The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

More than 30 percent of $140m in public-private partnership (PPP) funding has now “crystallised” on the Government’s books as a debt that has to be repaid by Bahamian taxpayers, the Fiscal Strategy Report 2026 has revealed.

The document, released alongside the 2026-2027 Budget that was unveiled last week, reveals that some $43.1m of the $140m PPP funding that the Africa Export-Import Bank has provided for road infrastructure upgrades on Eleuthera and Cat Island has now become a liability that the Government has to repay from the Public Treasury.

“The Government faces a potential contingent liability of $140m arising from financing arrangements with the African Export-Import Bank in respect of public-private partnership transactions with Bahamas Striping and Cat Island Infrastructure Company. At the time of preparation of this report, approximately $43.1m of this liability has crystallised in respect of these arrangements,” the Fiscal Strategy Report said.

The disclosure is likely to reignite the debate over many of the Government’s PPP deals with the Opposition having repeatedly charged that most are, in reality, ‘off the books’ loans designed to keep borrowings from adding to the annual deficit and national debt by ensuring they are kept off the balance sheet of the Bahamian public finances.

Budget documents released last week showed that some $417m worth of such deals as either active or proposed. Apart from Bahamas Striping’s roadworks projects on Eleuthera and Exuma, valued at $180m and $62m, respectively, these also include Cat Island Development Company’s $124m road upgrade and pipeline works on Cat Island, plus similar $52m and $19m works on San Salvador and Mangrove Cay, Andros.

The the African Export-Import Bank is financing both the Eleuthera and Cat Island road upgrades. Bahamas Striping previously announced that its arrangement was structured as an “accounts factoring” deal, which typically involves a company selling receivables or monies/debts owed to it to a third-party. This has the benefit of freeing up cash flow and liquidity, while the third-party now has the job of collecting payment.

In the case of Bahamas Striping, this implies that Africa Export-Import Bank is providing the necessary financing to complete the Eleuthera improvements and has stepped into the company’s shoes when it comes to receiving payment from the Government. This suggests that Africa Export-Import Bank, rather than Bahamas Striping, will be collecting the loan repayments from the Government.

The 2026-2027 Budget shows that the Bahamian Government is already making interest payments to Africa Export-Import Bank. Some $316,751 worth of interest was paid to the African lender during the 2024-2025 fiscal year, with a further $308,137 expended during the first nine months of the present 2025-2026 fiscal year despite no provision having been made for the latter when the previous Budget was passed in June 2025.

Moving forward, the Government is shown as making six-figure interest payments to the Africa Export-Import Bank for the next three years, with some $532,362 due in the upcoming 2026-2027 fiscal year. And, starting this year and continuing for each of the subsequent two Budget years, the Government will be repaying the African lender some $1.67m in principal as well.

The only loan where the Government has obtained Parliamentary approval to borrow from the Africa Export-Import Bank is the $1.9m associated with the Afro-Caribbean Marketplace project targeted for the International Bazaar site in Freeport. Several sources, speaking on condition of anonymity, are questioning how the repayments can now be appearing on the Government’s books given both the nature of a typical PPP deal and that Parliament has seemingly not authorised the necessary borrowing resolution.

“PPPs are assessed as having a moderate potential fiscal impact and a possible likelihood of realisation, reflecting their current scale within the public sector and their concentration in infrastructure-related projects. While the overall exposure remains contained, the long-term nature of PPP commitments and their sensitivity to external conditions warrant continued monitoring,” the Fiscal Strategy Report 2026 conceded.

“PPPs introduce fiscal exposures through contractual obligations and contingent liabilities associated with the delivery of infrastructure and public services. While PPPs can support investment and efficiency gains, they may also generate fiscal risks where project performance deviates from expectations or where contractual obligations require government intervention.”

These risks, the Fiscal Strategy Report added, revolve around “long-term payment commitments, including availability payments or service fees”, which “may create sustained expenditure pressures over the life of a project”. And the potential issuance of “guarantees, minimum revenue arrangements or termination provisions may give rise to fiscal costs if project risks materialise”.

”Delays, cost overruns or operational challenges may necessitate renegotiation or additional government support,” the Fiscal Strategy report said, adding that “infrastructure projects, particularly those located in vulnerable areas, may be affected by climate-related events or changes in economic conditions, with potential fiscal implications”.

The Fiscal Strategy Report concluded: “The Government continues to strengthen the PPP framework through formalised project appraisal, risk assessment and approval processes. Existing policies emphasise value for money, appropriate risk allocation and fiscal affordability. In addition, ongoing efforts to improve data consolidation, contract monitoring, and institutional co-ordination are expected to enhance the management of PPP-related fiscal risks over time.”

Michael Halkitis, minister of finance, defended the Government’s PPP structures post-Budget and asserted that the Davis administration has “nothing to hide”. He added: “Private-public partnerships allow government to invest in infrastructure without paying all of the money upfront.

“They get a partner that can put forward the money, and the Government, there’s a payment schedule, and so you’re able to accelerate your infrastructure without having the money upfront. There’s nothing wrong with that. It’s an established procedure that many countries use.”

Mr Halkitis said some critics incorrectly define PPPs as only legitimate when the underlying infrastructure directly generates revenue, such as toll roads or bridges.

“Some people think that unless money is being generated from the infrastructure project, like if it’s a toll road or a toll bridge, then it’s not a so-called true PPP because it does not generate income. But we don’t take that view,” he said.

“The idea is we are a country that needs infrastructure, and once it’s transparent and above board, properly structured, it enables us to do things like accelerate our airport infrastructure and improvement of infrastructure in the Family Islands.”

PPPs are typically designed to reduce the financial stress on cash-strapped governments by contracting the private sector to provide the funding, development and expertise to construct much-needed infrastructure or run public services.

The Government’s cash flow pressures are eased by requiring the private sector to finance the up-front capital costs, with the latter earning a return on investment - and paying back any lender - from the revenue streams generated by infrastructure assets they develop or services provided.

The Opposition has previously argued, though, that several projects touted by the Davis administration as PPPs do not fit this model or meet this criteria. Mr Halkitis said the Government’s position, though, is that PPPs need not be income generating for the private sector partner.