The Bahamas is in Need of a Prudent Fiscal Culture
Deo Adjuvante, Non Timendum
“With God as My Helper, I Have Nothing to Fear”
Nassau, The Bahamas
By Dr Kevin Turnquest Alcena
The Bahamas Is Not the Government’s Bank Account
“The practice of funding has gradually enfeebled every state which has adopted it.”
— Adam Smith, The Wealth of Nations
More than two centuries later, Adam Smith’s warning still cuts through the noise.
One of the greatest tragedies of the developing world is not necessarily a lack of resources. It is the failure to turn resources into lasting national wealth.
Countries can have oil and remain deeply indebted. They can have gold and remain poor. They can have copper, gas, diamonds and vast natural resources and still struggle to provide their citizens with the prosperity those resources should have generated.
Nigeria is a powerful example. Angola is another. Zambia’s experience with copper and sovereign debt is another.
The lesson is uncomfortable:
Natural resources do not make a country wealthy. Good institutions do. Fiscal discipline does. Sound investment does.
And that is why The Bahamas needs to have a very serious conversation about the sovereign funds , national investment funds, debt, regulation and the growing role of the state in the economy.
Because there is a fundamental principle that every government should understand:
Winning an election does not mean you own the country. You have been entrusted with it.
The Treasury does not belong to the political party in office. The country’s assets do not become the property of the government because voters gave one party a mandate. And national investment funds should never be treated as a convenient political bank account.
THE DEBT SHOULD MAKE EVERY BAHAMIAN PAY ATTENTION
The Bahamas has made real progress since the fiscal disaster of the pandemic. That fact should be acknowledged.
The IMF says the country’s fiscal position has strengthened, with the primary balance remaining in surplus for a third consecutive fiscal year in FY2024/25. The economy has also recovered strongly, largely because of tourism and construction.
But here is the part we cannot ignore:
Central government debt remains around 74 percent of GDP. The IMF estimates central-government debt at 74.1 percent of GDP for FY2025 and 72.7 percent for FY2026. The Fund says additional fiscal consolidation is still necessary to reach the government’s own medium-term target of 50 percent of GDP.
That is not a reason for panic. It is a reason for discipline.
The Bahamas is a small, open economy. We are extraordinarily exposed to tourism, global economic conditions, international interest rates and natural disasters.
The IMF specifically identifies a global slowdown that could hurt tourism, tighter financial conditions and natural disasters as downside risks to the Bahamian economy. So we should not behave as if money will always be available. It won’t. Interest rates change. Tourism changes. Hurricanes come. Recessions come. Financial crises come. Governments change. And when the next crisis arrives, the country will wish it had preserved more fiscal space. Fiscal responsibility is not about being cheap. It is about being prepared.
A GOVERNMENT IS A CUSTODIAN, NOT THE OWNER
This brings us to the National Investment Fund. Let’s get the facts straight. The Bahamas’ old Sovereign Wealth Fund Act was repealed and replaced by the National Investment Funds Act, 2022. The legislation created a framework for national investment funds and explicitly allows funds to be used for purposes including national development and infrastructure.
The Davis administration was quite explicit about this. In presenting the legislation to Parliament, Prime Minister Philip Davis said The Bahamas Resilient Infrastructure Fund would include a Growth Fund for Family Islands infrastructure, including airports, ports and maritime infrastructure. The government also said the funds were intended to mobilize private capital and partnerships rather than rely entirely on government revenues or borrowing.
And in 2025, the government confirmed that $265.3 million was transferred into the National Investment Fund, with funds allocated toward capital works at New Bight Airport, Arthur’s Town Airport and Governors Harbour Airport. The government said the transfer had been authorized by Parliament and that the associated borrowing remained recorded on the government’s balance sheet. Those are the facts.
So the argument should not be that the government secretly stole money from a sovereign fund or that the law prohibits airport investment. It doesn’t.
The much bigger question is:
Should scarce national capital—including borrowed money—be placed into a government-controlled investment vehicle and directed toward infrastructure without an exceptionally rigorous test of economic return, risk and opportunity cost?
That is a legitimate question. And it deserves an answer.
A NATIONAL INVESTMENT FUND IS NOT A POLITICAL ATM
This is where the principles matter. The government’s own presentation of the 2022 legislation said the National Investment Funds framework was designed around the Santiago Principles, which emphasize transparency, accountability, ethical standards, independence, auditing and public disclosure. Those principles exist because governments face an enormous temptation.
