The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Total public sector debt fell by $93m during the first quarter of the 2023-2024 fiscal year, it was disclosed yesterday, cutting it slightly from its June peak as the foreign currency share fell by 1.5 percentage points.

The Ministry of Finance’s quarterly public debt statistical bulletin, covering the three months to end-September 2023, suggested that further growth in the Government’s debt burden had been contained over the period with the economy’s continuing post-COVID rebound helping to lower the debt-to-GDP ratio to 80.4 percent over the period.

The central government’s direct debt also declined by $45m during the 2023-2024 fiscal year’s first quarter, lowering slightly to $11.215bn, although some $3.257bn in maturing debt has to be refinanced in the nine months between October 2023 and June 2024. Included in that sum is a $300m foreign currency bond issue held by external investors.

“Outstanding debt of the public sector was estimated at $12.556bn at end-September 2023, a decline of $92.9m (0.7 percent) from end-June 2023 and a $453.8m (3.8 percent) increase since end-September 2022,” the report said.

“Foreign currency debt was lower by $182.6m relative to the previous quarter and constituted 44.6 percent of the total portfolio—an almost uninterrupted quarterly reduction from the 46 percent posted at end-September 2022.

Since end-June 2023, the Bahamian dollar component grew by $89.7m (1.3 percent), and the share in total debt firmed by 1.4 percentage points since end-September 2022 to 55.4 percent. Movements in the public debt stock vis-à-vis end-June 2023 were due to almost equal net repayment positions for both government and agencies and GBEs (government business enterprises).”

Despite the modest reduction in the Government’s outstanding debt, the interest burden associated with it continues to suck large sums of money away from the provision of public services such as health, education, social services, the police, Defence Force and other national security agencies.

“Debt service costs totaled an estimated $830.7m for the first quarter of fiscal year 2023-2024, a reduction of 7.4 percent from the June 2023 quarter but nearly 58 percent above the outlays in the corresponding period of the prior year,” the Government’s debt bulletin said.

“Reflecting the central government’s debt profile, 73 percent of the aggregate costs was on account of Bahamian dollar obligations with the remaining 27 percent attributed to foreign currency liabilities. Of the $698.9 million in principal payments (84.1 percent of the total cost), a dominant 75.6 percent was in Bahamian dollars and reflected the Government’s domestic securities issuance programme.

“Interest costs of $131.8m (15.9 percent of the total) were split between Bahamian dollars (59.3 percent) and foreign currency (40.7 percent) components.” The Government also has to contend with significant refinancing needs over the next nine months as existing domestic and foreign securities mature.

“The debt redemption profile for the balance of the fiscal year includes reissuances of Treasury bills ($1.054bn), Treasury notes ($76.9m) and Central Bank advances ($337.5m), and the $300m external bond maturity,” the Government’s debt bulletin added.

“The pattern of external payments primarily reflects the incidence of central government’s bond maturities, with the domestic evolution similarly tracking government’s domestic bond redemptions. Across the maturity spectrum, the longer maturity and amortizing profile of the multilateral and bilateral credits continue to provide smoothing to debt operations.”

As for the Government’s direct debt, the report added: “The central government’s debt outstanding stood at an estimated $11.215bn at end-September 2023, down $45.5m (0.4 percent) since end-June 2023 and a gain of $437.8m (4.1 percent) over end-September 2022 (see Table 1).

“Reflecting the continuation of favourable economic conditions, outstanding debt improved to an estimated 80.4 percent as a proportion of nominal GDP from 82 percent for the June 2023 quarter and 86 percent a year earlier.” While the Government’s foreign currency debt enjoyed a $165.6m net decline during the 2023-2024 first quarter, the domestic component rose by $120.1m.

“Implementation of the Government’s debt management strategy to contain interest rate risk was observed in a further firming of the share of domestic debt contracted at fixed rates by 2.6 percentage points at 65.9 percent at end-September 2023. Correspondingly, there was an equivalent contraction in the variable interest rate debt share to 34.1 percent,” the debt report added.

“At end-September 2023, debt outstanding for agencies and government business enterprises was estimated at $1.342bn corresponding to a net repayment of $47.4m (3.4 percent) relative to end-June 2023 but a firming of $16m (1.2 percent) over the comparative period in the prior year.

“The $988.1m in domestic indebtedness constituted 73.7 percent of the portfolio at end-September 2023. Meanwhile, the Bahamian Dollar component declined by $36.6m (3.9 percent) to $895.1m, which represented 66.7 percent of the total.

“With approximately $92.8m of domestic debt denominated in foreign currency, total foreign currency indebtedness amounted to $446.5m or 33.3 percent of the total portfolio.”