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Introduction
Mister Deputy Speaker:
Today, I rise to present the Mid-Year Budget Communication for Fiscal Year 2025/2026, which demonstrates the progress we’ve made as we expand opportunities, island by island.
As we discuss the technical details of our fiscal performance, as well as our economic and policy track record, we must remain mindful of the true measure of our success: the impact we have on people.
Because we know numbers only tell part of the story.
Macroeconomic indicators can improve, while some households still feel pressure.
Revenues can strengthen, while vendors await payments that must be prioritised and paid regardless of bureaucratic bottlenecks.
And unemployment can decline, while young people still search for stable opportunity.
So today, I will report on the fiscal facts.
And I will also speak about the context in which those facts exist and the impact that is being felt by the Bahamian people.
Because it is through the lens of our people, the conversations happening around kitchen tables, and in barbershops, offices, and churches, that we see most clearly where our policies are succeeding and where we must continue to drive progress.
This Budget was anchored on five guiding pillars:
The first pillar focuses on expanding opportunity through investment in education, training, skills development, and entrepreneurship.
The second pillar focuses on improving infrastructure, advancing energy reform, and accelerating Family Island development.
The third is based on strengthening national security, border protection, policing, justice systems, and public safety infrastructure.
The fourth pillar focuses on reducing cost-of-living pressures through targeted VAT and duty relief on essential goods, medicines, hygiene items, building materials, fuel, and energy-efficient appliances.
And the final pillar is modernising government operations, improving tax fairness and compliance, upgrading digital systems, and increasing accountability across public institutions.
Mister Deputy Speaker:
In alignment with the requirements set out in the Public Finance Management Act, 2023, I will begin with an overview of the domestic and international macroeconomic context.
I will then provide a detailed review of fiscal performance for the first half of the fiscal year, followed by an update on debt and financing, arrears, fiscal risks, and the progress of key policy initiatives.
Macroeconomic Development
Global Economic Overview and Outlook
Mister Deputy Speaker:
Before turning to domestic performance, we must first examine the international economic environment shaping our outlook.
Although recent years have placed considerable strain on the global economy, through pandemic disruptions, supply chain constraints, geopolitical tensions, and inflationary pressures, the global economy has demonstrated resilience.
However, that resilience remains uneven.
According to the International Monetary Fund, global real GDP growth is projected at 3.2 percent in 2025 and 3.1 percent in 2026. Both figures fall below historical averages and earlier forecasts.
Advanced economies are expected to expand at a modest pace of 1.6 percent in both 2025 and 2026.
Emerging and developing economies are projected to grow at 4.2 percent in 2025 before moderating to 4.0 percent in 2026.
At the same time, global inflation has declined in 2025, though not uniformly.
The IMF projects global inflation at 3.7 percent in 2026 compared to 4.2 percent in 2025. However, while price pressures have eased in several jurisdictions, inflation in countries like the United States remains above central bank targets, and policy tightening continues to influence financial markets.
A defining feature of the past year has been elevated trade policy uncertainty. Tariff measures introduced earlier this year have slowed global trade growth.
The United States recently increased its global import tariff rate from 10 percent to 15 percent, following legal developments affecting earlier tariff programmes. While exemptions and bilateral arrangements have mitigated some of the impact, uncertainty remains.
For a small open economy such as The Bahamas, heavily integrated into global trade, tourism flows, and financial markets, these developments can affect travel, borrowing costs, fuel prices, and capital flows.
But while we cannot control these global conditions, we can navigate them prudently.
Mister Deputy Speaker:
In the United States, the economy continued to perform strongly in 2025. Real GDP grew at an annual rate of 4.3 percent in the third quarter, following 3.8 percent in the second quarter. Growth was supported by solid consumer spending, stronger exports, and higher government expenditure, though investment declined.
Looking ahead, U.S. real GDP is forecast to expand by 2.1 percent in 2026. Inflation averaged 2.7 percent in 2025, with a projected rate of 2.4 percent in 2026. The unemployment rate stood at 4.4 percent in 2025 and is expected to ease slightly to 4.1 percent in 2026.
Turning to Canada, the economy regained positive momentum toward the end of 2025. Real GDP increased by 0.6 percent in the third quarter, rebounding from a contraction in the previous quarter. For 2025, growth was projected at 1.1 percent in 2025 and 1.5 percent for 2026. Inflation measured 2.4 percent at end December 2025 and is expected to fall to 2 percent in 2026. Canada’s unemployment rate stood at 6.8 percent in 2025 and is forecast to edge down to 6.6 percent in 2026.
Mister Deputy Speaker:
In the United Kingdom, real GDP showed modest improvement through November 2025, estimated at 1.4 percent. Growth in 2026 is forecast at 1.3 percent. The UK recorded an inflation rate of 3.2 percent over the twelve months to November 2025, with a forecasted rate of 2.5 percent in 2026. Unemployment rose to 5.1 percent in October 2025, though it is projected to decline to 4.7 percent in 2026.
Across the Euro Area, the economy expanded by 0.3 percent in the third quarter of 2025, reflecting steady but moderate growth. Real GDP is expected to increase by 1.1 percent in 2026. Inflation stood at 2.1 percent in November 2025 and is projected to ease slightly to 1.8 percent in 2026. The unemployment rate in November 2025 was held at 6.3 percent, and is projected to be 6.3 percent for 2026.
Meanwhile, China remained one of the world’s fastest-growing major economies, recording 5.0 percent GDP growth in 2025. Growth is forecast to moderate to 4.2 percent in 2026. The labor market remained stable, with urban unemployment averaging 5.2 percent in 2025, and expected to be 5.1 percent in 2026. Consumer prices rose 0.8 percent year over year in December 2025 and is projected to be 0.7 percent for 2026.
Mister Deputy Speaker:
Let us turn our eyes to our counterparts in the Caribbean, starting with Jamaica.
Jamaica’s economy expanded during 2025. Real GDP is estimated to grow by 2.1 percent in 2025, up from 0.5 percent in 2024 despite the impact of Hurricane Beryl and adverse US travel advisories. In 2026 real GDP is estimated to grow by 1.5 percent.
