The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s finance spokesman yesterday voiced concern that the Government used $203m set aside to cover future maturing foreign bonds to repay its “debt obligations” in the last fiscal year.

Kwasi Thompson, the east Grand Bahama MP, said the revelation contained in the just-released quarterly report covering the final three months of the 2023-2024 fiscal year was contrary to the Government’s annual borrowing plan which made no mention that it would use more than half - 53.6 percent - of so-called “sinking fund” assets to meet current debt repayments.

The fourth quarter and full-year fiscal report confirmed: “During fiscal year 2023-2024, drawings on the Sinking Fund for the servicing of debt obligations totaled $203m. The four sinking fund arrangements earmarked for scheduled retirement of external bonds amounted to $175.6m at end-June 2024, of which $96.6m is subject to a repurchase agreement.”

That is the Goldman Sachs repo (repurchase) agreement that the Government entered into in early 2022 where it pledged a portion of the ‘sinking fund’ assets as security for liquid foreign currency cash worth over $200m from the US investment bank.

The just-released report further affirmed: “In financing activities, the balance under the net acquisition of financial assets shifted to a negative $185.8m from an increase of $226.5m as the Government drew down on sinking funds to assist with financing debt obligations and the value of loans to Government Business Enterprises was significantly less.”

The report effectively confirms that the Davis administration has been using ‘sinking fund’ assets, which were supposed to be set aside and built up to cover future international foreign currency bond issues as they mature, to help repay current debt obligations and cover its 2023-2024 fiscal deficit. In effect, it has been using assets held for future benefit to meet current needs.

“The report causes us to raise another matter we previously raised that has gone unanswered,” Mr Thompson said yesterday. “The report has indicated that the Davis administration has used over $200m of the sinking fund resources to pay debt obligations, This is inconsistent with the Government’s budgetary plan to add some $59m to the sinking fund.

“This was clearly an unplanned draw down and also inconsistent with the Government’s published Annual Borrowing Plan which made no mention of using the sinking funds to meet current debt obligations. Once again we find the Davis administration committing one thing to the Bahamian people and then turning around and doing the opposite.”

Simon Wilson, the Ministry of Finance’s financial secretary, could not be reached for comment before press time yesterday despite numerous attempts. However, Mr Thompson added: “What is even more concerning is the Government once again is in breach of the law.

“Section 56 of the Public Finance Management Act states that the minister of finance shall disclose in the annual Budget the government securities and loans to be redeemed from the sinking funds. This means that it must be disclosed before the funds are used out of the sinking funds.

“The annual Budget disclosed the opposite - that funds would be added, not taken away, from the sinking funds. The Government must explain how their actions can be consistent with section 56.”

The Public Finance Management Act, which the Davis administration brought to the House of Assembly in 2023, stipulates in section 56’s clause two that “the minister [of finance] shall, as part of the annual budget, disclose the particulars of government securities and loans to be redeemed from the sinking funds”.

This was not done in May 2023, and both the full-year Budget and half-year report show the Government intended to expand the sinking funds’ collective asset base by $59.8m during the course of the 2023-2025 fiscal year.

That was to be accomplished via a $1.131m payment from the Clifton Heritage Authority; $3.7m and $1.7m in likely interest received on respective $200m and $100m US dollar bond issues; and the bulk - some $53.279m - generated from a $750m US dollar bond holding.

Mr Thompson, meanwhile, renewed Opposition concerns that the Government’s deficit reduction in 2023-2024 was achieved only by deferring payments to vendors resulting in a build-up of arrears not shown by the public sector’s cash-based accounting.

“The Opposition is convinced that the constant complaints we receive from our constituents regarding late and no payments from government indicates that the fiscal hole may be even worse and government arrears seem to be building up,” he argued.

“How did the Government manage to spend approximately $20m less on utilities than last year? Does this reflect non-payment to BPL by the Government and a build up of payables? There is $111m less spent on goods and services. Does this reflect less goods and services, or non-payment or delayed payments for these goods and services?

“The Government’s fiscal performance for the year has been marked by a significant shortfall in revenue compared to its target and an alarming increase in the overall national debt,” Mr Thompson added.

“The expected revenue targets have not been met, due to what we have warned the Government is a stagnating economy. Neither the overall revenue nor the VAT collections met their targets. This shortfall has compounded the fiscal deficit.”

Mr Thompson also returned to the Opposition’s theme of attacking the Government’s travel spending even though it accounts for a relatively modest portion of its $3bn-plus total expenditure. “The PLP has once again busted its travel budget by over 40 percent after committing to cutting spending on travel,” he blasted.

“True to form the PLP spent $30m less on healthcare and $7m less on education than the previous fiscal year and decided it was more important to go $5m over-budget on extravagant travelling.”