NASSAU, BAHAMAS — Prime Minister Philip Davis announced an estimated fiscal surplus of $75 million, or 0.5 percent of GDP, marking the first time since Independence that The Bahamas has secured a balanced budget with a surplus.
He also announced that VAT will be reduced to 5 percent on essential items like baby diapers, feminine hygiene products, prescription drugs, and medical supplies starting September 1, 2025.
“For the very first time since Independence, we have finally secured the achievement of a balanced budget. More than a balanced budget – a budget with a surplus,” Davis said while presenting the government’s annual budget for the 2025/2026 fiscal year.
Davis further explained that the government’s fiscal deficit has steadily declined. “The Government’s fiscal deficit has followed a consistent downward trajectory, falling to $178.9 million or 1.1 percent of GDP, down from 1.4 percent last year,” he noted. This reflects a controlled spending environment alongside growing revenues that outpace expenditures.
Revenue collections for the current fiscal year ending June 2025 are projected at $3.89 billion, with expenditures planned at $3.82 billion. Much of this increase is tied to a strong rebound in the tourism sector, which has returned to pre-pandemic levels.
“Our tourism sector has truly come roaring back,” Prime Minister Davis said. “It remains the cornerstone of our economic recovery and the engine that drives growth.” Cruise arrivals topped 9.4 million, an increase of 20.6 percent from 2023, surpassing 2019’s pre-pandemic levels by 72.1 percent. Overall visitor arrivals reached 11.2 million in 2024, up from 9.7 million in 2023.
The Prime Minister also pointed to foreign direct investment as a key driver of economic confidence. “Over the last two years, The Bahamas attracted more than $10 billion in foreign direct investment, signaling investor confidence in the country’s economic prospects,” he said. “This investment influx represents confidence in The Bahamas’ economic potential and signals sustained growth for our people.”
Tax revenue collections improved the budget’s position significantly. Property taxes increased by $27.3 million, largely from commercial and foreign-owned undeveloped properties. VAT receipts climbed by $50.8 million to reach $1 billion, reflecting stronger domestic demand.
However, Davis acknowledged challenges with tax compliance. “VAT on real estate is still not being captured fully,” he admitted, “and we are committed to improving compliance and closing loopholes to ensure all revenues due are collected.”
Government expenditures rose by $230.8 million to $2.6 billion but were aligned with the planned budget framework. The increased spending supports key priorities including education, healthcare, infrastructure, and public safety.
“We continue to invest in the areas that matter most to Bahamians,” Davis said. “Our commitment to improving healthcare facilities, upgrading schools, and enhancing public safety remains strong.”
Capital spending will remain steady at 2.3 percent of GDP, with recurrent expenditure rising slightly to 20.8 percent of GDP in the coming fiscal year. These allocations reflect a balance between maintaining infrastructure investments and managing day-to-day government operations.
The Prime Minister emphasized the importance of maintaining fiscal responsibility to improve the country’s credit rating. “Achieving an investment-grade credit rating within the next three years is essential,” Davis said. “This will unlock new economic opportunities, reduce borrowing costs, and boost investor confidence.”
He noted that a stronger credit rating would benefit all Bahamians by lowering government debt servicing costs, freeing funds for social programs and economic development initiatives. “This is about the future prosperity of our country,” Davis explained. “It requires discipline, focus, and a commitment to sound fiscal management from all sectors.”
Davis referenced the Fiscal Responsibility Council’s report, which shows debt falling as a percentage of GDP and highlights progress on fiscal consolidation. “The government’s efforts to reduce debt and maintain a balanced budget are being recognized by experts and rating agencies,” he said.
Despite these positive indicators, Davis warned of ongoing challenges. Inflationary pressures and external shocks continue to impact the global and local economy. “We must remain vigilant,” he cautioned, “and ensure that our fiscal policies are adaptable and sustainable.”
He called for continued cooperation among government agencies, the private sector, and citizens to support economic growth and fiscal stability. “Our success depends on all of us working together,” Davis said. “By maintaining fiscal discipline and encouraging investment, we can build a stronger Bahamas for generations to come.”
In outlining new revenue and relief measures, Davis said the government was acting to ease the burden on Bahamian households impacted by inflation. “We are acting decisively to bring relief to the people,” he said. Customs duties will also be removed or reduced on dozens of everyday products, including cleaning supplies, hardware, and butane fuel—steps Davis described as part of a “broader commitment to build resilience and affordability into everyday life.”
Additionally, the government will extend VAT relief to building materials for religious institutions and eliminate duty on digital signage to support community outreach.