Tourism performance remained soft as stopover arrivals declined by 2.3 percent year over year for the first six months of 2025. Cruise arrivals dropped 10 percent over the same period. Encouragingly, the unemployment rate improved to 3.3 percent in the third quarter of 2025. Inflation slowed sharply to 4.2 percent in 2025 and is estimated to rise to 5.0 percent in 2026.
Trinidad and Tobago’s economic growth dampened to 1.0 percent in 2025 and real GDP is expected to grow by 1.2 percent in 2026. Their unemployment rate decreased to 4.0 percent in 2025 and is expected to increase slightly to 4.1 percent in 2026. Inflation rose modestly to 1.5 percent in 2025. It is estimated to rise to 2.2 percent in 2026.
Meanwhile, Guyana continued its strong performance following 43.6 percent growth in 2024. Growth is estimated to slow to 10.3 percent in 2025 and to expand by 23 percent in 2026. Inflation is estimated to rise to 3.6 percent in 2025 and 4.4 percent in 2026.
Mister Deputy Speaker:
Barbados’ economy expanded by 2.7 percent in 2025, slowing from a 4 percent growth in the prior period of 2024. Growth is expected to slow to 2.1 percent in 2026. Tourism was the main driver. Stopover arrivals increased by 5.5 percent for the first nine months of 2025. Cruise passenger arrivals surged 31.5 percent to a record 496,256 visitors during the same period. Their unemployment rate stood at 7.9 percent for 2025 and is expected to decline to 7.8 percent in 2026. Inflation increased modestly to 2.3 percent in 2025 and 2.5 percent in 2026.
Furthermore, in the Dominican Republic, economic growth slowed to 2.9 percent in 2025, compared to 4.9 percent during 2024. Growth is expected to rise 4.5 percent in 2026. Stopover arrivals increased 2.3 percent during the first nine months of 2025. Arrivals by sea, primarily cruise visitors, advanced 4.2 percent during the first nine months of 2025. The unemployment rate of 5.3 percent is estimated to remain the same for 2025 and 2026. Inflation measured 3.7 percent in 2025 and is expected to rise to 4.1 percent in 2026.
Mister Deputy Speaker:
Across the region, the picture is mixed. Guyana, Dominican Republic and Barbados continue to perform strongly, with Guyana maintaining double-digit growth driven by oil expansion. The Dominican Republic and Barbados both benefited from solid tourism activity. Jamaica has recorded modest but steady growth despite external shocks. Trinidad and Tobago experienced modest economic growth, reflecting some weakness in the energy and non-energy sectors despite some improvements in production.
Domestic Economic Overview and Outlook
Mister Deputy Speaker:
In the global landscape, we are currently witnessing a conflict in the Middle East involving Iran, Israel, and the United States. Because the conflict is in the Middle East, one of the immediate global impacts is an increase in oil prices. Since we import nearly all of our fuel, any rise in global oil prices affects us directly.
Higher fuel costs are inflationary. Inflation, in the absence of mitigation, would fall on consumers. Thankfully, we have measures in place to protect us during times of volatility, which means the inflationary impact on consumer electricity bills will not be felt due to this conflict in the short and medium term.
Rest assured Mister Deputy Speaker, we are fully committed to working on behalf of every Bahamian to reduce the cost of electricity and fuel prices.
Mister Deputy Speaker:
Let us now turn our attention to the domestic economy.
In 2024, real GDP growth reached 3.4 percent. The IMF estimates the Bahamian economy to expand by 2.8 percent in 2025, driven primarily by activity in the construction sector and continued strength in cruise tourism. Growth is expected to taper in 2026 to 2.2 percent, partly reflecting relatively stagnant stayover tourism. Over the medium term, economic growth is projected to slow toward the economy’s assessed potential growth rate of 1.5 percent.
Mister Deputy Speaker:
Over the past four years, The Bahamas has typically outperformed IMF growth projections. In 2021, the IMF forecasted real GDP growth of just 2 percent, but the economy grew by 17.6 percent. The trend continued in 2022, with actual growth reaching 10.9 percent compared to the IMF’s 8.0 percent projection. By 2024, while the IMF anticipated a modest 1.9 percent increase, The Bahamas achieved a 3.4 percent growth rate.
Mister Deputy Speaker:
Strengthening community-based tourism and ensuring that the fiscal benefits of this expansion are more evenly distributed across The Bahamas.
Mister Deputy Speaker:
The Bahamas has strengthened its position as a premier cruise destination through bold partnerships and strategic investments. These investments are not just figures on paper they represent confidence in The Bahamas, confidence in our people, and confidence in our future.
Across our Family Island cruise destinations, we are witnessing unprecedented development. As major cruise lines invest in building luxury private island destinations throughout our archipelago, The Bahamas benefits alongside them. These developments drive economic activity, increase visitor spending, and expand opportunities island by island.
For example, in July 2025, Carnival Cruise Line officially opened Celebration Key on Grand Bahama, a transformative private beach destination that has already generated increased visitor arrivals, created new employment opportunities for Bahamians, and stimulated economic activity on the island.
Similarly, in December 2025, Royal Caribbean International launched the Royal Beach Club on Paradise Island, further enhancing the tourism product in Nassau with a premium beach experience designed specifically for cruise visitors.
Mister Deputy Speaker:
These projects are not isolated ventures. They are part of a broader national strategy to ensure that tourism remains the primary driver of our economic growth over the next three years. The contributions to GDP from cruise tourism continue to expand, strengthening government revenues and supporting infrastructure development throughout our islands.
Most importantly, these investments create jobs. They lower unemployment. They empower Bahamians to earn a living, support their families, and build generational wealth. From construction and hospitality to transportation and small business services, the ripple effects are felt throughout our communities.
We are creating opportunities island by island ensuring that growth is not confined to one location but shared across our archipelago.
