NASSAU, BAHAMAS — Deputy Prime Minister and Minister of Finance K Peter Turnquest yesterday acknowledged that the country’s fiscal headroom is “narrowing” as it faces roughly $9 billion worth of debt.
Turnquest said it was “unfortunate but necessary” for the government to borrow $1.3 billion this fiscal year to mitigate the fall-out from COVID-19 on the heels of Hurricane Dorian.
He appeared as a guest on ‘The Political Review’ with Quincy Parker on Guardian Talk Radio.
“Unfortunately we find ourselves in a situation where we have roughly $9 billion dollars worth of debt,” Turnquest said.
“That means that our fiscal headroom is narrowing in that we could only afford to acquire so much debt before the financing cost of that debt becomes the most significant, dominant part of our budget, meaning we are working and collecting taxes only to pay interest on these loans.”
He said: “That means we all have to do our best to reduce the amount of expenditure, thus the amount we borrow but also that we are using whatever we are borrowing to produce a return. That is where we have been trying to place our attention.”
Turnquest noted government revenue is roughly $2 billion annually, adding that historically the country has not done a good job paying its debt, with significant roll-over among successive administrations.
The Central Bank reported that the government’s overall deficit widened sharply during the fourth quarter of fiscal year 2019/20, relative to the same period a year earlier.
The regulator said this was underpinned by revenue losses and increased spending for health and social welfare related to COVID-19, along with outlays for post-hurricane rebuilding works.
“Deficit financing was led by borrowings from external sources, and included a $250 million loan from the International Monetary Fund (IMF),” the bank added.