BY NEIL HARTNELL
TRIBUNE Business Editor
nhartnell@tribunemedia.net
A SENIOR Bahamian banker yesterday argued that the Government’s use of the National Investment Fund (NIF) to finance $311m in capital investments creates “a significant challenge” as to whether the touted $39.3m Budget surplus is “accurate”.
Gowon Bowe, Fidelity Bank (Bahamas) chief executive, told Tribune Business that the Fund’s financial performance should be incorporated with that of the whole Government given that the latter is, in effect, its “full and beneficial owner” which was using it as a special purpose vehicle (SPV) for specific spending purposes.
Speaking after Prime Minister Philip Davis KC unveiled the “first ever post-Independence” Budget surplus for the 2025-2026 fiscal year that closed at end-June, he argued that the outcome was “not surprising” given the Government’s original and revised projections but there was little explanation or analysis of what had produced the figures.
Noting that the Ministry of Finance’s monthly and quarterly reports are the public sector equivalent of management accounts, and often subject to change in later fiscal years, Mr Bowe told this newspaper that recent government communications signal that “certain of their capital expenditures are not reflected in these numbers”.
“The conversations that have been going on regarding the National Investment Fund really put these numbers in a significant challenge because, if you accept that the Ministry of Finance has invested the Fund for commitments of capital works in excess of $300m, that’s not reflected here,” the Fidelity chief, and member of the first Fiscal Responsibility Council, said.
“How would this change the numbers? If you made transfers into the National Investment Fund, and they transacted from that on behalf of the Government, should this expenditure not be recognised in the same manner?
“The National Investment Fund is a subsidiary of the Government. The Government is the full and beneficial owner. There are no other parties. If the Government consolidated the National Investment Fund, the expenditure of $300m out of the $700m will have to be reconciled, it leaves the question if these [fiscal 2025-2026] numbers are an accurate reflection of the Government’s consolidated fiscal affairs.”
Mr Bowe reiterated that the question yet to be answered is whether the Government is effectively “not fully, comprehensively and accurately reflecting its fiscal performance” as it unveiled a Budget surplus that came in 47.9 percent, or $36.2m, below the original $75.5m target for the 2025-2026 fiscal year.
One source, speaking on condition of anonymity, told Tribune Business that - besides the $310m National Investment Fund spending - the Government had effectively kept $131.7m in subsidies to loss-making state-owned enterprises (SOEs) from adding to the deficit and national debt by treating these advances as loans, and thus recording them as assets.
“As at end-June 2026, bilateral short-term loans of public entities with the government stood at $728.7m, an annual increase of $131.7m (22.1 percent),” the Ministry of Finance’s June 2026 report revealed yesterday.
When this is added to the $310m tied to the National Investment Fund, the source said up to almost $462m in government spending is not being reflected in the 2025-2026 figures as many of the entities receiving these loans are heavy loss-makers and generate little to no income, meaning there is minimal to no chance they will be able to repay them.
The Ministry of Finance’s report for June 2026, which also includes the full-year figures, shows that the $39.3m annual figure was ultimately achieved by a more than five-fold increase in the Budget surplus for that month - from $25.4m in 2025 to $130.7m this time around.
The increased June surplus was driven by major jumps in both revenues and spending. The Government’s total tax income more than doubled for the month, increasing by 116.7 percent or $307.2m year-over-year to hit $570.5m, while non-tax revenue more than quadrupled by $159.8m to hit $206.6m as opposed to just $46.8m in 2025.
Revenues, though, grew at a faster rate than the Government’s fixed-cost, or recurrent, spending on civil service wages, rents and debt servicing, which also more than doubled in June to increase by 103.8 percent or $279m to hit $547.6m. Capital expenditure also surged, expanding by $82.7m year-over-year to hit $98.7m for June 2026.
The nine-figure, and double-digit, increases in both revenue and spending in June were not explained in-depth in the Ministry of Finance’s report. The revenue surge, it said, was driven by a combination of VAT more than doubling, growing by 119.6 percent to $248.3m on the back of enforcement to likely set a monthly record, plus $68.6m collected from the new 15 percent corporate tax.
The final boost came from what the Ministry of Finance described as “significant gains in dividend income from several public entities” whose identities were not revealed. This produced a more than seven-fold jump in ‘other’ non-tax revenue from $23.3m in June 2025 to $172.8m.