Politicians think in electoral cycles. Investment funds must think in decades.
A politician can look at a fund and see money available for a project. A professional investment manager should look at that same money and ask: What is the return? What is the risk? What is the opportunity cost? Is this investment commercially viable? Could private capital do this? What happens if revenue projections are wrong? Does this investment preserve or destroy long-term national wealth?
That is the difference between managing national capital and spending national capital. And it is a distinction we cannot afford to lose.
BORROWING MONEY TO INVEST IS NOT THE SAME AS CREATING WEALTH
This is particularly important. The government has explained that money was borrowed and then placed into the National Investment Fund for strategic infrastructure investments. It also says the debt remains fully recorded on the government’s balance sheet.
That clarification is important. But it raises another question. What is the return on the investment?
If government borrows $100 million at a certain cost and invests it in an asset that produces a higher risk-adjusted economic return, there may be a rational investment case. But if the investment produces a return lower than the cost of capital—or requires continuing government subsidies—then the country has not magically created wealth.
It has simply transformed one financial obligation into another asset. That may still be justified for infrastructure with significant public benefits.
But then the government should show the numbers. Show the projected return. Show the assumptions. Show the risk. Show the alternatives. Show the opportunity cost. Show the public exactly why this is the best use of national capital. “It’s an investment” is not an economic analysis.
LOOK AT NORWAY
Norway offers an important lesson. Norway’s Government Pension Fund Global exists to manage petroleum wealth for the long term and to ensure that the wealth benefits both current and future generations. Its fiscal framework governs how much can be transferred from the fund into government spending, with the long-term guideline based on the fund’s expected real return.
The principle is simple: Preserve the capital. Invest the capital. Earn returns. Protect the future.
That is fundamentally different from treating a national fund as an extension of the government’s annual budget. The Bahamas does not have Norway’s oil wealth. But we can learn from Norway’s discipline.
A national fund should be designed to outlive political administrations. It should not be structured around the spending priorities of whichever party happens to hold office.
Because the government of today is temporary. The assets belong to generations.
THE REAL DANGER IS POLITICAL CONTROL OF CAPITAL
This is where the discussion becomes more uncomfortable. The greatest danger may not be the airport itself. The greatest danger is the precedent.
Once politicians become accustomed to controlling large pools of national capital, there is a natural temptation to expand the number of things government believes it should finance, own, regulate or manage. One project becomes another. One fund becomes another. One government enterprise becomes another. One strategic investment becomes another.
And gradually, government becomes not simply the referee of the economy, but one of its biggest players. That should concern us.
A healthy private economy needs government to establish the rules and enforce them fairly. But government should not become the regulator, investor, employer, developer, lender, owner and allocator of opportunity all at the same time.
Because when government controls too many economic levers, political power can become economic power. And that creates another problem: political clientelism.
POLITICAL CLIENTELISM: WHEN GOVERNMENT BECOMES THE GATEKEEPER OF OPPORTUNITY
Political clientelism is the practice of exchanging targeted benefits—such as jobs, contracts, resources or other advantages—for political support. It has been documented across developing democracies, including parts of Africa.
And the danger is not that elections disappear. The danger is that elections remain while the economic system increasingly revolves around who controls the state.
The cycle becomes: Win the election. Control the government. Control public resources. Control appointments. Control contracts. Control licenses. Distribute benefits. Build political loyalty. Then fight to remain in power.
That is not the kind of institutional democracy The Bahamas should aspire to. Democracy should mean that a Bahamian can succeed regardless of which party is in office.
A business should win a contract because it is competitive. An entrepreneur should succeed because the business works. An investor should invest because the economic fundamentals make sense. A citizen should not need political connections to navigate the economy. Government should be the referee—not the prize.
AND THEN THERE IS REGULATION
This is where the Bahamas needs to be particularly careful. Nobody is arguing for a lawless economy.
Good regulation is necessary. We need financial regulation. We need environmental protections. We need consumer protection. We need building standards. We need proper oversight of businesses that pose genuine public risks.
The issue is not regulation itself. The issue is regulation without discipline. Because governments often look at regulations individually.
One new license doesn’t seem dangerous. One new fee doesn’t seem dangerous. One additional reporting requirement doesn’t seem dangerous. One additional approval process doesn’t seem dangerous. One new tax doesn’t seem dangerous. One new government agency doesn’t seem dangerous.
