By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Christie administration has added $1.6 billion to the Bahamas’ national debt over the past three years, continuing to push it beyond the IMF’s so-called ‘danger threshold’.
The Central Bank of the Bahamas’ 2015 annual report, released yesterday, confirmed that this nation’s debt-to-GDP ratio had increased to 76.3 per cent at year-end.
This compared to 73.7 per cent at year-end 2014, and shows the Bahamas’ national debt and associated metrics are continuing to expand beyond the International Monetary Fund’s (IMF) 70 per cent debt-to-GDP benchmark.
“At end-December, the national debt-to-GDP ratio stood at 76.3 per cent, higher than the prior year’s 73.7 per cent rate, while the central government’s liabilities approximated 67.8 per cent of GDP, compared to 65.5 per cent in 2014,” the Central Bank report confirmed
The Fund has consistently warned that countries who go beyond the 70 per cent debt-to-GDP ratio, as the Bahamas has done, will face increasing economic and fiscal problems.
Rising debt results in ever-increasing interest/service costs, which threaten to suck countries into a deepening ‘debt spiral’, where they are forced to borrow to meet existing obligations.
The timing of the Central Bank’s report is unlikely to be welcomed by the Government, given that its 2016-2017 Budget communication is now just 24 hours away.
To the Christie administration’s credit, the rate of increase in the national debt and its key accompanying ratios slowed markedly in 2015 compared to previous years, largely due to the revenue boost provided by Value-Added Tax’s (VAT) introduction.
This was acknowledged by the Central Bank, which said: “The national debt rose by $361.1 million (5.8 per cent) to $6.638 billion at end-2015, albeit lower than the $689 million (12.3 per cent) gain registered in 2014.
“Similarly, the debt-to-GDP ratio firmed by 2.6 percentage points to 76.3 per cent, a notable tapering from the 7.4 percentage point widening to 73.7 per cent in 2014.”
The slowdown in the rate of national debt increase is also in line with the Government’s projections, various Cabinet ministers having warned that the growth could not be reversed overnight.
The Government has first sought to slow the national debt’s growth, via the reduction - and planned elimination - of the multi-million dollar annual fiscal deficits it has been running.
However, the Central Bank’s annual report will likely prompt further charges from the Opposition and private sector that they were misled over the impact of VAT’s introduction.
Many have argued they were under the impression that VAT’s arrival would generate revenues sufficient to eliminate both the annual fiscal deficit and pay down the national debt, but neither has happened yet.
The Central Bank’s annual report also shows that the Bahamas’ national debt has increased from $5.003 billion at year-end 2012 to $6.638 billion at end-December 2015, a rise of some $1.635 billion in just three years under the Christie administration.
The Government will likely argue that the former Ingraham administration was just as profligate, but the ever-increasing national debt - and associated servicing costs - threaten to suck growing sums of money away from critical public services and ‘crowd out’ the private sector.
For the 2015 calendar year, the Government’s direct debt increased by $312.7 million or 5.6 per cent to $5.889 billion, which was “a slowdown from the $590.8 million (11.9 per cent) growth recorded in the prior year”.
The Government’s direct debt-to-GDP ratio stood at 67.7 per cent at year-end 2015, up from 65.5 per cent the year before.
“Government’s contingent liabilities expanded by $48.9 million (7 per cent) to $748.3 million, with the majority of the growth attributed to increases in the loan guarantees for the Public Hospitals Authority, the Water & Sewerage Corporation and Bahamasair,” the Central Bank added.
“Bahamian dollar-denominated debt, which accounted for 71.7 per cent of the total, advanced by $214.5 million (5.4 per cent) to $4.224 billion, while foreign currency obligations firmed by $98.2 million (28.3 per cent) to $1.665 billion.”
The Bahamas’ foreign currency debt, whose servicing consumes this nation’s external reserves, rose by $114.6 million or 4.7 per cent to hit $2.562 billion at year-end 2015.
“Foreign currency debt servicing payments fell by $391.1 million (68.6 per cent) to $178.7 million relative to the previous year, when both the Government and the public corporations undertook significant refinancing,” the Central Bank said.
“The Government’s component fell by $184.1 million (65.7 per cent) to $96.3 million, and public corporations’ by $207 million (71.5 per cent) to $82.4 million.
“Net of refinancing activities, at end-2015, the public debt service to exports ratio rose by 0.8 percentage points to 5.6 per cent, while the ratio of government’s debt service to total revenue narrowed by 1.1 percentage points to 5 per cent.”
