Some of us continue to be very concerned about the fiscal affairs of Barbados despite feel good statements coming from those in authority. A recent media report (see below) lends credence to the concern.

Why should it require budgeted subventions if it has been well documented SOEs like the Caribbean Broadcasting Corporation (CBC), Barbados Agricultural Development Marketing Inc (BADMC), Transport Authority and a few others are in a constant state of being cash-strapped and described as insolvent?

According to the media report there is a high risk that these entities may require unbudgeted subventions during fiscal year 2024/25. Despite over 11 million dollars being allocated in supplementaries for these entities at the close of the last financial year. The cancelled plan for the House to meet on a Saturday to vote additional monies was required after all? What is the blogmaster missing?

A restructure of SOEs was promised by the previous government but it was too ‘chicken’ to implement recommendations from the Justin Robinson led committee for political reasons. Although the Mottley government has received an unprecedented mandate to govern, it too has no appetite to cutout the fat of funding SOEs. In a recent disclosure former minister in a BLP cabinet Anthony Wood validated what is widely known, SOEs are used by government to provide employment for party supporters. O what a web we weave when we practice to deceive.

The blogmaster is happy economic indicators continue to improve post the pandemic BUT is not convinced the economy is on a good footing. The debt to GDP ratio has improved BUT it has done so because of how well the volatile tourism sector is currently performing. Inflation and employment indicators continue to be a concern. We should keep an eye on the significant increase in interest cost as a result of the many loans negotiated with variable conditions attached which seems to have caught Barbadians unaware that international lenders hardly agree to fix term interest rates. And of late the creep in the price of oil given its high proportion of the domestic import bill.

The recent Estimates confirmed there is a significant deficit in the current fiscal statement that has to be funded and with continuing bailouts for some of the insolvent SOEs expected in the current financial year, it does not help to improve Barbados’ fiscal state.

Recent revelations of squandermania of public finances associated with the Chinese steel houses transaction and the financial dark hole about the little known Clearwater Bay exposes a lack of financial discipline by government despite all the feel good reports from the talking heads. The commentary contained in the Auditor General Reports post 2018 have not changed.

What does it say when government has to vote additional monies for SOEs with a tired financial record of non performance and deemed to be insolvent? Does it inspire confidence? Is this a case of the Prime Minister having to appease a favoured unionist sitting outside the Cabinet BUT operating in the inner sanctum as it relates to government’s sluggish rationalising of SOEs?

HIGH-RISK’ SOEs

Government may have to bail out cash-strapped entities

By Shawn Cumberbatch

shawncumberbatch@nationnews.com

Government may have to allocate millions of dollars to continue bailing out some cash-strapped state-owned enterprises (SOEs).

A new Fiscal Risk Statement from the Ministry of Finance says there is evidence that a number of SOEs, including the Barbados Agricultural Development Marketing Inc. (BADMC), the Caribbean Broadcasting Corporation ( CBC) and the Transport Board are likely to be short of cash and other liquid resources needed to pay their debts this year.

The authorities say this means that “given the traditional reliance on Government to settle arrears of the SOEs in times where they have been cash-strapped, there is a high risk that these entities may require unbudgeted subventions during fiscal year 2024/25”.

In recent supplementaries approved by Parliament before the last financial year ended on March 31, $4 million was allocated to settle outstanding arrears of the Transport Board, and $2.5 million was voted “to meet the expenditure for the payment of pensions and operations of CBC”.

There was also $4.6 million for the BADMC “to enhance water solutions under the [Farmers’ Empowerment and Enfranchisement Drive] programme by expanding the irrigation networks including pumphouses and distribution piping at Wakefield, Spencers, Bath and Mount Poyer”.

Weak revenue growth

In the 2024 Fiscal Risk Statement, which is a requirement of the Public Finance Management Act of 2019, the Ministry of Finance said “weak revenue growth for most commercial enterprises and a high reliance on Government subventions to meet operating expenses have meant consolidated net losses of commercial public enterprises before subventions”.

“A number of SOEs have been deemed insolvent as current assets are unable to cover liabilities. Additionally, some commercial entities’ revenues have not fully rebounded post peak pandemic,” it reported.

“This had led to an accumulation of short-term liabilities that must be settled to avoid an untenable arrears position for the public sector. The financial performance of public enterprise poses potential risk to Government as financing shortages necessitate increased transfers to these enterprises. This includes the settlement of short- and long-term liabilities.”

Consolidated net loss

The report said “the consolidated net loss of commercial public enterprises before subventions totalled $49.9 million for fiscal year 2023/24, compared to $226.4 million for fiscal year 2022/23”.

It added: “Non-commercial entities registered losses of approximately $164.7 million for fiscal year 2023/24 compared to $139.8 million for fiscal year 2022/23. Overall, liquidity ratios generated for the current financial year reflect medium and low risks for the commercial and non-commercial SOEs, respectively.”

The BADMC, CBC and Transport Board were listed among the statutory entities with negative debt-to-equity ratios, indicating they were insolvent. The challenge facing CBC, the Transport Board and other SOEs is short-, medium- and longterm in nature in several instances.

“Solvency ratios generally indicate whether the entities have sufficient cash flow to meet their long-term liabilities and thus measure the financial health of the entity,” the Fiscal Risk Statement explained.

Nation Newspaper