Three state-owned agencies posing ‘significant risk’

Three state-owned entities (SOEs) have been identified as posing a “significant risk” to the country’s fiscal plan, according to a government report, including a fledgling housing project, the 61-year-old national broadcasting and the national bus company.

The HOPE Inc project, Caribbean Broadcasting Corporation (CBC), and Transport Board were all described as “technically insolvent” and undermined the International Monetary Fund-supervised austerity drive.

A red flag has been raised about the risk posed to the fiscal plan due to the millions in debt which the government has guaranteed for three state-owned entities (SOEs) in particular.
But other vital public services providing health, education, housing and farm produce remain under watch from month to month.

The administration’s Barbados Medium- Term Fiscal Framework 2025/2026 to 2027/2028 said “the most significant risk” is posed by the government’s implicit guarantee of the liabilities of the controversial HOPE Inc project, the CBC and the Transport Board.

The section, Performance and Outlook for Major SOEs, noted that under the IMFbacked Barbados Economic Recovery and Transformation (BERT) programme, the Queen Elizabeth Hospital (QEH), University of the West Indies (UWI), the Transport Board, Barbados Agricultural Development Management Corporation (BADMC), the National Housing Corporation (NHC) and the CBC were all being monitored on a monthly basis.

“Guaranteed debt stood at $56.0 million at June 30, 2024, an increase of $23.3 million from the same period in the previous year, due mainly to a new loan secured on behalf of Kensington Oval Management Inc. Guaranteed debt consists of external multilateral loans and one external bond issue secured on behalf of three SOEs,” the document stated.

But the operations of HOPE Inc, CBC, and the Transport Board were flagged for the elevated risk they posed. The report declared that these three agencies were “technically insolvent” as their total liabilities exceeded their assets.

It said: “This risk is most significant for a few SOEs with total liabilities exceeding total assets, making them technically insolvent, namely [Transport Board], CBC, and HOPE Inc. Additionally, other SOEs, such as [National Petroleum Corporation] NPC, [Barbados Water Authority] BWA, and QEH, are facing liquidity challenges related to settling accounts payables arrears and/or pension liabilities.”

It added: “HOPE Inc. has experienced recurring annual net losses since its inception in January 2021. The BWA has been adversely affected by prolonged delays in collecting accounts receivables, while the NPC has faced cash-flow issues due to consecutive net losses from 2019 to 2024.”
But while there was concern that many agencies were targeted for reform and thus an expected slash in government transfers to support their operations, it was conceded that several SOEs still received larger amounts of taxpayer support.

The QEH was budgeted to receive $139 million in 2023-2024 but actually got $110.7 million and was set to get $100.9 million in 2024-2025. The Transport Board was to receive $12.2 million for the financial year 2023-2024 but actually received $36.5 million; it is again scheduled to get $12.2 million in 2024-2025.

The document revealed that the BADMC, which handled state agricultural lands, was only budgeted to receive $7 million in state funding in 2023-2024, but got $51.1 million and in 2024-2025 the government has allocated zero financial support to the entity.

According to the extensive 47-page document which was laid in Parliament: “Several SOEs received higher funding than initially projected due to higher-thanexpected operational expenses. However, the [government] managed to adhere to the cap set under the [IMF’s] Extended Fund Facility supported programme for entities monitored by the Technical Memorandum of Understanding [TMU], which was $477 million.”

Importantly, the document disclosed: “Anticipated grants to public institutions for the 2024/25 period are estimated at $542.3 million.

. . . Expected transfers to entities not monitored under the TMU include $50.0 million for the Barbados Defence Force (BDF) and $39.8 million for the Barbados Revenue Authority (BRA).”

The report continued: “Detailed plans have been drafted for the restructuring of the Transport Board and the National Housing Corporation, and for the amalgamation of the operations of the Rural Development Corporation and the Urban Development Corporation; the National Petroleum Corporation and Barbados National Oil Company Ltd.; as well as for the merger of the social services entities of the Child Care Board, National Assistance Board, Welfare Department and the National Disabilities Unit. These and other reform measures are expected to result in reduced SOE transfers over the medium term.”
(IMC1)