The Tribune

BY NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

THE BAHAMAS’ national debt increased by more than $1bn during the first Davis administration’s final year in office, the Central Bank has revealed, breaching the $13bn mark and driving several key debt ratios higher than their end-fiscal year 2024 and 2025 comparatives.

The banking and monetary policy regulator, unveiling its 2026 second quarter economic review, affirmed that the latest debt surge was driven by nearly $700m in net new borrowings plus a $373.5m year-over-year increase in contingent liabilities, which represent debt that the Government has guaranteed repayment of on behalf of struggling or loss-making state-owned enterprises (SOEs.).

The 8.8 percent year-over-year increase in The Bahamas’ national debt to $13.17bn is likely to fuel questions about the extent of pre-election spending, as well as the seeming disconnect between the size of the debt surge and seemingly much-lower annual GFS deficit. The latter, which is supposed to measure the net increase in the Government’s debt, as well as by how much its spending exceeds tax/revenue income, stood at only $121.2m at end-April.

The more than $1bn jump in the national debt came despite a slight drop in the Government’s direct liabilities during the three months to end-June 2026. “For the quarter ended-June 2026, the direct charge on the Government fell by $7.1m (0.1 percent) to $12.466bn while, on an annual basis, it grew by $697m (5.9 percent),” the Central Bank confirmed.

“The Government’s contingent liabilities increased by $358.7m over the review quarter, and by $373.5m year-on-year, to $703.4m. Consequently, the national debt, inclusive of contingent liabilities, rose by $351.6m (2.7 percent) over the three-month period, and by $1.071bn (8.8 percent) on an annual basis, to $13.17bn as at end- June 2026.

“As a ratio to GDP, the direct charge decreased by 0.2 percentage points on a yearly basis to 70.7 percent at end-June. However, the national debt-to-GDP ratio increased to an estimated 74.7 percent from 72.8 percent in the second quarter of 2025.” The latter indicator was also ahead of the 74.2 percent national debt-to-GDP ratio at the 2024 mid-point, while total public sector debt - having fallen from 76.6 percent to 75.2 percent at the half-way mark in 2025 - is now back up to 77.3 percent of GDP.

Much of the contingent liability increase is related to the borrowings that the Government guaranteed for its $280m Grand Bahama Power Company acquisition and working capital, plus its liquefied natural gas (LNG) energy reforms and Public Hospitals Authority (PHA) in the months leading up to the general election.

However, the Central Bank report will likely reignite Opposition questions as to why the Government’s direct net debt has increased by almost $700m when the fiscal deficit at end-April 2026 - with just two months left in the fiscal year - was shown as $121.2m. And the re-elected Davis administration, as late as end-June 2026, was forecasting a $32.7m Budget surplus for 2025-2026, albeit reduced by some $42.7m or more than 50 percent from the original $75.5m target.

The surplus, if achieved, should mean the national and direct government debt decreases rather than goes up by a much higher amount. The Opposition has already charged that the Davis administration has been using the National Investment Fund to hide the scale of government borrowing and debt, placing borrowed funds into this rather than the Consolidated Fund, which enables it to treat these monies as equity rather than debt.

Based on a 400,000-strong population, The Bahamas’ national debt is equal to $32,925 per citizen and resident, and represents the per capita amount that the country must repay. The $1bn national debt increase also occurred against a backdrop where there was no national emergency such as a Hurricane Dorian-style storm or COVID-19 pandemic.

The Government’s debt, and how this has been financed through borrowings, also recently attracted the attention of the Fiscal Responsibility Council, the public finances watchdog, in its report on the 2026-2027 Budget.

In particular, it noted that the borrowing amounts and types were inconsistent with what had been set out in the annual borrowing plan (ABP) for the 2025-2026 fiscal year, with more than $290m in Central Bank advances taken out during the nine months to end-March 2026 even though this financing form was not included or mentioned in the ABP.

“Loan disbursements ($240m) for projects funded through multilateral development banks against net repayments of commercial bank debt ($91.4m) and multilateral and bilateral debt ($32.1m), and increases due to exchange rate depreciation accounted for the expansion in external debt,” the Council’s report said of 2025-2026.

“Net issuances of Treasury Bills ($338.7m) and Bahamian dollar bonds ($40m), and a net increase in Central Bank advances ($290.3m), against net repayments of treasury notes ($100,000) and commercial loans ($79.8m), and decreases associated with exchange rate appreciation ($3.1m), explained the increase in domestic debt.

“The Fiscal Responsibility Council notes the Government’s publication of key financing components in net terms, in contrast to the reporting framework in the annual borrowing plan (ABP), which identifies scheduled debt repayments and planned borrowing activity separately,” it added.

“The publication of financing components in net terms, which provides only an end-of-period summary position, precludes an assessment of how actual borrowing and repayment activities for the period compared to expectations.

“The Fiscal Responsibility Council is of the view that the Government’s financing should be presented in a manner that is consistent with the presentation in the APB, which would allow for comprehensive assessment of the Government’s adherence to that Plan and support greater transparency.”

Turning to the practical realities, the Council added: “The Fiscal Responsibility Council also notes that while Central Bank advances feature significantly in the Government’s domestic financing for the period, this form of borrowing was not included in the annual borrowing plan for fiscal year 2025-2026 as a source of financing.

“Where there is a material deviation from the planned financing, the Fiscal Responsibility Council encourages the Government to provide an explanation for such deviation, including the factors necessitating the departure from the plan and any implications the deviation might have for debt and cash management.

“The Fiscal Responsibility Council further notes that the reported debt outstanding as of the end of March 2026 was $12.473bn, while the stated end of 2025-2026 projection is $11.387bn representing 64.6 percent of projected GDP. Meeting this end-of-year projection would require a net repayment of $1.087bn over the final three months of the fiscal year.” The Central Bank report signals that the Government was far from close to achieving this.