National debt reaches over $8 billion

National debt reaches over $8 billion
The Central Bank of The Bahamas logo.

The Bahamas’ national debt, as of the end of 2018, stood at $8.2 billion, according to information provided by the Central Bank of The Bahamas.

In the last five years, the country’s national debt has grown by near $2 billion, the Central Bank’s Quarterly Statistical Digest (QSD) shows.

National debt, including contingent liabilities — both Bahamian and foreign currency claims on public corporations guaranteed by the government — increased by over $353 million last year, totalling $8.219 billion by the end of 2018.

The country’s debt to GDP ratio was not stated for the end of 2018 in the report.

The debt to GDP ratio moved from 59.6 per cent at the end of 2016 to 64.8 per cent at the end of 2017. It was previously reported the debt to GDP stood at 67.8 per cent at the end of 2017.

At the end of 2017, national debt stood at $7.88 billion, up from the $7.05 billion at the end of 2016.

The government borrowed $750 million in an external bond last year for the purpose of meetings its fiscal obligations.

The government is expected to establish an independent fiscal council by June to address high government debt levels as well as fiscal imbalances.

The council was one of the recommendations of the Inter-American Development Bank (IDB).

In recent months, the Minnis administration has made strides to institute a legal framework of debt management and accountability of public funds through fiscal responsibility legislation.

During his recent mid-year budget communication in Parliament, Deputy Prime Minister and Minister of Finance Peter Turnquest announced that, following a reevaluation, the government’s revenue projections for this fiscal year, would become in short to the tune of $185 million.

He attributed this to lower than expected value-added tax (VAT) collections; the renegotiated tax scale of the gaming houses in The Bahamas, following months of negotiations; as well as the delay in the establishment of the Revenue Enhancement Unit.

That unit was projected to collect around $80 million incrementally.

However, Turnquest noted that expenditure was projected to be lower than originally budgeted for the fiscal period 2018/2019.

He said while the government increased spending in the first half of the fiscal year in comparison to the same period in the previous fiscal year, “total expenditure was both below the budgeted halfway mark, at 41 per cent and 42.4 per cent, respectively”.

The Central Banks stated in its Monthly Economic and Financial Developments (MEFD) for January 2019 that the country was continuing to experience modest growth this year, largely as a result of sustained gains in tourism, additional foreign investment-related activity.

The bank said the government’s success in reducing the deficit and gradually improving the debt indicators depend on the “effectiveness of the government’s measures to curtail expenditure growth and increase revenue”.

The report showed that for the first half of 2018/2019 the government reduced the deficit by $79.7 million (31.4 per cent), bringing the deficit to $174.2 million.

The Central Bank said this level was “relative to the comparable period of the previous fiscal year”.

Tax receipts increased $117.1 million to $902 million, which was directly the result of increased VAT collections following its hike from 7.5 per cent to 12 per cent last July and increased stamp tax revenue.