But put them all together and the picture changes. The entrepreneur doesn’t see ten harmless regulations. The entrepreneur sees ten more reasons to think twice before investing. And this is where The Bahamas could make a very serious mistake.
CAPITAL HAS OPTIONS
The Bahamas is not operating in a vacuum. We compete with other Caribbean jurisdictions. We compete with international financial centres. We compete for tourists. We compete for businesses. We compete for investors. We compete for entrepreneurs.
And capital is mobile. An investor does not have to invest in The Bahamas. A company does not have to establish its regional operation here. An entrepreneur does not have to build a business here. They have choices.
And if the cost of regulation, taxation, bureaucracy and compliance becomes too high relative to the return, investors can simply take their capital somewhere else. They may never publicly complain. They may never criticize the government. They may simply say: “Let’s invest somewhere else.”
That is the silent danger. The country may not see businesses leaving in dramatic headlines.
It may simply see fewer businesses arriving. Fewer startups. Fewer investments. Fewer expansions. Fewer jobs. Fewer opportunities. And by the time policymakers recognize the problem, the damage can already be done.
IF GOVERNMENT CONTINUES TO REGULATE EVERYTHING, PEOPLE WILL STOP WANTING TO DO BUSINESS HERE
This is the warning that policymakers need to hear. If The Bahamas continues piling regulation, taxes, fees, licensing requirements and bureaucratic procedures onto businesses without constantly asking whether each measure is justified, we risk making the country less attractive as a place to do business.
Not because The Bahamas suddenly becomes a bad country. Not because investors stop loving our beaches.
But because businesses ultimately make economic decisions. They calculate costs. They calculate risks. They calculate returns. They calculate uncertainty. And then they choose where to put their money.
The Bahamas cannot assume that investors will stay simply because we are The Bahamas. Investment is not sentimental. Capital goes where the risk-adjusted opportunity makes sense.
That is why the objective should not be “no regulation.” It should be smart regulation. Regulate where there is a genuine public interest. Eliminate regulations that no longer serve a purpose.
Digitize government services. Set clear deadlines for approvals. Reduce unnecessary paperwork.
Make fees transparent. Prevent arbitrary enforcement. Give businesses predictable rules.
And before introducing another regulation, ask one simple question: What problem are we solving, and what will it cost the economy to solve it this way? Because every regulation has a cost.
Sometimes the business pays. Sometimes the consumer pays through higher prices. Sometimes workers pay through fewer opportunities. Sometimes investors pay by earning lower returns. And sometimes the country pays because the investment never happens.
THE GOVERNMENT SHOULD WANT MORE PRIVATE CAPITAL, NOT MORE GOVERNMENT CONTROL
The irony is that The Bahamas needs investment. We need investment in energy. We need investment in infrastructure. We need investment in housing. We need investment in tourism. We need investment in agriculture. We need investment in technology. We need investment in the Family Islands. We need investment in small businesses.
But the answer cannot always be: Government will finance it. Government will own it. Government will regulate it. Government will manage it.
The private sector has capital. The private sector has expertise. The private sector can take risks that government should not.
And when government creates a predictable environment, private capital can multiply what the public sector is capable of doing. Indeed, the Davis administration itself made this argument when it introduced the National Investment Funds legislation, saying that public-private partnerships could expand the number and scale of infrastructure projects while reducing the need for government to finance every project itself. That principle is worth preserving. The government should use its limited capital to catalyze private investment, not crowd it out.
THE TAXPAYER CANNOT ALWAYS BE THE ANSWER
The Bahamas already depends heavily on taxation to finance government. And the IMF’s current assessment says additional revenue-enhancing measures and expenditure reforms may be needed to achieve the government’s medium-term debt target. Those measures could include replacing the business-license fee with corporate income tax, introducing personal income tax, rationalizing tax exemptions, raising VAT and reducing transfers to state-owned enterprises.
Those are IMF recommendations, not laws that have necessarily been adopted. But they demonstrate the dilemma.
When government spends more, someone ultimately has to pay. If it isn’t the taxpayer today, it may be the taxpayer tomorrow. If it isn’t the taxpayer, it may be the holder of government debt. If it isn’t either, it may be the next generation through reduced fiscal space.
There is no such thing as free government money. There is only money that comes from somewhere else.
THE BILL ALWAYS COMES DUE
That is why Adam Smith’s warning matters. Debt can make government spending look painless. The project is visible. The ribbon is visible. The press conference is visible. The new building is visible. The airport is visible.
