NASSAU, BAHAMAS — A former finance minister yesterday warned that the country is on an “unsustainable” path of borrowing foreign currency to pay foreign currency debt, telling Eyewitness News that more focus should have been placed on plugging this loophole.
James Smith told Eyewitness News: “This was an extraordinary year given the pandemic and the impact it had on the local economic activity. We are behind on our foreign currency inflows because tourism has been down for a year. We have been borrowing foreign currency and at some point it becomes more expensive or, God forbid, it may be denied.
“I would have thought government would have focused more on that and a plan to deal with that. What we are doing now is borrowing in foreign currency to pay foreign currency debt and that is unsustainable.”
Smith added: “That is crucial to the economic sustainability of The Bahamas because the peg of the one-to-one relationship with the US dollar is basically what we survive on as an economy with our proximity to the US and appetite for imports.
“I think more focus should have been directed at how. [to] plug this loophole without continuous borrowing foreign debt, whether sale of government assets or some other measure. This is something that is going to be an Achilles heel for budgets in The Bahamas over the next few years.”
Dr Hubert Minnis tabled a resolution in the House of Assembly on Wednesday revealing the government’s intention to borrow $871,645,371 million in the 2021/2022 fiscal year.
Minnis also tabled a second resolution to borrow $115,247,319.15 for the mitigation and treatment of COVID-19; to support the Public Hospitals Authority’s modernization of the health system; and to incentivize medium and small businesses.
Smith noted: “We were doing bad before the pandemic. We were not able to keep the debt under control. At least at that point, the foreign component was manageable. We will see what we are facing when we go back to borrow later this year. We are already borrowing at nine percent.”
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