On the spending side, the Government’s outlay on goods and services increased more than four-fold in June 2026, rising year-over-year from $61.8m to $255.1m due to increased spending on “utilities and communications”.
“Non-tax revenue more than doubled by $159.8m to $206.6m. This outcome included significant gains in dividend income from several public entities, a significant portion of which was used to settle the Government’s payment arrears,” the Ministry of Finance report said.
“Payments for the use of goods and services rose more than two-fold, by $193.3m, being associated with higher outlays for utilities and communications…. Movements in both revenue and expenditure included significant reciprocal offsets of receivables and payables between the Government and statutory bodies, together with sizeable dividend receipts.”
One well-placed fiscal observer, speaking on condition of anonymity, said the major hikes in these figures - and both overall government revenues and spending for June - could stem from what they described as “offsets” between what the Government owed the public utilities and the dividend payments.
Government ministries, departments and agencies often owe significant sums to the likes of Bahamas Power & Light (BPL) and Water & Sewerage Corporation, and the source suggested that the Davis administration may have paid these debts - hence the reference to settling “payment arrears” - and then received at least some of this sum back as dividends.
“Give them a huge cheque and declare it right back to the Government,” they suggested. However, the VAT revenue, which represented a $138.3m year-over-year increase for June, both occurred in a month when such earnings are typically lower because quarterly filers do not pay, and was some $70m-plus higher than the four peak months when they do.
“Tax revenue was higher by $307.2m (116.7 percent) at $570.5m,” the Ministry of Finance said. “VAT receipts rose by $135.2m (119.6 percent) to $248.3m, reflecting improved collection of VAT arrears.
“Taxes on financial and capital transactions were higher by $35.3m, mainly associated with stamp duty on sales of shares. Taxes on income, profits and capital gains of $68.6m represented receipts of the Domestic Minimum Top-Up Tax (corporate income tax).
“Taxes on international trade and transactions advanced by $44.4m (44.6 percent), reflecting a combination of improved receipts of departure taxes and excise duty.”
The Ministry of Finance report also compared the 12-month performance for 2025-2026 against the original Budget projections - not the supplementary Budget that it presented in June 30 right as the fiscal year closed, and whose existence was only disclosed by the Fiscal Responsibility Council watchdog.
The Davis administration would likely have known where the 2025-2026 fiscal year was coming in when it produced those revisions, and the $39.3m surplus unveiled by the Prime Minister yesterday actually beat the revised $32.7m projection by $6.6m. Recurrent spending, too, at just over $3.5bn came in more than $120m below the updated $3.63bn estimate.
However, while Mr Davis pointed to full-year total revenues of $3.964bn exceeding the original Budget forecast of $3.896bn, they came almost $120m short of the enhanced $4.084bn target set in the supplementary Budget at end-June 2026.
“I think the fiscal summary is not surprising,” Mr Bowe told Tribune Business. “It gives the number the Government indicated earlier in terms of what the surplus turns out to be, but what this fails to do is explain the overruns on the capital and recurrent [spending] side.
“There are capital expenditures that appear not to have been recognised because they have gone through an SPV, and even though revenue exceeded the original Budget it was largely driven for the most part by the Domestic Minimum Top-Up Tax.” Without the latter’s contribution, Mr Bowe said revenues may well have “undershot” the target.
“Preliminary data on the fiscal outturn for June 2026 showed a significant improvement in the overall balance to an estimated surplus of $130.7m from $25.4m recorded in June 2025,” the Ministry of Finance said.
“This outcome reflected a $467m (150.7 percent) gain in revenue receipts to $777.1m, which surpassed the $361.7m (127.1 percent) increase in total expenditure to $646.3m. Movements in both revenue and expenditure included significant reciprocal offsets of receivables and payables between the Government and statutory bodies, together with sizeable dividend receipts…
“Capital expenditure broadened by $82.7m to $98.7m. Approximately 91.7 percent was expended for the acquisition of non-financial assets, primarily related to road repairs, building maintenance and airport infrastructure. The remaining 8.3 percent represented capital transfers.”
On the debt front, the Ministry of Finance said of June 2026: “Aggregate debt repayment amounted to $95.3m, of which 80.8 percent related to domestic currency and 19.2 percent belonging to foreign currency. Sinking funds established for future debt repayments aggregated $46.5m at end-June 2026.”