Together, these developments underscore The Bahamas’ role as a valued and trusted partner in the global cruise industry. They also reflect our unwavering commitment to delivering world-class tourism experiences while ensuring that Bahamians remain at the center of our nation’s progress.
Mister Deputy Speaker:
The national unemployment rate declined to 9.3 percent in the second quarter of 2025, down from 10.8 percent in the first quarter, with youth unemployment falling to 20.3 percent and driving much of the improvement. Looking ahead, unemployment is expected to ease slightly to 9.1 percent in 2026. In more recent years, unemployment averaged 14.1 percent between 2017 and 2020, then moved to an average of 9.9 percent in the four years following the 2021 election, supported by a broad recovery in services particularly tourism and steady growth in construction and retail.
Mister Deputy Speaker:
On the price front, inflation remained contained. The most recent data through May 2025 shows a modest 0.4 percent increase compared with the same period in 2024. The largest price increases were recorded in furnishings and household equipment, clothing and footwear, and health services, while gasoline and diesel prices declined by 7.3 percent and 7.8 percent, respectively.
Overall, The Bahamas continues to demonstrate steady economic progress, supported by strong tourism performance, improving labour market conditions, and contained inflation.
Update on Arrears
Mister Deputy Speaker:
As directed by the Public Finance Management Act, I will now discuss known obligations that were still outstanding at the end of December 2025. Full details of this information are also placed as an annex in the Mid-Year Budget Performance Book.
At the end of the halfway point in the fiscal year, the Government’s obligations, which include both arrears and unpaid invoices, totaled $241.9 million. This figure includes:
· $60.5 million in arrears, which are payments carried forward from prior fiscal years; and
· $181.4 million in unpaid invoices from the current fiscal year, that are typically turned around in a 90-day period.
Mister Deputy Speaker:
The primary driver of this increase relates to obligations to State-Owned Enterprises.
When obligations to public corporations are excluded, the yearly increase in outstanding balances at end-December 2025 would have been approximately $29.0 million.
To put this into perspective, total commitments including the SOEs reached 6.3 percent of the total expenditure budget in FY2025/26, compared with 3.4 percent in FY2024/25—a period when most SOEs recorded zero unpaid invoices. Excluding the SOEs, however, commitments remain low, at just 3.7 percent of the total expenditure budget in FY2025/26, up from 3.1 percent in FY2024/25.
These figures help us understand the role of State-Owned Enterprises in our arrears and unpaid invoices. Unlike central Government operations, these entities follow different billing cycles, financing structures, and settlement arrangements with private vendors.
Turning to the position outside of State-Owned Enterprises, the remainder of the total outstanding mainly comprised of the following:
· $68.1 million from Ministry of Works for Roadworks and drainage management; building maintenance; and Infrastructure development including airports, clinics, and schools.
· $24.4 million from Ministry of the Public Service for office rent and building maintenance.
· $12.7 million from Ministry of Finance for capital projects and car and equipment fees.
· $10.0 million from the Department of Information and Communications Technology for network support and cable services.
Mister Deputy Speaker:
This level of outstanding balance reflects the interaction of project execution, support for essential services, and seasonal cash flows. The Government is strengthening commitment controls, improving cash forecasting, and prioritizing structured arrears reduction – all within the broader fiscal consolidation framework to maintain debt sustainability and deficit reduction targets.
Fiscal Performance during the First Half of FY2025/2026
Mister Deputy Speaker:
I now shift our focus to the fiscal performance for the first six months of the 2025/2026 fiscal year, beginning with the provisional revenue estimates.
Revenue Performance
For the first six months, preliminary total revenue collections are estimated at $1.5 billion, reflecting a $66.6 million increase compared to the same period last year. So far, revenue collections have accounted for 38.7 percent of the annual budget target.
Some of the key movements in revenue include:
- Tax revenue collections increased by $54.4 million and stood at $1.3 billion for the first six months of the fiscal year. This represented 39.1 percent of the budget target.
- Value-added tax collections accounted for 54.9 percent of tax revenues and totaled $739.1 million at the half-year mark. This represented growth of $76.1 million compared to the same period in the previous year and equated to 48.5 percent of the annual budget target. VAT has seen higher performance in both the goods and services and realty components. Vat on Realty saw a 50.3 percent increase in this period over the prior fiscal year’s first six months period. We have also saw a notable increase in VAT collected from cruise lines and private destinations, with collections at end-2025 improving 164% compared to end-2024.
Mister Deputy Speaker:
VAT performance in The Bahamas has continued to strengthen during the first half of this fiscal year. That improvement has not been driven by higher rates, but by stronger compliance, more effective enforcement, and better administration across the tax system.
For our people, our emphasis on efficiency over increases matters a lot.
This Administration has taken deliberate steps to reduce the VAT burden on Bahamian households.
In 2022, the standard VAT rate was reduced from 12 percent to 10 percent. That decision reflected a conscious effort to balance fiscal responsibility with economic relief at a time when global inflation was placing pressure on families.
In April 2025, we further reduced VAT from 10 percent to 5 percent on unprepared food items to provide relief in grocery stores.
In September of 2025, we reduced VAT from 10 percent to 5 percent on essential items including medicines, medical supplies, feminine hygiene products, and adult and infant diapers. This policy applies to both prescription and over-the-counter medications and forms part of our broader strategy to lower healthcare costs and ease the cost of living for Bahamian families.
Building on these measures, this April, less than a month from now, the Government will again reduce the VAT burden by reducing VAT on unprepared foods from 5 percent to full exemption status, which will make these food items completely VAT-free.
This steady flow of VAT reductions reflects our commitment to the Bahamian people that where fiscal space allows, relief will follow.
Mister Deputy Speaker:
The improved revenue performance recorded over the first six months of the current fiscal year is a clear reflection of the continued growth and resilience of the Bahamian economy. This performance aligns with broader economic indicators, particularly the strength of the tourism sector, which I noted earlier has reached record levels. Visitor arrivals are higher than ever before, and this expansion in tourism activity has translated into stronger revenue outcomes across several key tax categories. For instance, this tourism growth should be reflected in our departure tax collections.
