The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas’ national debt surged to just below $12bn at end-September 2024 with a corresponding rise in the debt-to-GDP ratio due to a $339m increase over the previous three months.

The Central Bank, unveiling its quarterly economic review for the 2024 fourth quarter, disclosed that both the national debt and direct charge on the Government increased slightly as a percentage of economic output compared to end-September 2023.

The direct charge, which represents the direct debt incurred by the Government, rose from 78.8 percent of GDP at end-September 2023 to 79.1 percent at the same point this year. And the national debt, which represents both the central government’s debt as well as that which it has guaranteed on behalf of state-owned enterprises (SOEs), climbed from 81.3 percent to 81.4 percent.

This is the first time that The Bahamas’ debt-to-GDP ratio has increased since the Davis administration took office. It has been trending downwards from the 100 percent threshold it struck in June 2021, when the national debt matched the size of the Bahamian economy post-COVID, but the economy’s subsequent re-opening and reflation has brought it back down.

The end-September 2024 reversal, though modest and by no means yet a trend, illustrates the extent of the national debt increase over the prior three months and the fact it outpaced economic growth. “The Government’s contingent liabilities reduced by $3.7m (1.1 percent ) over the September quarter, and by $23.4m (6.5 percent) on an annual basis, to $335.3m.

“Given these developments, the national debt - inclusive of contingent liabilities - rose by $338.8m (2.9 percent) over the three-month period, and by $418.9m (3.6 percent) year-on-year, to $11.992bn as at end- September 2024.

“As a ratio to GDP, the direct charge increased by an estimated 30 basis points on a yearly basis to 79.1 percent at end-September. Meanwhile, the national debt-to-GDP ratio held steady at an estimated 81.4 percent vis-à-vis the same quarter in 2023.”

Based on a Bahamas population of 400,000, the figures disclosed by the Central Bank reveal that the national debt is now the equivalent of $30,000 per person. “For the fiscal quarter ended-September 2024, the direct charge on the Government rose by $342.5m (3 percent) over the June quarter and by $442.3m (3.9 percent) year-on-year to $11.656bn.

“A breakdown by currency for end-September revealed that Bahamian dollar debt represented 52.9 percent of the total, while foreign currency liabilities accounted for the remaining 47.1 percent. A further disaggregation by creditor revealed that private (non-financial) and institutional investors held the largest share of local currency debt (41.6 percent), followed by banks (39.7 percent), the Central Bank (12.2 percent) and public corporations (6.5 percent).”

As for the Bahamian commercial banking industry, the Central Bank said its overall profitability for the 2024 second quarter breached the $100m mark driven by increases in non-interest income, which largely means fees, along with a drop in bad debt expense.

“During the second quarter of 2024, the latest period for which data is available, banks’ net income moved higher by $2m (2.1 percent) to $100.9m as compared to the same period of 2023, owing mostly to gains in other, non-interest income, and a reduction in bad debt expenses,” the Central Bank said. 

“The net interest margin rose by $2.8m (1.9 percent) to $150.5m, underpinned by a $3m (1.9 percent) uptick in interest income, which outweighed the $0.2m (2.7 percent) rise in interest expense. Further, interest from commission and foreign exchange fees increased by $0.8m (5.1 percent) to $17.3m, contributing to a $3.6m (2.2 percent) growth in the gross earnings margin to $167.8m.....

“Banks’ overall profitability ratio stabilised over the review quarter. As a percentage of average assets, the gross earnings margin stayed at 5.61 percent as the interest margin was approximately unchanged at 5.03 percent, while the commission and foreign exchange income ratio edged up by 1 basis point to 0.58 percent,” the banking sector regulator continued. 

“However, the net earnings margin fell by 51 basis points to 1.21 percent as the operating costs ratio rose by 50 basis points to 4.4 percent. Meanwhile, owing to increased contribution from other income sources and a decrease in bad debt expenses, the net income ratio was relatively stable at 3.37 percent.”

The Central Bank also disclosed signs of a healthier housing market for new construction and repairs based on the disbursement, or issuance, of mortgage financing for such projects. “During the third quarter, construction sector developments were undergirded by ongoing varied-scale foreign investment projects. Further, bank-financed domestic private sector activity strengthened relative to the same quarter in 2023,” the Central Bank said.

“As it pertains to the domestic component, total mortgage disbursements for new construction and repairs - as reported by banks, insurance companies and the Bahamas Mortgage Corporation - almost doubled to $43.1m relative to last year’s 3.3 percent uptick.

“Contributing to this development, residential disbursements grew further by 20.0 percent ($4.1m) to $24.8m, exceeding the 6.3 percent growth in the previous year. Moreover, commercial disbursements expanded $18.2m from just $1.3m in the year prior, a reversal from the 29 percent reduction in 2023,” the Central Bank added.

“Compared to the same period last year, total mortgage commitments for new buildings and repairs - a forward-looking indicator of domestic activity - expanded by 64 to 117, while the associated value rose by 88.7 percent to $35.1m.

“Disaggregated by loan category, the number of undisbursed approvals for residential commitments grew by 63 to 113, with a $13.4m (99 percent rise in the corresponding value to $27m. Further, the number of approvals for commercial commitments for new construction and repairs firmed to four from three, with the accompanying value higher by $3.1m (61 percent) at $8.2m relative to the preceding year.

“In terms of interest rates, the average financing costs for residential mortgages edged up by 10 basis points to 6 percent, vis-à-vis the same quarter in the previous year. Meanwhile, the average interest costs for commercial disbursements stood at 6.5 percent.”