The taxpayer’s future interest payments are not. That is the political temptation of debt. The benefit is immediate. The cost is delayed. And the people paying the ultimate bill may be people who never voted for the government that incurred it.
That is why fiscal responsibility is not simply an accounting exercise. It is a moral obligation to future generations.
THE BAHAMIAN PEOPLE ARE THE OWNERS
This is the principle that must never be forgotten. The government is not the owner of The Bahamas. The government is the custodian.
The national assets belong to the Bahamian people. The investment funds belong to the Bahamian people. The natural resources belong to the Bahamian people. The country’s future belongs to the Bahamian people.
Politicians are temporary. The nation is permanent.
That means every government should be asking itself not: “What can we spend?”
but: “What can we build that will still benefit Bahamians 25, 50 or 100 years from now?” That is the standard.
THE MOST DANGEROUS SENTENCE IN GOVERNMENT
Perhaps the most dangerous sentence in public finance is: “We have the money.”
The correct question is: “Should we spend it?”
And the question after that should be: “What is the opportunity cost?” Could the money earn a return? Could it reduce debt? Could it strengthen reserves? Could it attract private capital? Could it protect the country from the next crisis? Could it generate wealth for future generations? Those are the questions of serious government.
Not simply: Can we do it?
But:
Should we do it?
THE BAHAMAS NEEDS A FISCAL CULTURE
We cannot build a strong country simply by passing another budget. We need a culture of fiscal responsibility. We need stronger institutions. We need independent oversight. We need transparency. We need professional investment management. We need clear rules for national funds. We need proper assessments of public-private partnerships. We need serious scrutiny of state-owned enterprises. We need regulatory reform. We need to make it easier—not harder—for legitimate businesses to operate. And we need governments that understand that restraint is sometimes more valuable than spending.
Anybody can spend money. Anybody can borrow. Anybody can announce a project. Anybody can cut a ribbon.
Leadership is knowing when to say: No. No, we cannot afford it. No, the return isn’t high enough. No, the government shouldn’t own it. No, the private sector can do it. No, we shouldn’t borrow for it. No, we shouldn’t raid national capital for short-term political gratification. No, another regulation isn’t justified. No, another tax isn’t the answer. No, the government does not need to control everything. That is fiscal discipline.
THE BAHAMAS WILL OUTLIVE EVERY GOVERNMENT
The Progressive Liberal Party will not govern forever. The Free National Movement will not govern forever. No prime minister will govern forever. No cabinet will remain forever.
But the Bahamas will. The national debt will remain. The national assets will remain.
The consequences of today’s decisions will remain. That is why every administration has a responsibility to leave the country stronger than it found it.
Not simply more buildings. Not simply more programs. Not simply more government.
Stronger institutions. A more competitive private sector. Lower fiscal vulnerability. Greater national wealth. More opportunity. And a government that understands the difference between owning power and exercising responsibility.
THE CHOICE IS BIGGER THAN ONE GOVERNMENT
This argument is not ultimately about the Davis administration alone. It is about the kind of political system The Bahamas wants to become.
Do we want a country where government increasingly becomes the centre of economic life? Or do we want a country where government creates the conditions for citizens and businesses to flourish independently? Do we want national investment funds governed by long-term investment principles? Or do we want political administrations to have increasing discretion over national capital?
Do we want regulation that protects the public while allowing businesses to breathe? Or do we want a bureaucracy so complicated that entrepreneurs eventually decide that it is easier to invest somewhere else?
Do we want future generations to inherit assets?
Or obligations?
These are not partisan questions. They are questions about the future of the Bahamas.
Because there is a simple truth that every government should remember: The country is not its treasury. The treasury is not the government’s personal bank account. And winning an election does not give anyone ownership of the Bahamas.
The government is only the custodian. And a custodian has one fundamental responsibility: Leave the house standing. Not just for the people living in it today—but for the children who will inherit it tomorrow.
The Bahamas does not need governments that simply know how to spend. It needs governments that know how to preserve, invest, build, regulate wisely and say no. Because once national capital is consumed, it cannot be spent twice. Once an investor decides to go somewhere else, that investment may never return. Once a business closes because the regulatory burden becomes unbearable, the jobs disappear with it. And once a generation inherits a mountain of debt, no political speech can make the obligation disappear.
The bill always comes due. The only question is: Who will be left to pay it?