Comments
John 8 years, 3 months ago
The Bahamas is in very close proximity, economically, to where Puerto Rico is: BANKRUPT! Puerto has a national debt of $70 billion and a population of 3.5 million people. The Bahamas has a national debt of $6.8 billion so technically each man, woman and child in the Bahamas owes nearly as much as each Puerto Rican does and their country is bankrupt and seeking for the US government to bail them out. Who will stand for the Bahamas and what will be the consequences on our sovereignty and the value of our dollar? What about the standard of living and the availability of goods and services. Venezuela a flourishing, oil rich nation only a few years ago cannot feed its people. A burger costs $170 if you use a US credit card and people are reportedly hunting stray dogs and cats for food to avoid starving
John 8 years, 3 months ago
Puerto Rico $70 billion to a population of 3.5 million. equals $20,000.00 per person owed. Bahamas with $6.8 billion debt and .35 million people equals $19,428.57 owed by each Bahamian.
observer2 8 years, 3 months ago
Very good point John. I've attached a graph of a representative Puerto Rico Government Bond which shows that the prices declined from 100 cents on the dollar to 60 cents on the dollar and they have stopped paying on the debt.
I would suggest that the Bahamian government devalue the currency while they still have time. All of the B$ debt is owed to Bahamians so it would not impact foreigners, which seems to be all we care about these days.
Moving into election mode the government will now need to inject a lot of debt spending into the economy to secure another 5 year term. They have a good chance of winning as the opposition is in disarray.
VAT has caused a spike in Bahamian inflation which Bahamian are cutting expenditures where they can to balance their personal budgets.
observer2 8 years, 3 months ago
http://tribune242.com/users/photos/2016…
sheeprunner12 8 years, 3 months ago
Yep ............ we have many countries around us as perfect examples of independence-gone-bad (Haiti as #1) .......... and what can Perry tell us he borrowed this money to do ......... and what can he show as the tangible outcomes of this borrowing??????? ....... no local investment schemes, no new schools, no new roads, no new airports, no new docks, no new island government complexes, no new potable water, no urban transport system, no urban/inner-city redevelopment, no downtown redevelopment, no new sports complexes, no new BEC generators, ....................... a few new boats and planes????? ........ BAMSI, BPL, RESOLVE, RENEW, Carnival, IAAF track & Popeyes football, and many "task force studies, reports and conventions" ?????? ........... FLUFF for $2 Billion
asiseeit 8 years, 3 months ago
1.6 BILLION and nothing to show for it except some very happy PLP crony's!
John 8 years, 3 months ago
How Much Is The World In Debt? "I don't know what criteria the authors used to define 'debt', but the total unfunded liability of the US Federal government alone is somewhere on the order of 130 to 140 trillion dollars when all entitlement spending obligations are considered (give or take a few trillion). World debt comparison: The global debt clock | The Econo www.economist.com/content/global_debt_c… Search for: How Much Is The World In Debt? What country has the least amount of debt? Saudi Arabia was ranked at the bottom of the list, with US$87.7 billion (A$99.5 billion), which represents 12.2% of its GDP. The highest debt as a proportion of GDP was Japan, with 226.1%, which means that the country's national debt of US$11.3 trillion (A$12.9 trillion) is more than double what it made for the year."
viewersmatters 8 years, 3 months ago
hey everybody lets celebrate junkanoo carnival watch the Government spend up all of the Bahamian money and lets dance around and jump for joy lets continue to watch the Government increase our national debt and be happy about it.......what we asked for is what we got make no since heading our heads now we the people supported the Government in their wrong doing instead of standing as a nation and saying enough is enough we stood by their sides laugh with them drink a few cups eat some steak and now this happen
Sickened 8 years, 3 months ago
What is scariest to me is that a few of the well educated people that I know still claim to be PLP supporters. HOLY SHIT!!!
I acknowledge that it is difficult to support the FNM... but to support the PLP, at this time, is TRULY mind boggling**.
proudloudandfnm 8 years, 3 months ago
With VAT and all the new fees and levies?!?!?!?!?
What are these MORONS doing with our money?!?!?
We have never been this taxed in our history!
All the PLP has done since getting into office is add new taxes and fees. Shipping costs have gone thru the roof because of the new fees.
What are these amateur MORONS doing with our money?!?!?
Economist 8 years, 3 months ago
The last FNM government may have spent money, but at least it was for infrastructure (roads) that has a lasting tangible economic effect.
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