Over the first six months of the fiscal year, departure tax revenues totaled $160.9 million. This represents a slight decline of 5.1 percent when compared to the same period in the previous year due to outstanding cruise departure tax and sustainability levy payments, totaling approximately $18.8 million that was owed to the Government in December 2025. Once these payments are received and accounted for, the true improvement in departure tax performance will be accurately reflected in the Government’s fiscal accounts.
A similar timing issue is evident within customs duty collections, particularly as they relate to the cruise industry. While overall customs revenues are affected by delayed cruise‑related payments, several sub‑categories within this tax group have performed strongly. We have recorded positive intakes for cruising permits, anchorage fees, and frequent visitor cards.
Some have expressed the view that the cruising permit regime has weakened our maritime sector. However, despite these concerns, demand for access to Bahamian waters has remained strong.
In fact, even as new fees such as anchorage charges and fishing permit fees were introduced, the cruising permit intake has grown over 100 percent year over year.
We recognise that the maritime market is evolving, with differences in vessel types, usage patterns, and visitor expectations.
To ensure fairness, competitiveness, and transparency, my Government will introduce a revised cruising permit structure that creates two new categories of fees tailored to these distinct segments of this community.
This will allow us to modernise the regulatory framework while continuing to protect our marine resources and support sustainable growth in the maritime economy.
Mister Deputy Speaker:
We introduced the Frequent Visitors Digital Card to modernise processing and strengthen compliance for private vessels and aircraft visiting our islands.
Whether arriving by pleasure craft or propeller-driven aircraft, travelers can now obtain the necessary permissions through a streamlined, digital process, making leisure travel to The Bahamas more efficient and user-friendly.
During the first half of the fiscal year, this initiative generated $2.8 million in revenue.
As of January 2026, a total of 1,313 vessels and aircraft have utilised the Frequent Visitors Digital Card, confirming the value of digitisation in improving service delivery while supporting public revenue.
These gains reflect increased maritime activity, growing interest in The Bahamas as a destination for repeat and long‑stay visitors, and improved compliance within these revenue streams.
Taken together, these results underscore that the underlying fundamentals of the economy remain strong.
Where revenue performance appears muted, it is largely the result of timing and settlement issues rather than reduced economic activity.
As outstanding payments are resolved, these revenues will more fully align with the robust tourism growth we are experiencing, further strengthening the Government’s fiscal position.
Mister Deputy Speaker:
- License to conduct special business activity witnessed a period-over-period increase because of gains in the business license component, which grew by 8.4 percent compared to the previous year.
- In the non-tax revenue component, collections were mainly higher for fees and service charges, particularly for customs fees, which increased by $11.6 million to $41.8 million, and equated to 48.2 percent of the budget target.
Total Expenditure Performance
Mister Deputy Speaker:
For the first half of the fiscal year, preliminary aggregate expenditure was $1.9 billion, which represented an increase of $41.3 million over the previous year. To date, total expenditure has represented 48.4 percent of the annual budget target.
Recurrent Expenditure Performance
Preliminary recurrent expenditure for the period made up 48.1 percent of the budget target and amounted to $1.7 billion. Recurrent spending increased by $42.2 million year-over-year.
Key spending components during the period comprised the following:
- An increase in compensation of employees by $21.0 million, to $456.9 million, represented 48.7 percent of the budget target. Increased spending in this component is explained by higher employment costs during the period.
- Spending on the use of goods and services decreased by $16 million to $331.2 million and accounted for 45.0 percent of the annual budget target.
- Public debt interest payments were higher by $3.9 million and totaled $339.4 million, which represented 50.8 percent of the budget target.
- Subventions to [public non-financial corporations] drove the $10.2 million year-over-year increase in subsidies, which totaled $224.2 million and accounted for 49.8 percent of the budget target.
- Further, other recurrent transfers increased by $5.7 million and accumulated to $136.7 million because of higher transfers to non-financial public corporations. At the half-year mark, recurrent transfers accounted for 47.5 percent of the budget target.
Capital Expenditure Performance
Mister Deputy Speaker:
Capital expenditure for the first half of the fiscal year totaled $191.7 million, a $0.9 million decline over the same period in the previous year. Capital expenditure accounted for 51.0 percent of the annual budget target.
Key capital expenditure during the period included:
Investments in capital infrastructures, which amounted to $69.4 million, represented an increase of $11.8 million over the previous year. This spending component accounted for 74.9 percent of the budget target and included improvements for airport infrastructure, ports and docks, and roadworks.
Fiscal Balance, Debt and Financing
Mister Deputy Speaker:
During the period, The Government experienced a net deficit of $342.4 million, which represented a decrease of $25.3 million relative to the previous comparable period. However, the Primary Balance improved significantly to a $3.1 million deficit in the first half of this fiscal year, 2025/2026, compared to a $32.3 million deficit for the first half of 2024/2025, the prior year.
Mister Deputy Speaker:
As a result of net borrowing activities, central government debt increased by $637.6 million to $12.4 billion, which equated to 75.1 percent of GDP at the end of December 2025.
Mister Deputy Speaker:
Over the past six months of this fiscal year, the financing mix included the following transactions:
- On the domestic front, a net borrowing of government securities totaling $221.6 million, Central Bank advances amounting to $290.3 million, alongside bank loans repayments totaling $61.6 million.
- In terms of foreign currency, a net borrowing of $230.0 million in loans from international financial institutions, alongside a net repayment of $46.3 million in foreign currency bank loans.
- The financing position also included funds that were placed into the National Investment Fund to be used for strategic infrastructure investments. Over the period funds have been allocated toward the following:
- To facilitate Capital Works in New Bight Airport and Runway
- To facilitate Capital Works in Arthur’s Town Airport
- To facilitate Capital Works in Governors Harbour, Eleuthera Airports
Mister Deputy Speaker:
I now wish to address concerns raised by the Opposition, including the Member for East Grand Bahama, regarding the transfer of $265.3 million into the National Investment Fund.
