The Tribune

By NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

A BAHAMIAN economist yesterday asserted that “something’s not adding up” with the Government’s finances as she questioned how the national debt could increase by more than $1bn in a year when the Government is still forecasting a $32.7m Budget surplus.

Therese Turner-Jones, who from 2017 to 2021 served as general manager for the Inter-American Development Bank’s Caribbean group country department, told Tribune Business that “the lack of transparency is mind boggling to me” given that there should not be such a huge gap or disconnect between the annual fiscal deficit, or surplus, and the increase in both direct government and the national debt.

The Central Bank, in its 2026 second quarter economic report, revealed that the national debt had increased by $1.071bn during the 2025-2026 fiscal year to breach the $13bn mark at $13.17bn. The increase featured a $697m jump in the Government’s direct debt, plus a $373.5m year-over-year surge in contingent liabilities that represent repayment guarantees provided on behalf of loss-making state-owned enterprises (SOEs).

However, despite the significant jump in the national debt, the Davis administration’s April 2026 fiscal report pegged the deficit - which measures by how much the Government’s spending exceeds revenues in a specific Budget year - at just $121.2m. That sum is far removed from the extent to which the national debt, which is largely fuelled by the annual deficits the Government has incurred every year since Independence, has risen for 2025-2026.

Several observers suggested the disconnect could be due to the Government, under the public sector’s modified cash-based accounting, depositing the proceeds of borrowings in the bank with the result they do not show up as spending. They added that borrowings could also have been placed with the multiple special purpose vehicles (SPVs) that the Government has had an increasing liking for since the last Christie administration was in office.

Ms Turner-Jones, telling this newspaper that The Bahamas’ national debt and fiscal position is “concerning”, said of the Central Bank report and the Government’s 2025-2026 fiscal projections: “Something’s not adding up… You cannot run a surplus and build your debt at the same time.”

She was not alone. Marlon Johnson, the Ministry of Finance’s former acting financial secretary under the Minnis administration, in a post on social media, said of Tribune Business’ report on the Central Bank data: “What was the calamity that caused the national debt to grow by $1bn for the fiscal year ending this past June? How can we still be talking about surpluses when central government debt increased $700m during that fiscal year?

“If the surplus/deficit is not in broad alignment with the surge in central government debt, then that means we are having substantial spending taking place off-book. And also likely outside of approved parliamentary appropriation. If this is so, any such spending would be illegal and unconstitutional.”

Ms Turner-Jones, though, told Tribune Business that the $1bn national debt expansion was likely to have been driven by an increase in government guarantees for SOEs plus borrowing from the likes of the Central Bank itself, which had provided more than $290m in advances to the Davis administration for the first nine months of the 2025-2026 fiscal year.

“They are running large accruals to local suppliers, so people are not getting paid on time,” she added. “Businesses are delivering services and goods to the Government and not getting paid. The payables are very large.

“It’s not adding up. I would say it’s probably not on the central government side. They are guaranteeing state-owned enterprise debt. It could be BPL, it could be Water & Sewerage, it could be the Public Hospitals Authority (PHA). It could be those contingent liabilities added on.”

Ms Turner-Jones questioned why the Government has yet to publish the final fiscal numbers for the 2025-2026 fiscal year, which will confirm whether it has attained its surplus forecast or slipped into deficit, when the debt figures have already been released.

She added that The Bahamas’ debt-to-GDP ratio should ideally be 60 percent or lower but, according to the Central Bank, this stood at almost 75 percent at end-June 2026 compared to 74.2 percent just two years earlier.

“I wouldn’t start to say it’s an unsustainable debt level yet, but it becomes problematic because with all the revenue collected you have to allocate more for debt service,” Ms Turner-Jones said, adding that she is also concerned that yields on outstanding external Bahamas sovereign foreign currency bonds, representing the interest rates demanded by investors, remain relatively high compared to other Caribbean countries.

“I’m concerned. I think the rating agencies, which have given us a stable outlook, are going to be screaming and everyone needs to pay attention. There’s $1bn in additional debt. What do we have to show for it? What was it spent on? Was this the best use of taxpayer money?

“The debt is coming at a cost, an increasing cost, and the more we borrow the higher the cost becomes. When the sovereign rating changes, like in a downgrade, it doesn’t just affect the sovereign’s borrowing; it affects everyone’s borrowing. Interest rates, for example, may go from 4 percent to 5 percent. The rating of the country affects everyone’s borrowing, not just the sovereign borrower. Everything becomes more risky.”

The 8.8 percent year-over-year increase in The Bahamas’ national debt to $13.17bn is likely to fuel questions about the extent of pre-election spending, as well as the seeming disconnect between the size of the debt surge and seemingly much-lower annual GFS deficit. The latter, which is supposed to measure the net increase in the Government’s debt, as well as by how much its spending exceeds tax/revenue income, stood at only $121.2m at end-April.

The more than $1bn jump in the national debt came despite a slight drop in the Government’s direct liabilities during the three months to end-June 2026. “For the quarter ended-June 2026, the direct charge on the Government fell by $7.1m (0.1 percent) to $12.466bn while, on an annual basis, it grew by $697m (5.9 percent),” the Central Bank confirmed.

“The Government’s contingent liabilities increased by $358.7m over the review quarter, and by $373.5m year-on-year, to $703.4m. Consequently, the national debt, inclusive of contingent liabilities, rose by $351.6m (2.7 percent) over the three-month period, and by $1.071bn (8.8 percent) on an annual basis, to $13.17bn as at end-June 2026.

“As a ratio to GDP, the direct charge decreased by 0.2 percentage points on a yearly basis to 70.7 percent at end-June. However, the national debt-to-GDP ratio increased to an estimated 74.7 percent from 72.8 percent in the second quarter of 2025.” The latter indicator was also ahead of the 74.2 percent national debt-to-GDP ratio at the 2024 mid-point, while total public sector debt - having fallen from 76.6 percent to 75.2 percent at the half-way mark in 2025 - is now back up to 77.3 percent of GDP.

Much of the contingent liability increase is related to the borrowings that the Government guaranteed for its $280m Grand Bahama Power Company acquisition and working capital, plus its liquefied natural gas (LNG) energy reforms and Public Hospitals Authority (PHA) in the months leading up to the general election.

However, the Central Bank report will likely reignite Opposition questions as to why the Government’s direct net debt has increased by almost $700m when the fiscal deficit at end-April 2026 - with just two months left in the fiscal year - was shown as $121.2m. And the re-elected Davis administration, as late as end-June 2026, was forecasting a $32.7m Budget surplus for 2025-2026, albeit reduced by some $42.7m or more than 50 percent from the original $75.5m target.

The surplus, if achieved, should mean the national and direct government debt decreases rather than goes up by a much higher amount. The Opposition has already charged that the Davis administration has been using the National Investment Fund to hide the scale of government borrowing and debt, placing borrowed funds into this rather than the Consolidated Fund, which enables it to treat these monies as equity rather than debt.