the conclusion of fiscal year 2025-2026 with no accompanying notes or explanations as to what necessitated the extraordinary budget for 2025-2026 and implications that it poses in respect of the Government’s attainment of the established fiscal objectives.

“The supplementary Budget also revised the draft estimates of revenue and expenditure for 2026-2027 contained in the Budget tabled in the House of Assembly on May 27, 2026, without notes or explanations as to the rationale for the revisions, one month after the commencement of the Budget debate.

“While the Fiscal Responsibility Council acknowledges that budgets are presented as draft estimates, the Fiscal Responsibility Council recommends that the revisions be accompanied by details of the rationale for such revisions and the implications for performance vis-à-vis the fiscal objectives.”

The Council’s report noted that the Government’s fiscal adjustments meant its 2026-2027 forecasts for key indicators are now below their initial targets. For example, the forecast revenue-to-GDP ratio is now 23 percent compared to the 23.5 percent target, while recurrent and capital spending as a percentage of GDP - at 19.3 percent and 2.1 percent of respectively - are off the original 21 percent and 3.5 percent goals.

Kwasi Thompson, the Opposition’s finance spokesman, told Tribune Business that the 2025-2026 supplementary Budget and changes to the prior, now-completed fiscal year’s forecasts were tabled in the House of Assembly after the debate had ended. He argued that, by making such late changes with minimal disclosure, the Davis administration is losing “credibility and trust” over its management of The Bahamas’ public finances.

“For the Government to come and table a supplementary Budget without explaining their reasons for changing the original Budget, it causes the Government to lose credibility and causes the Government to lose trust,” the east Grand Bahama MP blasted. “Trust in a government with financial numbers is essential, and for the Government to change, and the Council to make these points without the Government addressing them, causes the Government to lose credibility and lose trust.

“No government should operate its finances in a manner the people cannot trust, and that should trouble Bahamians. They are operating the finances of government in a way that people cannot trust. That’s reflected in their fiscal projections. It’s reflected in their surplus announcements, which the Fiscal Responsibility Council has spoken about, it’s reflected in their public-private partnerships (PPPs), which the Council has spoken about.

“It goes to trust, and being able to trust a government’s word when it comes to fiscal matters,” Mr Thompson added. “The fundamental point is that the finances of a government must be done transparently, and must be done in a way people can trust.

“The Fiscal Responsibility Council has only confirmed that the behaviour of this government is operating in a way that the people cannot trust what they say when it comes to fiscal matters.. They must be able to trust the Government when they speak about fiscal matters.”

The Council, meanwhile, warned the Davis administration that the $291m Budget surplus target for 2026-2027 - equal to 1.6 percent of GDP - is “aggressive” given the Government’s consistent failure to meet its revenue targets and could require “downward adjustment in spending” if they are to be met.

“Although the projected fiscal balance for 2026-2027 at 1.6 percent of GDP falls just short of the 1.7 percent target, the Fiscal Responsibility Council notes that the projection still suggests a marked improvement from the previous forecast of 0.2 percent of GDP,” the Council’s report said.

“The Fiscal Responsibility Council is of the view that below-Budget revenue performances to-date amid persistent downside risks suggests that this forecast is optimistic. Achieving this objective could require downward adjustment in the spending programme, which could be a challenge with recurrent and capital expenditure projected to be contained at levels lower than the previous 2025-2026 Budget.”

The Council was also not done with the previous 2025-2026 fiscal year. “The Fiscal Responsibility Council notes that a fiscal surplus of $190.1m for the fourth quarter of fiscal year 2025-2026 is required to meet the projected $32.7m surplus. In light of current trends, there is uncertainty regarding the attainment of the required fiscal surplus to match the targeted Budget surplus,” it warned.

“The reported debt outstanding as of the end of March 2026 at $12.473bn, compared to the end of 2025-2026 projection of $11.387bn (64.6 percent of projected GDP). The Fiscal Responsibility Council notes that meeting this end-of-year projection would require a net repayment of $1.087bn over the final three months of the fiscal year.”