Barbados Government May Have To Bail Out Cash-Strapped SOES

  • The government of Barbados 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 several 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 the fiscal year 2024/25”.
  • 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.
  • The bailing out of these SOEs would have the impact of increasing the amount of government expenditure and could impact the fiscal progress made by the sovereign through its BERT (Barbados Economic Recovery and Transformation) Program.
  • Notably, for the nine months (April - December) of FY2023/24, the government recorded an overall deficit of $9.1Mn (-0.1% of GDP) due to higher global interest rates pushing up interest expenses on the country’s variable rate external debt along with increases in wages & salaries, as well as grants to public institutions. However, higher transaction-based tax receipts coupled with prudent non-interest spending allowed the authorities to meet its primary surplus target with a primary surplus of $434.3Mn (3.7% of GDP).

(Source: Nation New & NCBCM Research)