The Tribune

By NEILL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government yesterday asserted its fiscal progress is again being “under-estimated” as the Opposition argued that Fitch’s projection of a “$287m” hole in its 2026-2027 Budget forecasts exposes that “the emperor has no clothes”.

Dr Duane Sands, the Free National Movement’s (FNM) chairman, told Tribune Business that the credit rating’s assessment and forecast that the Government will incur a $64m deficit for the current fiscal year, as opposed to the Davis administration’s predicted $223.1m surplus, is “more consistent with the realities on the ground” such as the recent temporary suspension of health insurance cover for the security services by Colina.

And, with Fitch projecting the Government’s $1.024bn borrowing for 2026-2027 “may ultimately be higher than forecast” and global oil prices again hitting over $94 per barrel at press time last night, he warned that these impacts could result in reduced spending on critical public services - health, education and social welfare system.

However, the Government cited the positives in Fitch’s assessment of its annual borrowing plan. The rating agency conceded that The Bahamas’ fiscal recovery and consolidation process has outperformed international and market expectations in recent years, and hailed the “strong governance” that is “underpinning recent progress on structural fiscal consolidation”.

“External observers have under-estimated the strength and effectiveness of the Government’s fiscal approach in the past,” Senator Latrae Rahming, the Prime Minister’s communications director, said in response to this newspaper’s inquiries.

“We remain confident in our fiscal strategy, and in achieving the outcomes foreshadowed in our budgetary projections, supported by the Government’s ongoing revenue enhancement, expenditure management and debt reduction measures.” Michael Halkitis, minister of finance, could not be reached for comment by message or call before press time last night.”

However, Michael Pintard, the Opposition’s leader, in a statement asserted that Fitch’s deficit and borrowing forecasts, which differ from the Davis administration’s own, expose “a $287m hole in the Government’s fiscal fantasy”.

While Fitch effectively hedged its bets by forecasting The Bahamas will instead achieve a first annual Budget surplus in the 2027-2028 fiscal year, its prediction for the current period - if it comes true - would leave a major $287.1m hole in the Government’s finances.

For the Davis administration’s predicted $223.1m surplus, equal to 1.2 percent of Bahamian gross domestic product (GDP) or economic output, is forecasting that the Government’s tax and total revenue income will exceed its spending during the 2026-2027 fiscal year. But, if Fitch’s projection turns out to be accurate, this will represent a negative swing equal to 1.6 percent of GDP, as a $64m deficit would represent by how much expenditure will exceed the Government’s income.

Should the rating agency prove correct, the Government will not have a surplus to increase its cash balances by the forecast $223.1m and provide a further “buffer” to debt repayments. It would likely force the Davis administration to borrow beyond the $1.024bn targeted to finance debt rollovers and refinancing in the 2026-2027 fiscal year.

“The latest assessment from Fitch Ratings confirms what the Opposition has been telling the Bahamian people for months: The Davis Administration’s fiscal projections are built on wishful thinking, not reality,” Mr Pintard argued.

“The Government’s 2026-2027 Budget projects a surplus of $223.1m. Fitch Ratings projects a deficit of $64m for that same fiscal year. That is a swing of $287m, an almost $300m hole in the Government’s own story, told by their own numbers.”

Mr Pintard added: “This news comes against a backdrop of mounting arrears so severe that the Government’s own health insurer had to suspend services after reportedly being owed well over $100m. Meanwhile, public corporations like Bahamas Power & Light (BPL) and the Bahamas Public Parks and Beaches Authority continue to receive tens of millions of dollars with little public accounting of where it goes.

“The sad part? When these hidden loans, undeclared liabilities and mounting arrears eventually come due, they won’t be paid by the politicians. They will be paid by hardworking Bahamian taxpayers through higher debt, higher taxes, fewer opportunities and fewer public services.

“Every dollar spent servicing undisclosed debt is a dollar that cannot go toward the legitimate arrears owed to Bahamian small businesses. Every dollar diverted to cover a fiscal shortfall is a dollar that cannot go toward public servants, better public services or real relief for families struggling with the cost of living.”

Dr Sands echoed these concerns yesterday, suggesting that the Government’s will likely be to “shoot the messenger” and question “who the hell are these Fitch people” even though it has previously praised the credit rating agency.

“Fitch has basically said the emperor is not wearing any clothes,” he told Tribune Business. “This, unfortunately, does not help with their narrative. The Fitch assessment is more consistent with the realities on the ground. When we have a mixed bag, let’s call it what it is.

“As we noted, as we have seen, the evidence has pointed to the failure to pay insurance premiums, the failure to pay National Health Insurance doctors, the tremendous amount of payables that have not been executed. Fitch has basically said to them: ‘We don’t buy it and, notwithstanding all the things you put in the Budget communication, it’s all hogwash’.

“There’s no question that Fitch’s assessment is more in line with what the numbers on the ground show, whether the quantum’s $287m, $500m.. We can quibble about that. There’s no surplus that’s going to happen in the Bahamian economy any time soon. The Government of The Bahamas has forecast a Budget surplus: It ain’t going to happen.”

Asked whether Fitch’s deficit projection is premature, given that the fiscal numbers for 2025-2026 - a year in which The Bahamas was forecast to produce its first-ever Budget surplus of $75.5m - have yet to be released, Dr Sands replied that - even if the late payments to Colina, and temporary insurance coverage suspension were an isolated issue - the fact there were allegedly $100m in premium arrears means “that single issue alone changes the whole dynamic”.

He added that “tens, hundreds even thousands” of Bahamian companies are owed substantial sums by the Government for goods and services provided as shown by the $242m arrears and invoices due at the 2025 calendar year-end.

Dr Sands also voiced fears that the Government’s 2026-2027 fiscal projections will run up against international “headwinds” sparked by the revived Middle East conflict, with crude oil prices last night trading at over $94 per barrel on the Brent crude index having hit $95 earlier in the day.

He added that this will generate inflationary pressures and price increases by forcing shipping and fuel costs higher, with these impacts, pressures on traveller incomes and greater transportation costs potentially dampening Bahamian tourism demand.

“I think it’s not unreasonable to say, as we look at the tea leave, that Fitch has probably done a more realistic assessment of what is likely to happen than the Ministry of Finance in the Budget,” Dr Sands asserted.

“There’s going to be consequences internationally if we cannot get oil to flow through the Strait of Hormuz and elsewhere. It’s not unreasonable for crude oil prices to hit $100m per barrel again, and gas at the pump in Nassau to hit $8-$9 per gallon. That has a knock-on effect on everything.

“I’m hoping our financial people have moved beyond the idea of telling us a sweet, sweet story to being prudent and reasonable.” Dr Sands said Bahamians will likely continue to feel “pain” at the food store check-out, gas pump and in BPL bills, and warned that failing to hit fiscal targets - especially on revenue - could force the Government to scale back spending on public services vital to the Bahamian people’s welfare.

Mr Pintard added: “It’s a crying shame that the Government has yet to provide a full and honest accounting of all outstanding liabilities, contingent obligations, arrears and public sector commitments. Bahamians deserve to know the true state of their country’s finances, and they deserve real action to grow our economy. They don’t deserve cover-ups disguised as progress.”