The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas’ national debt breached the $6 billion threshold during the 2014 fourth quarter, with more than $200 million added to it in the preceding three months.

The Central Bank of the Bahamas’ quarterly report for the three months to end-September, published yesterday, revealed that the nation’s total debt was brushing the $6 billion mark at the end of that period.

Further data showed that the Government’s debt had grown by almost $500 million in the 12 months to end-September 2014, reiterating the urgent need for the Bahamas to get a grip on its $400 million-plus fiscal deficits.

While the Government, and some external observers, will suggest this highlights the need for extra revenues and Value-Added Tax (VAT), others will point to the need to rein in public spending.

“The national debt, which includes contingent liabilities, moved higher by $200.8 million (3.5 per cent) over the three-month period, and by $497.6 million (9 per cent) relative to the prior year, to $5.997 billion,” the Central Bank report said.

That is just $3 million shy of $6 billion, and with almost three months elapsed since then, at current pace the national debt is now likely to be somewhere in the region of $6.1-$6.2 billion.

Providing further details on the Government’s financial position at end-September, the Central Bank added: “The direct charge on the Government was higher by $187.9 million (3.6 per cent) over the previous quarter, and by $452.8 million (9.3 per cent), year-on-year, at $5.346 billion.

“The dominant share (71 per cent) was held in local currency. Commercial banks were the largest creditors (39.8 per cent), followed by ‘other’ private and institutional investors (29.3 per cent), public corporations (17.5 per cent), the Central Bank (13.2 per cent) and other local financial institutions (0.2 per cent).

“Government’s contingent liabilities increased by $12.9 million (2 per cent) over the quarter, and by $44.8 million (7.4 per cent), year-on-year, to $651.3 million.”

The Central Bank said the Government’s deficit financing for the 2014 third quarter totalled $239.4 million, featuring $209 million in short-term local advances and $30 million worth of Treasury bills.

“External loan drawdowns amounted to $0.4 million,” the Central Bank added. “Government’s debt repayment amounted to $51.5 million, the bulk of which (97 per cent) was used to retire Bahamian dollar obligations.”

The Bahamas’ foreign currency debt now amounts to more than one-third of its total borrowings, standing at $2.388 billion. The Government’s direct share is $1.552 billion, with the remaining $835.5 million including debt guaranteed on behalf of government corporations.

The Central Bank data also showed the ‘draining’ effect this debt burden is having, with increasing interest (debt servicing) costs drawing ever-more resources away from areas such as crime fighting, education and health.

“Relative to 2013, public sector debt service payments rose by 57.9 per cent ($12.5 million) to $34.1 million,” the Central Bank said. “The Government’s share firmed more than four-fold, to $16.5 million, with interest payments boosted by $12.3 million to $14.9 million and amortisations higher by $0.3 million at $1.5 million.

“Conversely, the public corporations’ component was lowered by 0.9 per cent ($0.2 million) to $17.7 million, as a $3.3 million reduction in interest charges to $8.8 million countered a $3.1 million rise in amortisation payments to $8.9 million.

“At end-September, Government’s debt service to revenue ratio stood at 5.2 per cent, for a gain of 40 basis points, year-on-year.”