I want to be very clear:
That transfer was fully authorised by Parliament under the Resolution passed on March 10, 2025. That Resolution approved both the borrowing and the subsequent deposit of funds into the National Investment Fund for the purpose of supporting national infrastructure projects.
Suggestions that the transfer bypassed Parliament or misrepresented the fiscal position are not supported by the facts.
The placement of funds into the National Investment Fund is consistent with the Public Debt Management Act, 2021, which empowers the Minister to borrow for national development purposes.
Further, the National Investment Fund Act, 2022 establishes the Fund as a statutory vehicle specifically designed to mobilise and deploy resources for strategic infrastructure investments.
From an accounting perspective, the treatment of this transaction reflects standard public sector practice. The Government exchanged cash for a financial asset while the associated borrowing liability remains fully recorded on the Government’s balance sheet. As a result, the debt, deficit, and surplus have all been transparently and accurately recorded in accordance with established public sector financial reporting standards.
Latest Medium-Term Debt Management Strategy
Mister Deputy Speaker:
Earlier this year, our Debt Management Office has released the government’s updated Medium-Term Debt Management Strategy. After evaluating the cost and risk trade-offs of alternative potential debt strategies going forward, our Debt Management Office at the Ministry of Finance have selected the optimal approach.
This approach includes meeting 22 percent of gross financing needs through foreign‑currency borrowing and a higher 78 percent through domestic‑currency borrowing, striking a balance between cost efficiency and risk management.
This strategy prioritises fiscal prudence by carefully considering macroeconomic trends, market conditions, future financing requirements, and key vulnerabilities. It places strong emphasis on developing the domestic debt market, thereby reducing exposure to foreign‑exchange risk, while also seeking to maximise concessional and semi‑concessional financing opportunities and credit enhancements. Together, these elements aim to contain debt‑portfolio costs and risks while supporting the country’s medium‑term fiscal and growth objectives.
Latest Credit Rating
Mister Deputy Speaker:
Recent macroeconomic and fiscal developments have been reflected in our international credit ratings.
S&P Global Ratings upgraded The Bahamas to BB- with a stable outlook. Moody’s assigned a B1 rating with a positive outlook. Fitch maintained its BB- rating with a stable outlook.
These assessments reflect independent recognition of stronger fiscal management and improved debt dynamics, as well as the Government’s continued commitment to reform and policy discipline.
These credit ratings matter because they influence borrowing costs, investor confidence, and the terms under which the country can access international capital markets.
Our improved outlook contributes directly to reducing financing risk and enhancing our credibility with investors, multilateral institutions, and development partners.
Fiscal Risks and Mitigation
Mister Deputy Speaker:
As required by the Public Finance Management Act, I will now turn to a discussion on the macroeconomic and fiscal risks faced by the Bahamas, and the mitigation measures that are established to address them. Our major risks can be grouped into several major categories, including climate-related disasters, State Owned Enterprises, Pension Liabilities, Healthcare, and Cyber Security.
Mister Deputy Speaker:
Over the past decade, The Bahamas has faced repeated and increasingly destructive hurricanes. These events have inflicted billions of dollars in damage, widened fiscal deficits, and reinforced a reality we know too well. Climate change is not a distant threat. It is one of the most immediate and consequential challenges facing our nation.
Climate changes has already affected our communities, infrastructure, public finances, and economy. I’ve always maintained that we must meet this threat head on and turn the challenges of climate change into opportunities for our people.
This administration has embedded climate resilience directly into fiscal planning, debt management, and national development policy. We have expanded the use of financial risk-transfer instruments, including regional catastrophe insurance, contingent credit facilities, and disaster-related debt payment deferrals.
These mechanisms do not eliminate risk, but they provide stability when shocks occur.
At the same time, The Bahamas continues to advance innovative climate finance solutions, including debt-for-nature swaps and blue carbon initiatives, designed to fund resilience and environmental protection without increasing the national debt.
And we continue to champion climate justice on the global stage, advocating for stronger emissions reductions, fairer access to climate finance, and the operationalisation of loss and damage mechanisms.
Mister Deputy Speaker:
Beyond climate risk, this administration is also addressing longstanding fiscal vulnerabilities associated with state-owned enterprises and contingent liabilities. Financial losses within SOEs and the Government’s role as guarantor for certain loans pose material risks to the national budget, as debt servicing obligations can and do migrate to the public purse. We are confronting these risks directly.
To strengthen governance and accountability, the Government has initiated structured training programmes for directors of state-owned enterprises and implemented a comprehensive guarantee policy framework. This framework establishes clear eligibility criteria, requires credit risk assessments, and introduces appropriate guarantee fees. Last year, following the conclusion of the budget cycle, the Ministry of Finance undertook a deliberate and necessary effort to strengthen communication with State‑Owned Enterprises and to enforce stricter adherence to statutory and policy‑based reporting requirements. These actions were taken to improve transparency, enhance monitoring, and reduce fiscal risk associated with government‑owned agencies.
As part of this process, the Ministry issued formal correspondence to all applicable SOEs and government agencies, clearly outlining their reporting obligations, timelines, and documentation standards. These requirements were given defined deadlines to ensure that up‑to‑date financial and operational information is available to support fiscal planning, risk assessment, and decision‑making.
The response from SOEs has been largely positive. Where gaps remain, the Ministry continues to work closely with individual agencies to address deficiencies, improve compliance, and strengthen internal reporting capacity.
This enhanced engagement and enforcement framework is critical. Accurate, timely, and consistent reporting allows the Government to better assess contingent liabilities, monitor financial performance, and identify emerging risks before they crystallize into direct fiscal pressures. It also supports stronger governance within SOEs and reinforces accountability for the use of public resources.
This provision of data is important because the Ministry of Finance is also undergoing a technical and financial assessment of SOEs and their fiscal risks to the Government, in partnership with the IMF, which will be detailed in its annual refresh of the Fiscal Strategy Report.
While on this topic, the Ministry of Finance has also commenced the task of ensuring that all Ministries and Local Governments also adhere to the reporting requirements outlined in the PFM Act, 2023.
