The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government slashed its fiscal deficit by 32 percent, or almost one-third, for the first two months of the current 2025-2026 Budget year due to a more than $50m decline in the amount of ‘red ink’ incurred during August.

The Ministry of Finance, unveiling the monthly fiscal report for August 2025, disclosed that the month’s deficit - measuring by how much government spending exceeds its revenue income - contracted by some 83.3 percent compared to the prior year’s $61.1m to come in at just $10.2m.

This, in turn, helped to more than offset the year-over-year jump in July’s deficit to $69.1m. The total deficit for the first two months of the current Budget year was thus relatively contained at $79.3m, representing a $37.3m fall compared to the $116.6m incurred during July and August 2024.

While the two-month deficit figure represents a $154.8m difference, or gap, to the Government’s forecast $75.5m Budget surplus for the full 2025-2026 fiscal year that closes at end-June 2026, it still has plenty of time to make that up.

This is because the revenue-rich part of the Budget cycle does not occur until the calendar year’s first four months, coinciding with the peak winter tourism season as well as the bulk of Business Licence fee and real property tax payments. The Government, in the last 2024-2025 fiscal year, generated a more than $182m monthly surplus in April.

However, the relatively modest deficits for August and the first two months of the 2025-2026 fiscal year contrast somewhat sharply with the near-$308m increase in total public sector debt that was recorded for the three months to end-September.

The Ministry of Finance’s public debt bulletin for the 2025-2026 fiscal year’s first quarter seemingly indicates that a relatively large deficit was incurred in September given the gap between the $79.3m deficit for the first two months and the $307.9m debt increase, coupled with the Government’s continued reliance on modified cash-based accounting which only records and tracks expenditure when it is incurred.

“Outstanding debt of the public sector was estimated at $13.551bn at end-September 2025, respective gains of $307.9m (2.3 percent) and $480.7m (3.7 percent) since end-June 2025 and end-September 2024,” the Ministry of Finance’s previously published debt report asserted.

“Compared to the previous quarter, foreign currency debt decreased by $46.2m (0.8 percent) to $5.837bn and accounted for a reduced 43.1 percent of the total portfolio relative to 44.8 percent at end-September 2024.

“Since end-June 2025, the Bahamian dollar component expanded by $354.1m (4.8 percent) to $7.714bn. This corresponded to 56.9 percent of overall debt - an upturn of 1.7 percentage points year-over-year. Central government’s net financing operations remained the principal driver for fluctuations in the public debt stock.”

As for August’s fiscal performance, the Ministry of Finance said: “Preliminary data on the fiscal outturn for August 2025 showed a significant decline in the estimated deficit to $10.2m from $61.1m in the prior year. This outcome reflected a 12 percent ($26.2m) rise in revenue receipts to $244.2m alongside an 8.8 percent ($24.7m) decrease in spending to $254.5m.”

Total government revenues rose from $218m the year before, while tax revenues increased by $28.3m or 14.6 percent year-over-year to hit $221.8 as opposed to $183.3m during August 2024.

“Tax revenue rose year-over-year by 14.6 percent ($28.3m) to $221.8m,” the Ministry of Finance added. “VAT, which totalled $126.5m, increased by $26.4m, partly reflecting enhanced compliance measures.

“Taxes on use and permission to use goods were higher by $6.3m at $12.2m due to receipts of Business Licence fees. Non-tax revenue declined by 8.6 percent ($2.1m) to $22.4m.”

On the spending front, the Ministry of Finance added: “Recurrent expenditure for August totalled $214.7m for a reduction of 7.4 percent ($17.2m) from the corresponding period in the prior year.

“Spending for the use of goods and services declined by 19.8 percent ($9.2m) to $37.2m due to comparatively lower payments for services and supplies and materials. Other payments decreased by 54.8 percent ($19.5m) to $16m due to timing of insurance premium payments.

“Capital expenditure declined by 15.9 percent ($7.5m) to $39.7m. The bulk was expended for the acquisition of non-financial assets, 71 percent, and the remaining 29 percent represented capital transfers.”

However, despite the narrowed deficit, the Ministry of Finance acknowledged that the Government’s debt increased by some $28.5m during August although no new figures were provided for its direct debt or the national debt. There were net borrowings of $25m from the Central Bank, in the form of advances, plus a net increase in outstanding Bahamian dollar bonds of $36.3m.

“During the review month central government’s debt outstanding increased by an estimated $28.5m. The $94.7m in proceeds from borrowings was almost entirely derived from domestic currency sources,” the Ministry of Finance added.

“Aggregate debt repayment of $68.2m was allocated between domestic (60.7 percent) and foreign (39.3 percent) currency redemptions.”