By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Total Bahamian public sector debt grew by $312.8m over the previous year to exceed $13bn at end-December 2024, it was revealed yesterday, “driven” almost entirely by central government borrowing.

The Ministry of Finance’s public sector debt bulletin for the 2024-2025 fiscal year’s second quarter and first six months revealed that the central government accounts for $11.749bn, or the majority, of those liabilities with its own indebtedness having expanded by $92.4m or 0.8 percent in the three months to year-end.

However, The Bahamas’ debt-to-GDP ratio reduced slightly despite the increased borrowing, falling from 79.5 percent at end-September 2024 to 79.2 percent when the 2024-2025 second quarter closed. The report also disclosed that government business enterprises (the former state-owned enterprises) and agencies were also reducing their debt, in contrast to the central government, via “net repayment positions”.

The Ministry of Finance, meanwhile, reiterated that the Government is still exposed to significant rollover or refinancing risk given that more than 25 percent, or one quarter, of its debt portfolio is due to mature during 2025.

Some $2.58bn, of which 90 percent is held by Bahamian investors, is due to mature over the nine months between October 2024 and end-June 2025. This debt will have to be refinanced via the issuance of new bonds, Treasury Bills or other securities, which exposes the Government to the potential - though unlikely at present danger - that a major investor may elect not to rollover and demand repayment of its principal.

“The average time to maturity (ATM) stabilised to 6.13 years over the recent two quarters. By end-December 2024, 26.78 percent of the debt portfolio was due to mature in one year compared with 27.45 percent in the prior quarter,” the Ministry of Finance said.

“The proportion of external debt maturing within one year receded to 7.76 years, while net issuance of longer dated maturities reduced the internal component to 41.5 percent from 43 percent in September 2024... Debt forecasts incorporate reissuances of Treasury bills ($1.222bn), Treasury notes ($33.8m) and Central Bank advances ($331m).

“Outcomes on both the external and domestic debt primarily reflect central government’s bond maturities. Across the maturity spectrum, the longer maturity and amortizing profile of the multilateral and bilateral credits continue to provide smoothing to debt operations.”

The Government’s key financing transaction during the 2024-2025 second quarter was its much-heralded debt-for-nature swap, whereby it used a $300m foreign currency bank loan from Standard Chartered to pay off more than $218m in outstanding bond debts. The interest savings generated by the cheaper bank loan will be directed to enhanced conservation and management of marine ecosystems.

“External operations were highlighted by the Government’s refinancing of $300m of its debt, comprising $218.1m in eurobonds repurchased via a public tender offer and $81m in commercial bank debt. This liability management exercise was financed through a new $300 commercial loan,” the Ministry of Finance report said.

“As a consequence, the exposure to capital markets was reduced by 3.6 percentage points to 45.7 percent, while that to financial institutions firmed by 3.9 percentage points to 29.4 percent.” Interest rates on the Government’s outstanding foreign debt were also impacted by the Standard Chartered transaction and debt-for-nature swap.

“Since end-September 2024, the weighted average interest rate (WAIR) on the debt stock declined by 18 basis points to 5.65 percent at end-December 2024,” the Ministry of Finance said. “The WAIR on external bonds was slightly higher at 7.39 percent, while the external loan measure was reduced by 41 basis points to 6.58 percent.

“The new $300m loan benefited from a comprehensive guarantee package comprising $200m from the Inter-American Development Bank, $70m from Builders Vision and $30m in credit insurance from XL. The WAIR on domestic loans eased by 34 basis points to 4.36 percent, attributed in part to lower costs associated with Central Bank advances to the Government. Meanwhile, the WAIR on domestic bonds was slightly lower at 4.62 percent.”

Assessing The Bahamas’ total debt, the Ministry of Finance added: “At end-December 2024, the public sector debt stock was estimated at $13.15bn for respective increases of $81.3m (0.6 percent) and $312.8m (2.4 percent) over end-September 2024 and the year-earlier comparative period.

“Gains in the outstanding debt continued to be driven by the central government’s net financing activities, in contrast to the net repayment positions for agencies and government business enterprises. Foreign currency indebtedness decreased by $133.4m (2.3 percent) during the review quarter, with the annual decline more than halved at $56.5m (1 percent). The outstanding balance accounted for a reduced 43.5 percent of the total, compared with 45 percent in the previous year.

“Quarterly growth in the Bahamian dollar component reached $214.7m (3 percent), elevating the aggregate gain to $369.3m (5.2 percent). Correspondingly, the share of Bahamian dollar liabilities advanced by 1.3 percentage points to 56.5 percent of the outstanding debt.”

As for debt servicing costs, the Ministry of Finance added: “Quarterly debt service costs of $1.542bn exceeded the prior quarter by $930.2m (152.1 percent), and by a more moderate $176.4m (12.9 percent) compared to the same period a year earlier. Outcomes continued to reflect the timing of the central government’s debt amortisations, which included an international bond buy-back transaction.”