Mister Deputy Speaker:
Pension liabilities represent another pressing fiscal challenge. The Government’s obligations to public service retirees are projected to reach $4.1 billion by 2032, with pension and gratuity payments now consuming nearly 6.2 percent of recurrent expenditure for the 6 months to December 2025. In response, we are advancing comprehensive pension reform through new legislation that will transition the system toward a funded, defined contributory model.
The Ministry of Finance has prepared a white paper for publication. This represents a major milestone in the Government’s commitment to modernising the public pension framework in a manner that safeguards the retirement security of public officers while strengthening the long-term fiscal sustainability of the country.
The White Paper sets out a comprehensive and carefully considered policy framework. Under the policy framework both employees and, the employer, which is the government, will contribute under a rate framework that will be determined.
Contributions will be credited to individual pension accounts, protected against negative investment returns. It provides for immediate vesting of employee contributions, graduated vesting of employer contributions, and flexible retirement benefit options, including lump-sum payments or lifetime annuities. In cases of death or permanent disability, accrued benefits will be payable to the employee or designated beneficiaries, ensuring security for families and dependents.
Mister Deputy Speaker:
As we discuss the security for our people, I must discuss one of the most critical areas of need and insecurity for Bahamians. That area is health coverage.
The global pandemic pushed our healthcare system to the brink of failure and exposed long-standing capacity constraints.
Through it all, we were reminded that access to quality healthcare should never be considered a privilege; it is a right. And it is a matter of human dignity.
Now that we are past the pandemic, not only the system, but the health of Bahamians remains in crisis.
Our nation continues to face high levels of non-communicable diseases, including high blood pressure, diabetes and heart disease, alongside a growing burden of obesity. These conditions place enormous strain on families and on our public health infrastructure.
They also carry long-term fiscal and economic implications.
This administration is committed to transforming the healthcare landscape across The Bahamas.
We are reforming National Health Insurance to expand coverage and improve access to care. We are investing in new hospitals and upgrading existing facilities. We are establishing additional clinics across our islands to ensure that geography does not determine the quality of care a Bahamian receives.
We are also committed to providing health insurance coverage for all government employees, reinforcing the principle that those who serve the public deserve the security of health insurance.
We remain resolute in our conviction that Bahamians, wherever they live, deserve high quality, compassionate, and accessible care.
At the same time, improving population health strengthens economic sustainability. Preventative care, early intervention, and expanded access reduce long-term costs while improving quality of life.
So, in many ways, health policy is not only social policy. It is economic policy.
And we remain committed to advancing both.
Mister Deputy Speaker:
In today’s interconnected world, cyber risk has emerged as a critical national security and economic concern. Cyberattacks have the potential to disrupt essential services, compromise sensitive data, and inflict significant financial harm.
As of January 2026, more than 100 malicious attempts occur daily against government systems and have been blocked at the firewall level, and the estimated cost of a single major data breach approaches $4.4 million with financial sector incidents averaging $5.6 million. Recognising this risk, we are making targeted investments in cybersecurity, including the recently launched Oracle platform to secure personnel and vendor information.
Taken together, these measures reflect a comprehensive and forward-looking approach to managing the risks facing our nation, climate, fiscal, health, and digital, while safeguarding the stability and future prosperity of The Bahamas.
Other Financial Matters
Mister Deputy Speaker:
The Bahamas has rebuilt its global standing and restored investor confidence through decisive financial reforms that have strengthened transparency, compliance, and oversight across the financial services sector, positioning the country among the world’s most compliant jurisdictions.
Since taking office in 2021, this administration has moved swiftly to reverse reputational damage and avert blacklisting by engaging constructively with international bodies such as the Organization for Economic Co-operation and Development, European Union, and Financial Action Task Force. These efforts have resulted in The Bahamas’ removal from international blacklists and recognition as a “largely compliant” jurisdiction with all 40 FATF recommendations.
We have also witnessed improved credit outlooks, and renewed economic momentum marked by billions in new investments, falling debt-to-GDP ratios, and the country’s first projected budget surplus.
Mister Deputy Speaker:
In November 2025, the Government of The Bahamas undertook a Public Expenditure and Financial Accountability Assessment, or known as PEFA, which is a globally recognised framework for evaluating the performance and effectiveness of public financial management systems.
The PEFA program was developed through a partnership of leading international development institutions, including the European Commission, International Monetary Fund, World Bank, and several national governments. The assessment provides an objective and comprehensive evaluation of fiscal institutions and practices, benchmarked against international standards.
The findings of the 2025 PEFA Assessment for The Bahamas have informed the Government’s ongoing reform agenda and would be released later in year.
In response, the Government is taking deliberate steps to strengthen fiscal institutions, with a particular focus on enhancing oversight and governance of State‑Owned Enterprises, which I discussed our efforts regarding this just earlier in this communication. We are also reinforcing the institutional framework for Public‑Private Partnerships and Public projects.
As part of this reform effort, the Ministry of Finance is currently developing, in partnership with a consulting firm, a new comprehensive Public‑Private Partnerships and Public Projects assessment framework to guide the complete project process of all public projects going forward.
In parallel, the Ministry is also establishing a robust monitoring and evaluation framework applicable to both new and existing public projects, aimed at improving project selection, implementation, accountability, and value for money across the public sector.
Update on Fiscal Measures or Policies
Mister Deputy Speaker:
I now turn to updates on the fiscal measures outlined in the Fiscal Year 2025/2026 Budget.
Cost of Living and Affordability Measures
When we presented that Budget, we were clear about one of our major goals: to help Bahamian families manage the rising cost of everyday life, without sacrificing the financial stability of the country.
We knew then, and we know now, that global pressures, higher food prices, more expensive energy, and disrupted supply chains, have made life harder for many households. Good governance demands that we respond to those realities, and that is precisely what we have done.
This Budget introduced targeted measures to reduce the cost of essential goods. Last year, VAT was reduced to five percent on medical supplies, prescription drugs, baby products, and personal hygiene items. These are things families cannot do without.
