By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Central Bank’s governor yesterday said there had been no pressure from the Government to revise the Bahamas’ various debt ratios downwards, a move that led to the re-publication of its 2016 second quarter economic review.
John Rolle told Tribune Business that the changes, and review’s re-issue, were based on the fact that the debt ratios should have been calculated against ‘nominal’ GDP.
Instead, he explained that they were originally based against ‘constant’ GDP, a measurement that strips out the impact of inflation, and thus places a lower figure on the Bahamas’ economic output.
“There was no communication with the Government on this matter,” Mr Rolle told Tribune Business, responding to this newspaper’s inquiries.
“The GDP ratios should have been against ‘nominal’ GDP. Instead, the calculations were presented against the inflation-adjusted estimates or ‘constant’ GDP. I can confirm that the dollar value of debts being used are the same. For time to time in the past, the Central Bank issued revised versions of its publications.”
The initial second quarter economic review, as reported by Tribune Business, revealed that total public sector debt was a mammoth $7.604 billion, a sum equivalent to more than 90 per cent of national economic output (GDP), based on official data from the Central Bank and the Government’s Department of Statistics.
The report also revealed that total public sector debt increased by more than $1 billion in the two years to end-June 2016,
“Total public sector debt, which includes both the guaranteed and non-guaranteed obligations of public enterprises, alongside the direct charge [on central government], rose by $29.3 million (0.4 per cent) during the quarter to $7.604 billion,” the original Central Bank review said.
“For the fiscal year, the combined debt increased by $426.9 million (5.9 per cent), as compared to growth of $651.8 million (10 per cent) during fiscal year 2014-2015.
“Public debt at end-June 2016 was estimated at 90.4 per cent of GDP, while the ratio for the direct charge [on government] and the national debt stood at 70.8 per cent and 79.6 per cent, respectively.”
However, the revised review version now available on the Central Bank’s website shows a total public sector debt ratio at end-June 2016 of 85 per cent. The ratios for June 2014 and 2015 were also reduced a similar amount - around five percentage points.
The ratios for the ‘direct charge’ on the Government, and the national debt, were also lowered.
The former came down from 70.8 per cent to 66.6 per cent in the revised report, while the national debt-to-GDP figure dropped from 79.6 per cent to 74.9 per cent.
While both figures now look slightly better in the revised review, they remain too high for many economists and, probably, the Government’s liking.
Making good on Mr Rolle’s promise to provide a clarification, the Central Bank posted a release on its website late yesterday.
It confirmed: “The debt-to-GDP ratios presented in the original report calculated a constant GDP series (2006 base) as follows: June 2014: $7.945 billion; June 2015: $7.859 billion; and June 2016: $8.414 billion.
“However, the correct relevant nominal GDP estimates - also from Department of Statistics - are 2014: $8.57 billion; 2015: $8.736 billion; 2016: $8.944 billion. This methodology converts calendar year GDP estimates into fiscal year estimates, by taking the average of the two adjacent years. The mid-point estimate for 2016 is averaged as the estimated value for calendar year 2015 and the projected value for calendar year 2016.”
Comments
Socrates 7 years, 6 months ago
No matter how you make it look, $7.0b+ is still owed and has to be repaid by a country that increasingly is heading to a position of being unable too.
Reality_Check 7 years, 6 months ago
Most public sector employees are buried in debt thanks to the partnership that exists between our corrupt government and the major consumer lending banks like Commonwealth Bank, Fidelity Bank and Bank of The Bahamas. Ordinarily a borrower's total monthly payments in respect of all loans received should not exceed one-third (33%) of their total monthly income. This rule of thumb in most civilized developed countries is often referred to as the debt service ratio. But our corrupt government, our Central Bank and our greedy consumer lending banks have conspired over the years to allow public sector employees to take on grossly excessive amounts of consumer debt, with the current average debt service ratio of a civil servant being well above 60%. The greedy consumer lending banks are content to take on this grossly excessive lending risk because the government has committed to them that the loans will be serviced and repaid by way of direct salary deductions and the borrowers will be kept on the government's payroll until the loans have been fully repaid. This is one of the key reasons why our country suffers from a very bloated public sector headcount.....our government cannot even fire known abusive and non-productive employees as long as they are heavily indebted to the consumer lending banks, and our civil servants are well aware of this fact; hence their willingness to take on much more debt than they should as it provides job security. The government of course sees all of this as a way to "buy" loyal votes from employees throughout the public sector. For their part, the greedy consumer lending banks reap enormous profits from the outrageous interest rates they charge on their consumer loans to public sector employees. In our system of government the Central Bank was intended to play a independent regulatory role free of government interference whereby borrowers would be protected from the predatory lending practices of the consumer lending banks. But that protective mechanism failed as a result of successive weak and incompetent Central Bank governors like James Smith, Wendy Craigg and now John Rolle, all of whom remain loyal lackeys of the corrupt Christie-led government to this day. To hear John Rolle recently announce the further relaxing of debt service ratios that should be imposed by the Central Bank on the consumer lending banks made me wince! This great conspiracy explains too why the local banks are willing to insanely extend additional credit facilities to our essentially bankrupt country in the aftermath of Hurricane Matthew and why they can continue charging all of us exorbitant bank charges and other bank fees. AND THAT MY FRIEND IS THE ENTIRE BIG PICTURE BEHIND THE GREAT CONSPIRACY OF GREED AND CORRUPTION THAT EXISTS BETWEEN THE GOVERNMENT, THE CENTRAL BANK AND THE MAJOR CONSUMER LENDING BANKS.
Well_mudda_take_sic 7 years, 6 months ago
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sheeprunner12 7 years, 6 months ago
The largest line item in our national budget is debt servicing ........... when that reaches 30% of our national budget we are DOA (no longer a viable state)........... it is around 20% right now ............. and the government is creating SPVs to hide public corporations' debt, not accounting/budgeting for civil servants' pension and creating a bloated, unproductive, corrupt public service and NOT collecting public revenue.
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