The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The deputy prime minister yesterday pledged to accelerate state-owned enterprise (SOE) reforms after they proved the one area of recurrent spending overruns in the revised 2019-2020 Budget.

K Peter Turnquest told Tribune Business the Government must now "look in even more detail" at proposals from the PricewaterhouseCoopers (PwC) accounting firm for arresting the multi-million burden imposed annually on Bahamian taxpayers by loss-makers such as Bahamasair and the Water & Sewerage Corporation given the fiscal blowout created by the COVID-19 pandemic.

While the Government's recurrent (fixed-cost) spending came in $179m below the $2.688bn estimate presented in the revised post-Dorian Budget, subsidies to SOEs represented the one area where the Government overshot its target. These subventions exceeded projections by 11.5 percent, coming in at $427m instead of the budgeted $383m.

"As we've outlined over the past two years, the public corporations and SOEs are continuing concerns for us as the level of subsidy we provide those entities is unsustainable," Mr Turnquest said. "We've had reviews done into a number of them, and they've given us some recommendations.

"We'll be looking at those in even more detail given all that has happened to see how to put into effect some of those, and save future costs and subventions required. Clearly, as we look into the future we have to figure out how to make these things cost recovery based or charge the necessary fees to ensure they are viable.

"It seems to be unfair to general taxpayers to make them pay for these services when they may not be getting direct benefits. We do have to rationalise them, and wring out whatever efficiencies we can in the first instance and determine whether the operating structure is right to take them into the future."

The Government, in its report on the full 2019-2020 Budget year and the three months to end-June 2020, blamed Hurricane Dorian and COVID-19 relief efforts for the increase in subsidies to SOEs and public corporations.

"Subsidies, comprising transfers to government-owned and/or controlled units that provide commercial goods and services to the public, expanded by $34.8m (8.9 percent) to $427.5m. The 11.7 percent excess over the revised budget reflected the additional funding earmarked to assist with Hurricane Dorian and COVID-19 relief initiatives," the report said.

"Subsidies to public non-financial corporations increased by $52m (14.9 percent) to $400.1m, as the Government facilitated the hurricane-related relief and restoration activities of several SOEs. Specifically, outlays to the national airline (Bahamasair) more than doubled to $27.4m from $13.3m in fiscal year 2018-2019, primarily representing additional allocations to cover various operational costs, and the cost of repatriation flights from Abaco and Grand Bahama to New Providence.

"Additionally, transfers to the Water & Sewerage Corporation to assist with repairs to water mains increased by $15.9m (51.3 percent) to $46.9m, and these outlays were also higher for the Public Hospital Authority by $22.3m (9.7 percent) at $252.5m. Meanwhile, outlays to the National Health Insurance Authority were relatively stable at $24m."

Mr Turnquest, meanwhile, said paying-off the $360m worth of unfunded arrears that the Minnis administration inherited upon taking office in 2017 remained a "priority" and would not be compromised by the Government's COVID-related fiscal crisis.

Some $237.3m had been paid-off as at June 30, 2020, and the deputy prime minister affirmed: "They're still a priority. Those persons we are still working on paying have been very generous with the amount of time taken to make those payments, so we will try to pay them as soon as we can. We will continue to work on those as we work to meet our fixed commitments."

Mr Turnquest also confirmed that the Government was likely to extend or rollover the $30m worth of "shareholder loans", divided into two credit lines worth $30m each, that it has provided to Bahamas Power & Light (BPL) and which are coming due for repayment this month.

"Unfortunately, that is probably the likeliest outcome," he said. "I think BPL is still working on their financing, so we have an obligation to continue to support them until such time as they get that arranged and finalised."

"The two shareholder loans of $15m each, made to BPL in June 2019 and August 2019, respectively, were originally due in December 2019," the report added. "While BPL continued to service the loans according to the loan agreement, the maturities have been extended to September 2020 because of the ongoing delay in the Rate Reduction Bond transaction, now exacerbated by of the COVID-19 pandemic."