The Tribune

By FAY SIMMONS

and NEIL HARTNELL

Tribune Business Reporters

A United Nations (UN) foreign debt specialist yesterday disclosed that The Bahamas is still paying off borrowings related to three post-hurricane restorations with the country facing “almost unbelievable pressure” from climate change.  

Attiya Waris, who also specialises in the areas of “international financial obligations” and human rights, speaking at the end of her ten-day visit to The Bahamas said this nation faces a recurring cycle of paying off hurricane-related debts only to have to repeat this process when a new storm strikes due to the increasing severity and frequency of such catastrophes.

She also pointed out that 19.9 percent of the 2023-2024 Budget’s recurrent (fixed cost) spending, or $1 out of every $5 expended, is allocated to servicing The Bahamas’ $612.726m interest bill on its $11.5bn national debt. And, with subsidies to loss-making state-owned enterprises (SOEs) consuming another 13.2 percent or $408.098m, more than one-third or $1 out of $3 spent - some $1.02bn - is being consumed by these two areas alone.

Ms Waris contrasted this with just 7.7 percent of the 2023-2024 Budget, or $236.538m, being spent on “social benefits”. This sum is equivalent to just 38.6 percent of what the Government is paying in interest (debt servicing) costs, and 58 percent of subsidies to loss-making SOEs. And it is less than one-quarter, or 23 percent, of the total $1.02bn being allocated to combined debt servicing and subsidies.

The UN debt specialist also noted that, despite ranked as having the highest income (gross domestic product) per capita in the region, The Bahamas has a 0.812 human development index score that ranks it below countries with lower economic output because of the “extremely high” cost of living in this nation.

Affirming that The Bahamas is almost trapped in a debt cycle due to the damage inflicted by severe, and more frequent, hurricanes, Ms Waris said the Government is currently paying off debts incurred to cover relief, restoration and rebuilding costs after three major hurricanes.

“You are also, as a country, very dependent on tourism. Unfortunately, you have had five hurricanes in the past ten years. The data that I have seen, which the Government has been very kind to share with me, is that the Government is still paying off debt for three hurricanes as we speak, and they just paid off a fourth one,” she added.

“So this is creating a cycle where you recover, partially rebuild, take on debt, but then in comes another hurricane, and you’re still paying off the previous hurricane and you’re rebuilding again. And what that means is countries like yours that are at a high threat of climate risk are unable to actually develop and move forward. And the thing is, The Bahamas is paying off its debt despite this almost unbelievable pressure of climate change on it.”

Ms Waris, in her report, implied that The Bahamas’ growing debt burden is increasingly sucking monies away from national security, public and social services to the detriment of the Bahamian people. “According to the latest 2023-2024 Budget, 19.9 percent of the Bahamas’ recurrent expenditure in 2023-2024 will go to repay interest on public debt, 13.2 percent to subsidies and only 7.7 percent to social benefits,” she said.

Further, some “16.52 percent of public debt interest repayments will go to non-residents (these include both institutional creditors – in particular the Inter-American Development Bank – as well as private financial institutions and bondholders),” Ms Waris added.

“Notwithstanding the severe dependence on tourism, the devastating consequences of Hurricane Dorian and the impact of COVID-19, Bahamians have shown great resilience, managing to inverse the curve and start decreasing the levels of public debt since 2022.

“Faced with the problems of internal inequalities, disparity between cost of living in The Bahamas compared to most other countries within the region, and with the disparity between its GDP and its human development index, The Bahamas classification as a high income country limits its access to international financial institutions and international development aid, having no choice but to acquire loans at higher rates, shorter terms and less favourable conditions in the private international bond market.”

Ms Waris agreed that the use of GDP, or income, per capita is a misleading indicator that is being used by multinational lenders to deny The Bahamas access to cheaper grants and other forms of concessional funding. The Government itself has been fighting against this, thus far without success, for the past two decades at least.

“Being designated as a high income country, The Bahamas does not generally qualify for development assistance and has very limited access to concessional funding by international financial institutions such as the World Bank,” the UN specialist wrote. “Despite a high GDP per capita, of $31,458, the cost of living is extremely high in The Bahamas.....

“The minimum wage is $260 per week, which is equivalent to $13,556 per year. As a consequence, despite having the highest GDP per capita in the region, The Bahamas has a Human Development Index of 0.812, below other countries with much lower GDP.”

Referring to The Bahamas’ blacklisting by the European Union (EU), Ms Waris said such blocs and bodies are often slow to remove countries once they have remedied the alleged weaknesses or deficiencies. She added that her independent assessment of the reforms implemnted by countries such as The Bahamas will be presented to the Human Rights Council next March, with recommendations for or against escape from these blacklists.

“I think it’s important to try and understand how long the country should be on a blacklist when it has achieved what it’s supposed to achieve, and therefore when it should come off the blacklist,” Ms Waris added.

“And one of the problems I’ve seen in global activities... is countries or regional blocs are quick to make one action of putting countries on lists, but are not as quick to remove them off the lists, which is why my assessment is to check and see if they have achieved it. And if they have that is what I recommend.

“I expect to get the remaining data over the next couple of weeks, which is why my final report will be in March 2024 when I present it to the Human Rights Council. And that is when I will be able to say definitively that, yes, The Bahamas has completed all the things it was required to do in order to return back into the traditional financial system and not be blacklisted any more.”

Ms Waris added that The Bahamas still has not implemented a National Development Plan, a National Human Rights Institution or finalised the Ombudsman Bill, and called for them to be “strengthened and taken forward”. However, she praised this nation for passing new legislation while strengthening other existing laws, adding that there has been “a good roll-out”.

Ms Waris added: “I would like to call upon the international community to step up their assistance and support for The Bahamas, and other small island states, that are the high risk of natural disasters due to climate change.

“The Bahamas needs long-term financing, planning to address its climate vulnerability and economic dependence on tourism. And it is very important that the high income status which is limiting the access of The Bahamas to international financial institution concessionary rates, as well as development aid, should be opened up.

“The reality is that the international community’s assistance and support could go a long way in helping this country improve its already very positive efforts.”