The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s finance spokesman yesterday challenged the Government to detail when Bahamians will see a return from its “much touted” blue carbon credits as it appears to be eyeing different securities.

Kwasi Thompson, ex-minister of state for finance under the Minnis administration, told Tribune Business the Government appears to have gone silent over an initiative that was billed as generating a new revenue stream for The Bahamas - worth hundreds of millions of dollars - by monetising the value of its seagrass meadows, mangrove forests and other natural assets that remove carbon dioxide from the atmosphere.

He spoke out after the Government’s recently-released debt management strategy, covering the upcoming three fiscal years through to 2027-2028, made no mention of carbon credits but, instead, signalled it is exploring other sustainability-focused financing mechanisms to raise low-cost funding for climate change mitigation and environmental preservation.

The Davis administration, fresh from November 2024’s debt-for-nature refinancing that replaced $300m worth of liabilities with lower-cost debt, disclosed that in the upcoming 2025-2026 fiscal year beginning on July 1 it will start work on developing a “framework” to comply with international best practices and allow The Bahamas to issue so-called ‘green’ or sustainable/social bonds to investors.

Its debt management strategy explained that the proceeds from such ‘green’ bonds would be “directed to finance new or existing projects with environmental and/or social benefits” such as renewable energy, social housing and ‘clean’ transportation.

“Typically, these bonds are aligned with the green bond principles (GBP) from the 2020 International Capital Market Association (ICMA)—a set of guidelines that foster a transparent and unified reporting on the benefits and expected impact, and the 2019 sustainability linked loans principles from the Loan Market Association (LMA),” the report added.

Also identified as a possible debt instrument for The Bahamas were “sustainability-linked bonds or loans”. The strategy report said these were “structured using key performance indicators (KPIs) that are linked to the achievement of climate or social goals”, and achieving the targets established by the KPIs could “result in a decrease (step down)... in the instrument’s coupon or interest rate”. Failure would lead to an increase.

Suggesting it has already decided to proceed with these securities’ development, the strategy report said: “As a first step in the development of new debt instruments to achieve sustainable development goals, like climate change mitigation and adaptation or biodiversity protection, the Government intends to build a framework that is aligned with international recognised best practices, similar to those provided by the ICMA and the LMA.

“The framework will explain the context and background of the policy intervention, and the functioning of the instruments in terms of execution, expected outcomes, monitoring and reporting. Typically, this framework requires the examination and analysis of a second party opinion (SPO) provider - a reputed organisation that validates compliance of the framework with international best practices.

“The Government contemplates commencing this work during fiscal year 2025-2026.” It argued that there was a sound rationale for the Government to do so given the ever-present threat posed to The Bahamas by climate change and hurricanes that are increasing in severity and frequency, along with sea level rise.

“Beyond the traditional borrowing instruments, the Government acknowledges the availability of alternative financing instruments being used to address public policy concerns in confronting the effects of climate change, and for blue economy and biodiversity protection and climate change mitigation and adaptation,” the debt strategy report added.

“Addressing these concerns will require substantial financing, and will need to be accompanied by a sound debt management strategy to support effective access to national and international debt markets.

“As observed from international experience, and increased interest among investors, two main sets of new sovereign debt instruments have emerged to improve market access and financial conditions for sustainable financing through offering opportunities for broadening the investor base, improving financing conditions (in tenor and cost), and increasing the transparency and accountability of sovereign debt markets.”

Mr Thompson, though, asserted that the Davis administration “failed to update us on their carbon credit programme in the mid-year Budget” while describing the debt management strategy as “as a smokescreen” that was full of “contradictions”.

“The Government has again failed to update the public on their much-touted carbon credits programme, and how much funds they have put out in reference to this and when we can expect to get any return,” Mr Thompson blasted.

“It is consistent with the behaviour of this government. They consistently do business in the dark and we must trust and believe them. The Bahamian people do not trust and believe them. They have failed to disclose what is happening with the carbon credits, and they have failed to disclose when and if we will receive a return from it.

“We are calling on them to come clean and provide us with an update, provide us with a status report on what’s happening with the carbon credits programme. I’m not going to guess, I’m not going to speculate. It’s the Government’s obligation to be open and transparent.”

Mr Thompson asserted that one of the “contradictions” in the debt management strategy is that the Government is predicting it will slash its direct debt by $866m during the three fiscal years to end-June 2028, as a result of generating three consecutive annual fiscal surpluses of around half-a-billion dollars each, yet is also forecasting economic growth will be “subdued” and average just 1.6 percent during this period.

Fiscal performance, and especially tax revenues, are heavily linked to economic growth. “You cannot say one thing and write another, and that is what apparently seems to be happening here,” Mr Thompson argued. “The Government has said the country is booming economically, but their own report forecasts sluggish, anemic growth from 2.6 percent [this year] to 1 percent next, and then only 1.5 percent for the next two years.

“I fail to see how they will realise half-a-billion dollar surpluses with anemic growth.” And, to pave the way for these surpluses, the Government is forecasting it will still hit a $69.8m full-year deficit for the current 2024-2025 fiscal year despite overshooting this by $325m at the half-way mark with a $394.8m deficit to end-December.

“We are in an economic hole. They have yet to explain how we will dig our way out of that hole. Even before we start to think about surpluses, they must explain how they will meet this year’s deficit target,” Mr Thompson argued. “This administration cannot claim accelerated growth with your mouth and predict economic stagnation with your pen.”

He also accused the Government of “doing business in the dark” and “governance in the dark” as a result of what he described as undisclosed “off the books loans” for public-private partnerships (PPPs), such as the Eleuthera and Exuma roadworks performed by Bahamas Striping, where the interest rate and other terms, such as the duration of the facility.

“The Government admits to over $200m in so-called PPPs - secret arrangements where private vendors borrow on the Government’s behalf to fund roads and infrastructure,” Mr Thompson added.

“These are loans by another name, but instead of showing these multi-year debts transparently in our national accounts and formal reports, the Davis administration has instead entered into cloaked, long-term repayment deals, with unknown interest rates and no parliamentary disclosure.

“The Bahamian people are thus being kept in the dark about the true size and cost of the nation’s debt and borrowing. The truth is that this government refuses - flat out refuses - to provide a full accounting.”