The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

More than one-third of the Government’s domestic debt holdings, equivalent to around $2.3bn, is due to mature within the next year as it moves to eliminate “spikes” in principal redemption that place undue strain on its finances.

The Ministry of Finance, in its public sector debt bulletin for the nine months to end-March 2022, said of its debt portfolio: “The average time to maturity (ATM) was 6.8 years at end-March 2022. An average 23 percent of the portfolio was coming due in one year, given the impact of the short-term nature of Treasury bills and notes which extended the percentage of the domestic debt maturing in one year to a high of 35.5 percent.

“By comparison, only 7.7 percent of the external debt is due to mature within one year.” The report shows that some $1.281bn in Bahamian dollar-denominated debt is due to mature, or come due for repayment, between April and June 2022, with a further $1bn set to be repaid next year.

The Government has given no indication that it will struggle to meet these obligations, and they will likely be refinanced or rolled over with existing creditors. “The distribution of public debt forecasted redemptions through 2032 continue to be shaped by the dominant portfolio of domestic bonds,” the Ministry of Finance report added.

“These bonds are primarily held by commercial banks, public corporations and institutional investors, and private individuals, who tend to maintain these investments amid the lack of readily available alternatives. The debt redemption profile featured a spike in domestic debt in 2023 and in external repayments in 2024 and again between 2027 and 2032, reflecting the scheduled maturity of various international bond issues.

“The Government intends to smooth out these spikes through appropriate liability management initiatives.” Once past 2023, the Government’s domestic debt repayment obligations ease considerably. Still, the combined sum set to mature in 2022 and 2023 is greater than the $1.877bn that will come due for repayment over the decades between 2033 and 2065.

“At end-March 2022, domestic debt stood at $5.8bn or 55.1 percent of the central Government’s total exposure for a net decline of $174m from the preceding quarter,” the report said. “The stock comprised net repayments of internal foreign currency debt to commercial banks ($63.5m), Central Bank advances ($60m), local currency commercial loans ($29.2m) and Treasury notes ($36.1m), plus a net bond issuance ($14.9m).

“Commercial banks were the largest domestic creditors, with loans and holdings of government securities aggregating $2.449bn or 42.2 percent of the total at end-March 2022. Credit sourced from the private sector via investments in government securities amounted to $2.298bn (39.6 percent), and debt held by the public corporations of $521.7m represented 9 percent of the total.

“Reflecting a quarterly net reduction of $87.3m, the Central Bank‘s credit position of $529.7m equated to 9.1 percent of the total domestic debt - down from 10.3 percent at end-December 2021. The interest rate pattern of domestic debt continued to reflect the Government’s strategic shift to fixed rate liabilities, in an effort to better manage interest rate risk.

“In this context, the fixed rate component of the domestic debt increased slightly to 59.4 percent at end-March 2022, with an equivalent decline in the variable rate component to 40.6 percent.”