By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday said to be within its legal borrowing limits despite increasing its reliance on short-term Central Bank advances by $140m, or 72 percent, during 2024.

The Central Bank, in unveiling its 2024 annual report and financial accounts, revealed that outstanding advances due for repayment by the Government had risen once again from $192.046m at the start of 2024 to $332.811m at year-end. This brought the latter’s reliance on short-term borrowing from the banking regulator back into line with the $335m that was outstanding at year-end 2022.

Despite several sources suggesting that the increased reliance on Central Bank borrowing indicates the Government continues to have challenges raising new debt “on the open market”, the Central Bank nevertheless asserted: “At the year-end date, advances to the Government were within the Bank’s temporary loan limits to the Government.”

Those temporary lending limits have been tightened by recent changes to the Central Bank Act, which cut the Government’s borrowing limits “from 30 percent to 15.5 percent of the average revenue of the Government or the estimated ordinary revenue of the Government, whichever is less”. Treasury bills and other securities are excluded from this calculation.

The Government, in 2024, borrowed a gross $1.31bn from the Central Bank and repaid $1.171bn, resulting in the $140m increase. During 2023, this position was reversed, with new gross advances of $1.297bn exceeded by $1.44bn in repayments to reduce the net sum outstanding.

Meanwhile, the Central Bank’s 2024 accounts also revealed that the Government has not started to repay the controversial International Monetary Fund (IMF) special drawing rights (SDR) loan that both sides agreed in November 2022.

However, the outstanding balance of $234.153m at the start of 2024 was reduced by more than $6.3m come year-end to stand at $227.812m, largely due to favourable movements within the basket of foreign currencies that make up and underwrite the SDRs.

“The SDRs are convertible into US dollars and, at year end, the loan totaled $226.099m (2023: $234.153m). The loan bears variable interest rates, which fluctuate on a monthly basis, ranging from 3.16 percent to 4.11 percent (2023: 2.92 percent to 4.2 percent),” the Central Bank said.

“The interest shall be repaid at such frequency, and on such dates, as may be set by the IMF, which is normally on a quarterly basis. To date, the Government has not commenced repayment of the loan. The MOU further stipulates all obligations related to the SDRs, including all costs, charges and payment of interest, will be the responsibility of the Government without a financial burden to the [Central] Bank.”

The Ministry of Finance said at the time that the SDR transaction was a prudent move to source low-cost foreign currency financing and thus save Bahamian taxpayers millions of dollars in associated debt servicing costs at a time when the Government would otherwise have to pay close to double digit interest rates on the international capital markets.

However, the Free National Movement (FNM) had argued that the IMF SDR transaction potentially breached the former Section 21 of the Central Bank Act, which sets limits on how much the monetary policy regulator can lend or advance to the Government.

The party also asserted that it violated Section 68 (1) of the Debt Management Act, which stipulates that any public official found to have borrowed money from the Central Bank outside of what is allowed in the Central Bank Act commits an offence of financial misconduct.

Elsewhere, the Central Bank annual report revealed that cheque transactions declined in volume by double digits while those for credit and debit cards increased by a similar percentage. “As observed in the previous years, cheque usage, except for large-value transactions, remained subdued,” it said.

“Specifically, the number of instruments processed reduced by 14.5 percent to 823.1m, with a fall-off in the corresponding value by 1.9 percent to $3.8bn. Growth continued in other digital transactions, highlighted by greater overall use of debit cards, credit cards and automated banking services.

“With regard to card-based payments, the number of debit card transactions rose by 15.9 percent to 28.7m, while the value increased by $4.1bn from $2.7bn in 2023.In the meantime, credit card transactions increased by 28.5 percent to $1.8bn, with expanded account access and increased credit utilisation,” the Central Bank added.

“Notably, the number of cards issued or renewed by commercial banks expanded by 7.8 percent to 110,546, and the associated value of debt owed rose by 7.6 percent to $254.4m. Disaggregated by access amount, the number of cards with a credit limit under $5,000 grew by 8.8 percent to 75,107, albeit the outstanding balances decreased by 8.4 percent to $81m.

“Meanwhile, the number of cards issued with a credit limit between $5,000-$10,000 increased by 5.5 percent to 21,232, and the corresponding credit balances by 5.8 percent to $72.7m. Also, for card limits in excess of $10,000, the number of accounts rose by 6.4 percent to 14,207, and outstanding credit by 8.4 percent to $100.7m,” it continued.

“The ATM network, supporting cash services and decentralised access to other banking services, expanded further by 1.5 percent to 398 machines in 2024. Meanwhile, the volume of ATM transactions advanced by 6.1 percent to 10.6m, and the corresponding value by 15.2 percent to $3.1bn.”