The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Bahamas’ national debt hit $7.882 billion at year-end 2017, coming close to the 70 per cent debt-to-GDP ‘danger threshold’ despite the upward revision to this nation’s GDP data.

The Central Bank of the Bahamas, in its quarterly economic review for the 2017-2018 fourth quarter, revealed that the country’s debt increased by almost $300 million during that three-month period despite the Minnis administration’s efforts to rein in the ‘red ink’.

The twin impacts of Hurricane Matthew and the Christie administration’s pre-election spending spree were also highlighted in the figures, which showed that the national debt had increased by $832 million during the 2017 calendar year. “The national debt, which includes contingent liabilities, rose by $294.5 million (3.9 per cent) over the three-month period, and by $831.9 million (11.8 per cent) on an annual basis, to $7.882 billion at end-2017,” the Central Bank said.

“In addition, the national debt-to-GDP ratio was estimated at 66.8% per cent at end-December, reflecting a gain of one percentage point over the three-month period and an increase of 4.2 percentage points year-on-year.”

This puts the Bahamas’ debt-to-GDP ratio back close to the so-called 70 per cent ‘danger threshold’ identified by the International Monetary Fund (IMF), notwithstanding the upward revisions to Bahamian economic output by the Department of Statistics - which has helped to keep the fiscal ratios in check.

Debt ratios that go above 70 per cent can lead to so-called ‘debt spiral’ recently identified by K P Turnquest, Deputy Prime Minister and minister of finance, where a nation’s debt can feed on itself in the form of ever more borrowing merely to serve existing interest payments.

Elsewhere, the Central Bank said there were “signs of modest improvement” in the domestic market for private sector construction “after a sluggish performance for almost a decade”.

“Total mortgage disbursements for new construction and repairs—as reported by commercial banks, insurance companies and the Bahamas Mortgage Corporation—grew by 44.3 per cent to $28.9 million, a turnaround from the prior year’s 39.9 per cent reduction,” the Central Bank.

“The dominant residential component rose by 38.9 per cent to $27.8 million, in contrast to a 35.5 per cent decline in 2016. Further, funding for commercial developments totalled $1.1 million, after registering no disbursements a year earlier.”

The Central Bank added: “Expectations are that activity in the domestic economy will continue to improve over the near-term, as mortgage commitments for new buildings and repairs - a forward looking indicator - rose in number by 37 to 146, but fell in value by 7.7 per cent ($1.2 million) to $14.2 million.

“This outturn reflected solely growth in the residential segment, as there were no new commercial commitments approved during the review period.”