National debt just under economy’s size at 98.4%

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas’ national debt was just less than the size of the economy at end-September 2021 after increasing to almost $10.5bn over the previous three months, it was revealed yesterday.

The Central Bank’s 2021 third quarter review revealed that the debt expanded by a net $132.2m, or 1.3 percent, during that period to take the Government’s total debt - both it direct liabilities and those guaranteed on behalf of state-owned agencies - to a new high of $10.488bn.

However, the slower pace of debt increase, coupled with increased economic activity as The Bahamas continued its post-COVID re-opening, grew gross domestic product (GDP) just enough to ensure the latter was marginally bigger than the national debt.

The Bahamas’ debt-to-GDP ratio dropped from 100.4 percent at end-June 2021 to 98.4 percent some three months later, according to the Central Bank, but still at an elevated level that continues to give the Government and many citizens/residents much cause for concern.

“The national debt, inclusive of contingent liabilities, expanded by $132.2m (1.3 percent) over the three-month period, and by $1.141bn (12.2 percent) on an annual basis to $10.488bn,” the Central Bank report said.

“As a ratio to GDP, the direct charge rose by an estimated 4.6 percentage points on a yearly basis to 94.4 percent at end-September. In addition, the national debt-to-GDP ratio increased to an estimated 98.2 percent compared to 94.3 percent in the same quarter of 2020.”

Breaking down the 2021 third quarter increase in the national debt, the Central Bank added: “Budgetary financing during the first quarter of fiscal year 2021-2022 was dominated by domestic sources. Specifically, internal borrowings amounted to $473.8m, and consisted of Treasury bills/notes ($265m); loans and advances ($160m) and government bonds ($48.8m).

“Further, drawdowns on existing external facilities totalled $23.7m. Debt repayment for the period totalled $342.9m, of which the largest portion (89.3 percent) went towards retiring Bahamian dollar debt. As a result of these developments, the direct charge on the Government rose by $151.6m (1.5 percent) over the quarter and by $1.183bn (13.3 percent) year-on-year to $10.087bn at end-September.”

Bahamian dollar-denominated debt, the Central Bank added, accounted for 55.1 percent of The Bahamas’ total national debt while foreign currency liabilities made up the balance at around 44.9 percent.

“Public sector foreign currency debt declined by $37.5m (0.7 percent) to $5.053bn during the third quarter, but rose by $904.5m (21.8 percent) relative to the same period last year,” the Central Bank said. “In particular, amortisation payments of $59.1m outweighed new drawings of $24.6m.

“By component, the Government’s outstanding liabilities - which accounted for 89.7 percent of the total - decreased by $15.8m (0.3 percent) to $4.533bn on a quarterly basis. In addition, the public corporations’ debt stock reduced by $21.7m (4 percent) to $520.3m.

“Relative to the same quarter of 2020, total foreign currency debt service payments contracted by $298.8m (76.4 percent) to $92.1m,” the regulator continued. “Contributing to this outturn, the public corporations’ segment declined significantly by $237m (88.5 percent) to $30.8m, with amortisation payments reducing sharply by $235.4m (91.2 percent) to $22.6m, while interest payments fell by $1.6m (16.5 percent) to $8.2m.

“Similarly, the Government’s debt component moved lower by $61.8m, as amortisation payments contracted by $66.3m (64.5 percent) to $36.5m, although interest charges rose by $4.5m (22.4 percent) to $24.7m.

“As a consequence of these developments, the Government’s debt service to revenue ratio decreased to 10.7 percent at end-September from 40.9 percent in the previous year, while the debt service ratio narrowed to 9.5 percent from 70.3 percent in 2020, when exports contracted sharply due to COVID-19.”

Elsewhere, tourism’s post-COVID rebound resulted in a $700m-plus increase in net travel receipts in the 2021 third quarter as it was up against a year-before period when the sector was virtually shutdown.

“The services account position switched to an estimated surplus of $399.2m from a deficit of $188.5m in 2020,” the Central Bank said.

“Leading this outturn, the dominant net travel receipts - largely tourism driven - recovered to $752.3m from $46.5m in the same period last year, as the sector output registered a healthy rebound, following the COVID-19 related fall-off in the preceding year.”

Comments

licks2 says...

One international financial giant said: "any politicia or financial guru" who taks about large national depts as the mark of that nation's strenght is a fool and do not understand how international money works!! For example, none of the economic giants are under 100% of GDP. . .een been there for multiple decades and never intend to get under them. . .in fact that is not how the G20 measure health of economies!!

Posted 10 December 2021, 3:47 p.m. Suggest removal

LastManStanding says...

I whole-heartedly agree that we are all just playing pretend with our modern economic system, as no nation is ever going to pay their debt off, but the key difference between us and the first world countries with regards to debt is why it is taken on. First world countries will assume debt to invest into public infrastructure, development programmes, and such areas that will produce a benefit for them. The Bahamas takes on debt to pay government worker salaries. We literally get no benefit from the debt that we take on.

We are like an unemployed single mother that pays all her bills with a credit card (and somehow gets the limit upped regularly), while the first world countries are the responsible adult that takes out a loan to buy a home or invest into a business.

Posted 10 December 2021, 8:07 p.m. Suggest removal

Maximilianotto says...

Small difference - industrial efficient countries with high levels of education can cope easily with 100% debt to GDP, but very challenging for a small tourism dependent country with overvalued local currency….and 90% grade D population-we will know soon how $2bn+ will be repaid/refinanced next year and if - at which interest rates. The financial markets will decide.

Posted 10 December 2021, 6:59 p.m. Suggest removal

Proguing says...

I remember the good old days when there was no VAT and the national debt was below 50% to GDP. But then our politicians declared that we needed to pay back our debt and introduced VAT. Oh the irony!

Posted 11 December 2021, 9:53 a.m. Suggest removal

sheeprunner12 says...

You are not taking into consideration the 2000 and 2008 financial crises and the Dorian/Covid whammy ........ Then the four "five year election cycles" that tried to spend or teef their way in or out of power

The Bahamas is at the point of no return to the "good ole days" (pre-2000)

Posted 11 December 2021, 10:34 a.m. Suggest removal

ThisIsOurs says...

They collected a billion in VAT in 2015. THEY were surprised. And immediatrly they started spending what we didnt have and dug us an even deeper hole, before Dorian

Posted 11 December 2021, 4:32 p.m. Suggest removal

GodSpeed says...

Every nation is submerged in massive debt, it can't go on forever. A collapse of this monetary system is inevitable. Better own Gold.

Posted 11 December 2021, 11:32 a.m. Suggest removal

Proguing says...

Not true, there are many nations with low government debt, Russia, Chile and Switzerland for example

And of course the model country that we should follow:

"Moody's expect Cayman's government debt will reach 9% of GDP in 2022"

https://finance.yahoo.com/news/cayman-i…

Posted 12 December 2021, 11:06 a.m. Suggest removal

sheeprunner12 says...

Cayman is not a country. It's UKs offshore tax haven

Posted 12 December 2021, 1:47 p.m. Suggest removal

Proguing says...

Yep this shows the consequences of independence...

Posted 12 December 2021, 8:37 p.m. Suggest removal

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