We did not stop there. On January 12th of this year, we announced our plans to go even further. Effective the first of April, less than a month away, VAT on unprepared food will be eliminated entirely. Groceries will no longer carry that tax burden.
This decision was made possible by stronger revenue collection and improved fiscal management.
VAT is a critical source of government income. But we determined that we could do more to provide relief for families, and we chose to do so.
Salary Review and Compensation of Public Officers
Mister Deputy Speaker:
Affordability is not only about what families pay at the checkout counter. It is also about what they take home in their pay. And so, I turn now to how this Government has focused on the men and women who serve in our public service.
We believe our public servants deserve to be compensated fairly, and this administration has worked toward honouring that obligation.
Since 2021, the total amount spent on public sector salaries has grown from $738.4 million to a projected $937.9 million in the current fiscal year. Base salaries have risen from $649 million to over $807 million. Allowances have been adjusted to address recruitment challenges and the very same cost-of-living pressures that affect every working Bahamian.
These were planned increases, phased responsibly, and paid for by improved revenue performance. We did not sacrifice spending on health, education, or social services to make room for these increases. We managed both.
Expanded Property Tax Relief
Mister Deputy Speaker:
Beyond wages, this administration recognises that for most Bahamian families, housing represents their single greatest financial commitment. That is why we have extended affordability measures to property owners.
Beginning in the next tax year, owner-occupied duplexes and triplexes will qualify for residential property tax exemptions, alongside expanded benefits for first-time homeowners. These measures are designed to help families benefit more from what they have worked hard to build.
Healthcare Affordability and Free Medication
Mister Deputy Speaker:
Affordability across these many areas is important but means very little to families in times of illness if the cost of healthcare remains out of reach. This is why the government has worked decisively to address healthcare costs.
Through the National Prescription Drug Plan, the number of medications available at no cost to patients has nearly doubled, from 72 to 142. We are working toward coverage for 160,000 Bahamians. For those managing chronic conditions, this is the difference between managing their health and trying to survive without access.
This effort works alongside VAT relief on medicines and medical supplies to reduce what families pay out of pocket for healthcare.
Electricity Bill Relief and Energy Costs
Mister Deputy Speaker:
There is perhaps no issue that reaches more directly into the daily lives of Bahamian families than the cost of electricity.
This Government understood that reality when we took office, and we have spent every year since working to change it.
Our work is producing results.
Through our Equity Rate Adjustment, 82 percent of BPL customers, which is approximately 78,000 households, paid lower electricity bills than they would have under the old rate. 44 percent saw their bills fall by at least 15 percent. More than 63,000 households are now receiving monthly bills under $125.
And for those who had fallen behind, we did not simply look away. Between November 2024 and January 2025, 2,811 disconnected households across New Providence and the Family Islands were reconnected, with outstanding balances restructured on terms they could manage. Because affordability must include a path back in, and not simply a barrier that keeps people out.
Mister Deputy Speaker:
Lower bills matter. But reliability matters just as much. Because what good is affordable electricity that is not there when you need it? I am pleased to report that power outage frequency fell by approximately 45 percent in 2025, and outage duration dropped by 35 percent.
The fuel savings tell the same story. The first phase of our energy reforms yielded $40 million in fuel savings in 2024. That figure is projected to reach $90 million in 2025, and $125.6 million annually by end of 2026.
And the transformation is accelerating. In New Providence, all renewable energy providers have executed their agreements, secured the necessary licenses, and commenced installation works. By early 2027, approximately 60 megawatts will be integrated into the national grid. That will be the first full integration of utility-scale renewable energy in this country’s history. Across the Family Islands, hybrid energy systems combining solar generation, battery storage, and LNG capacity are under construction, with major projects in Abaco and Eleuthera advancing now, followed by Exuma, Long Island, Cat Island, and San Salvador.
When this work is complete, The Bahamas will derive approximately 33 percent of its energy from renewable sources, surpassing our national target of 30 percent by 2030.
For Grand Bahama, the planned acquisition of the Grand Bahama Power Company represents a commitment to the people of that island that they will no longer be subject to an energy arrangement that has failed to serve them.
No island will be left behind in this new energy era.
Food Security and Nutrition
Mister Deputy Speaker:
Our commitment to affordability extends to food production. Investments in local agriculture, including hydroponics, grants, the Buy-Back Programme, Coconut 360, and Family Island initiatives, are supporting Bahamian farmers and helping to bring down the cost of locally grown food. Trade diversification efforts are also reducing reliance on imported goods and middlemen, which further eases prices for consumers.
Meanwhile, the School Breakfast Programme has served over 1.5 million hot meals to students. For many children, this ensures their day gets off to a good start. For many parents, it is one less financial pressure to carry.
Revenue Administration and Compliance Reforms
Domestic Minimum Top-up Tax
Mister Deputy Speaker:
The measures I have described require a government that manages its finances with discipline. Delivering relief to families while maintaining fiscal stability is only possible when the revenues owed to the Bahamian people are effectively collected. I am pleased to report that we have made significant progress on that front as well.
The Bahamas has committed to implementing the Domestic Minimum Top-Up Tax under the OECD Global Minimum Tax framework.
The related Business Development Incentives Programme Bill has been enacted to provide legislative certainty on qualifying incentives.
And the notification portal will go live this month.
This applies to large multinational companies operating here and ensures they contribute appropriately to our economy. It does not affect Bahamian households or small businesses.
Large Taxpayers Unit
Mister Deputy Speaker:
I also wish to provide an update on the work of the Large Taxpayer Unit, which plays a critical role in safeguarding government revenue by strengthening compliance among the largest contributors to the national tax base.
As of December 31, 2025, the Unit monitored 145 large taxpayers and 76 related entities, adding 52 new taxpayers during the year.
VAT collections totaled $358.5 million, which is approximately 50 percent of total VAT receipts, representing an $11.4 million increase year-over-year.
