The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Ministry of Finance's top official yesterday said the Government's financial performance over the next two months is "critical" to setting the foundation for a 2023-2024 fiscal year in which the deficit is forecast to be cut by 78 percent.

Simon Wilson, the financial secretary, told Tribune Business that hitting target for the current 2022-2023 Budget period will set "a good platform" for an upcoming 12 months in which the deficit is presently forecast to shrink to $125.3m from this year's $575.4m.

"It comes down to our performance. We have two months left in this fiscal year, which are critical," he said. "Our performance for the next two months will influence what happens in the next fiscal year. It will be a good platform for us to move forward. It's a big year." Successive governments have typically seen deficits spike towards the end of the fiscal year when departments, agencies and ministries present bills for payment that the Ministry of Finance knew nothing of.

Mr Wilson spoke after the Government's latest public debt statistical bulletin, covering the three months to end-March 2023, revealed that The Bahamas' total debt had increased by $137.6m or 1.1 percent for the period to $12.517bn. Over the prior nine months, it had risen by $386.1m or 3.2 percent since June 2022.

Despite the increase, the proportion of foreign currency-denominated debt has started to slowly decline, according to the report, while the interest rates on The Bahamas' issued and outstanding foreign currency bonds have also stabilised at just over 7 percent. Mr Wilson said the latter development is "very important" and will "help us a lot", as credit rating agencies such as Moody's and Standard & Poor's focus heavily on sovereign debt costs in the secondary market.

"Debt denominated in foreign currency, at $5.646bn, equated to 45.1 percent of the total debt, declining steadily from the peak 46.2 percent proportion held at end-June 2022," the debt report said. "Bahamian dollar debt registered a quarterly increase of $144.1m (2.1 percent) to $6.871bn for a leading 54.9 percent of the total compared with 53.8 percent at end- June 2022.

"Quarterly variations in the debt stock were almost equally distributed between debt operations of the central government and the agencies and government business enterprises, which grew by $68.1m (0.6 percent) and $69.5m (5.2 percent), respectively, since end-December 2022."

As for debt servicing, the report said: "Debt service costs during the review quarter were estimated at $882.9m for an aggregate $2.419bn over the nine months to March 2023. Consistent with the central government’s debt profile, approximately 70.6 percent of the recent quarterly costs represented Bahamian dollar payments, with the balance (29.4 percent) covering foreign currency liabilities.

"Of the $687.1m (78.2 percent) in principal payments, almost 80 percent was in Bahamian dollars. Meanwhile, 62.5 percent of the $190.5m (21.8 percent) in interest payments met foreign currency obligations, and the remaining 37.5 percent was incurred on Bahamian dollar debt."

While the Government has a significant amount of debt maturing in the short-term, with $1.438bn in domestically-held securities and $109.8m of external repayments due before end-June 2023, Mr Wilson said there was "no concern" over the appetite and willingness of investors to roll this over.

"The debt redemption profile for the balance of fiscal year 2022-2023 and first quarter of fiscal year 2023-2024 reflect reissuances of Treasury bills ($899.5m), Treasury notes ($97.1m) and Central Bank advances ($332.5m). The large increases in external payments for fiscal year 2023-2024 and fiscal year 2028-2029 are central Government’s bond maturities..... for which the Government intends to address through appropriate liability management exercise," the report said.

"Across the maturity spectrum, the longer maturity and amortising profile of the multilateral and bilateral credits providing some smoothing to the external bond maturity patterns. Domestic redemptions reflect the preponderance of bond issuances, which are typically refinanced upon maturity."