The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government spent more than $118m in combined subsidies to keep Bahamasair and the Water & Sewerage Corporation afloat at the height of the COVID-19 pandemic, it was revealed last night.

Data provided by the Ministry of Finance’s 2020-2021 full-year and fourth quarter fiscal “snapshot” revealed that the two state-owned enterprises (SOEs), which have long bled the Public Treasury, required triple the amount of taxpayer support originally estimated in the May 2020 Budget.

Bahamasair, which was originally allocated a $19m subsidy, saw this figure quadruple to $78.2m for the 12 months to end-June 2021 after it was grounded for much of that period by COVID-19 lockdowns and other health measures and restrictions.

And the Water & Sewerage Corporation, for its part, required $40m from the Public Treasury - a sum nearly double its initial $20.3m allocation. “Subsidies to public non-financial corporation were higher by $39.6m (9.9 percent) at $439.7m over the comparative fiscal year,” the fiscal “snapshot” revealed.

“This primarily included transfers of $238.9m to the Public Hospital Authority (PHA) for operational activities and to support COVID-19 remediation efforts; $78.2m to Bahamasair; $38m to the National Health Insurance Authority; $40m to Water and Sewerage; and $36.7m to the University of The Bahamas.”

While the increased health-related subsidies could be justified by the battle with COVID-19, the revelations concerning Bahamasair and Water & Sewerage Corporation are likely to prompt fresh debate about the need to urgently reform loss-making SOEs and the drain they produce on Bahamian taxpayers.

And the subsidies did not stop there. For so-called “current transfers” rose to $180.2m or 123.2 percent of the budgeted amount, meaning they more than doubled. A significant contributor was payments to keep the Grand Lucayan hotel operating while it awaited the closure of its sale to the ITM Group/Royal Caribbean consortium - a deal that will now have to be picked up by the new administration.

“Current transfers not elsewhere classified widened by $21.8m (13.8 percent) to $180.2m (123.2 percent of the budget), reflecting additional operational support to Lucayan Renewal Holdings ($13.6m), Nassau Flight Services ($5.7m) and the Airport Authority ($5.5m),” the report added.

“Transfers of $3.4m in scholarship funding was made to Bahamas Technical and Vocational Institute (BTVI) alongside a $3.9m reduction in international scholarships as the Government encouraged domestic education opportunities amidst global COVID-19 health and safety protocols and travel restrictions.”

Reflecting COVID-19’s devastating impact on Bahamian society, social assistance benefit payouts more than tripled during the 2020-2021 fiscal year. “

“Social assistance benefits expanded by $196.9m (412.5 percent) to $244.6m, representing 178 percent of the budget. The significant increase in outlays was primarily driven by extensions to the COVID-19 related food and unemployment assistance programmes,” the Government’s fiscal “snapshot” said.

“Public debt interest increased by $77.7m (22.6 percent) to $422.4m, equating to 106.4 percent of the budget. By currency, $194.4m (46 percent) represented payments on foreign currency obligations and $228m (54 percent) were for Bahamian debt transactions.

“Government subsidies, which include transfers to government-owned and/or controlled enterprises that provide commercial goods and services to the public, were boosted by $42.2m (9.9 percent) to $469.7m, exceeding the budget by 26.6 percent.”

Total COVID-19 related assistance spending was pegged at $352.7m, with some $273.3m worth incurred during the 2020-2021 fiscal year and $79.5m in 2019-2020. The bulk of this, some $174.7m or just under half, related to unemployment assistance payments.

Elsewhere, the Government said almost two-thirds of its revenues were secured during the 2020-2021 second half due to the economy’s reopening and end to COVID-19 restrictions as well as the tourism rebound.

Both quarters are traditionally the strongest revenue generators, but the Government said: “Of the $1.603bn in tax receipts,16.8 percent was amassed in the first quarter; 18.7 percent in the second quarter; 29 percent in the third quarter and 35.5 percent in the fourth quarter.

“Approximately $1.033bn (64.5 percent) was collected during the second half of the fiscal year. Quarterly VAT receipts strengthened progressively during the year, with the strongest gain of $271.8m posted in the final quarter.

“Taxes on property improved by an estimated $44.4m to $143.5m, and represented 136.9 percent of budget. This outcome included an additional $27.6m in collections from the Government’s real property tax forgiveness programme to reduce outstanding arrears.” No mention was made, though, of how much tax was given up or written-off as a result of this initiative.

Kwasi Thompson, minister of state for finance, last night said in a statement that revenues for July and August are “materially ahead” of target although no figures were provided. He said: “This administration has faced economic conditions that no other government has ever had to manage.

“Through it all, we have demonstrated sound and stable fiscal management that has prioritised the welfare of the Bahamian people while being strategic and forward looking in our planning.

“Despite the scepticism about our revenue projections last year, the preliminary numbers show our forecasting was sound and in line with the prevailing economic circumstances. We actually performed above projections because of the strengthening of the economy over the second half of the year,” Mr Thompson added.

“In fact, I am pleased to point out even now in the new fiscal year the revenue numbers for July and August are tracking materially ahead of the revenue targets for that period. It gives us early confidence that despite the pundit’s criticism of the current revenue budget targets, we are positioned at this stage to meet our budgetary expectations in line with what was approved by Parliament.”