Filing and payment compliance among these large taxpayers averaged 89 percent, even as deadlines were tightened. These results reflect a more disciplined, data-driven approach to tax administration.
Cruise, Maritime and Border-Related Revenue Measures
Stronger domestic tax compliance is one side of the equation. The other side is ensuring that activity in Bahamian waters translates into substantial revenue for the Bahamian people. For too long, that has not been the case. This Government has moved to change it.
We have taken meaningful action to close longstanding gaps in maritime revenue collection. Over the past year, coordinated inspections across New Providence, Grand Bahama, Bimini, Abaco, Exuma, Eleuthera, and surrounding cays identified and addressed widespread violations, including unpaid dock fees, improper customs clearances, and illegal charter operations.
At private cruise destinations, targeted compliance inspections found deficiencies in reporting and accountability. The Government engaged directly with cruise line operators, implemented corrective measures, and launched a secure data platform this month to standardise ongoing reporting requirements. As a result, maritime revenue collections increased by 150 percent compared to the prior fiscal year.
The Bahamian people are the rightful beneficiaries of economic activity in Bahamian waters. We intend to ensure that remains the case.
Future Policy Initiatives
Carbon Market
Mister Deputy Speaker:
Securing the revenues we are already owed is essential. But a forward-looking government must also position the country to benefit from the economic opportunities that lie ahead. Among the most significant of those is the emerging global carbon market.
The Bahamas is already recognised internationally as a leader in blue carbon governance. Our extensive marine ecosystems represent a real and emerging opportunity to generate sustainable revenue through the protection of our natural environment.
Two pieces of legislation, the Climate Change and Environmental Advisory Unit Bill, 2025 and the Climate Change and Carbon Market Initiative (Amendment) Bill, 2025, which aim to strengthen our climate governance framework, have already been passed in this House. In the meantime, foundational scientific work continues as we map our coastal environments, measure carbon baselines, and validate the data that will underpin credible, transparent participation in international carbon markets. As this area continues to evolve, the Government will proceed carefully and responsibly, ensuring that any future monetisation of blue carbon assets is transparent, well-governed, and firmly aligned with national interest.
Advancements in Health Services
Mister Deputy Speaker:
Among the most pressing challenges that requires urgent, transformative action is the state of our public healthcare system.
So far, we’ve laid the foundation as we prepare to take major steps forward in healthcare.
On Grand Bahama, the first phase of the Freeport Health Campus is underway. The facility will span approximately 60,000 square feet and provide modern diagnostic, clinical, and treatment services.
Across 52 clinics on multiple major islands, laboratory and diagnostic services are being expanded. Additional ambulances are being procured and emergency medical personnel are receiving expanded training.
And, of course, the New Providence Specialty Hospital is moving forward with a total construction cost of $267 million, financing for which has already been secured. When complete, it will add approximately 200 beds to the public system, significantly relieving congestion at Princess Margaret Hospital by relocating maternal, pediatric, and adolescent services to the new facility.
Infrastructure Modernisation and National Resilience
Mister Deputy Speaker:
A strong nation requires strong infrastructure. Roads, drainage systems, and reliable ports are the arteries through which a nation’s economic wellbeing flows, and this Government has invested in all of them.
Drainage and stormwater management works are progressing in New Providence, Grand Bahama, Eleuthera, Exuma, and Andros. Road rehabilitation is advancing in Andros, Abaco, and other communities. And Public-Private Partnerships are accelerating delivery across multiple islands. In total, over $600 million in infrastructure work has been delivered or is underway, including over $500 million in the Family Islands.
In Mayaguana, recently announced plans are advancing for a new port development near major international shipping routes, which will create opportunities for trade, logistics, and economic activity in the southeastern Bahamas, and create over 2,000 jobs in the island of Mayaguana.
Upskill Bahamas
Mister Deputy Speaker:
We are building roads, airports, and renewable energy grids, and all of that work matters tremendously. But we maintain that the most consequential investment any government can make is in its own people. That conviction is what gave birth to Upskill Bahamas.
In November 2025, the Government launched Upskill Bahamas, a workforce development programme offering free online access to more than 40 internationally recognised courses and certificates in areas such as artificial intelligence, hospitality, and digital design.
Within weeks, more than 10,000 Bahamians applied. That response speaks for itself. Our people are ready, and this programme meets them where they are.
Conclusion
Mister Deputy Speaker:
Revenues continue to strengthen. Public expenditure is being carefully managed. The overall debt burden is in steady decline. And this country is now firmly on course toward a projected budget surplus, a milestone that speaks not to luck or favorable circumstance, but to the disciplined, deliberate stewardship of a government that understood the assignment and executed it.
That is the foundation we’ve built.
But a foundation is only as meaningful as what rises from it.
What is rising, Mister Deputy Speaker, is a record breaking tourism sector that is the envy of this region.
What is rising is billions in investments flowing into this archipelago because of improving infrastructure and a growing economy.
What is rising, on every island, is infrastructure: roads, docks, drainage, waterworks, energy grids, and clinics.
And what is rising, Mister Deputy Speaker, is the standard of living for Bahamian families as more people are working, businesses grow, homeownership is more accessible, healthcare is more affordable, electricity bills are lower, and groceries cost less.
But I will not stand here and suggest that the work is finished. It is not.
There are pressures that remain. There are communities still waiting on the full weight of these investments to reach them. There are families for whom relief, though underway, has not yet arrived in sufficient measure. And there are clinics and hospitals that need to be completed for the many people who need them.
I am the first to acknowledge the work left to be done. I embrace it.
But what this Mid-Year Budget demonstrates is that this nation is headed in the right direction.
This government did not inherit easy circumstances. We inherited record debts, a pandemic-scarred economy, and global headwinds. We managed to make progress through all of it, without neglecting our people and without compromising the fiscal integrity of this nation.
So, of course there is more work ahead. We know it, we welcome it, and we are up to it.
Our goal, as aways, is to expand opportunities across every island to create a Bahamas that is safer, more prosperous, and more equitable for everyone.
Thank you, Mister Deputy Speaker.