By NEIL HARTNELL
Tribune Business Editor
The Bahamas was yesterday said to be “in a very, very dark position” after the Central Bank 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).
The revelation, based on official data from the regulator and the Government’s Department of Statistics, gives a complete picture of the Bahamas’ debt crisis by including public corporation liabilities that have not been guaranteed by the central government.
The data is laid out in the Central Bank’s review of the 2016 second quarter, which 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 Central Bank 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.”
The data concerning total public sector debt, and the non-government guaranteed liabilities of public enterprises, has never been disclosed and placed in context until now.
Prior to this, the focus from the Government and the Central Bank has been on the national debt (central government debt and the borrowings it has guaranteed), plus central government’s direct charge by itself.
The Christie administration, though, can point to the fact that it has brought all three ratios, which are benchmarked by GDP, down compared to where they were at the end of the 2014-2015 fiscal year.
The Government’s direct charge fell from 71.8 per cent to 70.8 per cent, while the $6.695 billion national debt dropped year-over-year from 81 per cent to 79.6 per cent.
The total public sector debt, too, fell from 91.3 per cent to 90.4 per cent, but none of these decreases provides the Bahamas with too much comfort since they are all above the International Monetary Fund’s (IMF) so-called 70 per cent ‘danger threshold’.
Above this level, interest servicing costs can become so severe that nations fall into an ever-increasing debt spiral, where they have to borrow to service existing debts.
The reaction from private sector ‘fiscal hawks’ was swift. Rick Lowe, an executive with the Nassau Institute think-tank, told Tribune Business: “It’s a very, very dark position.
“I think we’re headed to devaluation. Dionisio D’Aguilar is right, and Robert Myers. Nothing this government has promised with regard to fiscal responsibility has materialised. There’s no grain of salt in anything they said that appears to be happening with our fiscal situation.
“It’s a very sad occasion,” Mr Lowe added, “and I hope people realise that when D-Day comes whose responsible for the burden that the political class have put on us.
“There’s no semblance of control, no semblance of reduced spending, and the economy’s declining. There are a lot of people shell-shocked in the business community right now. Nobody knows what to do. There’s a dark cloud over this place at the moment.”
Mr Lowe expressed concern that if the Government failed to alter course with its fiscal policies, the Bahamas would face a creditworthiness downgrade to so-called ‘junk’ status, “with devaluation not too far behind”.
“I don’t care how much the foreign currency reserves indicate,” he added. “All other indicators are equally bad.”
Robert Myers, a principal with the Organisation for Responsible Governance (ORG), a newly-formed civil society group, told Tribune Business that the 90 per cent-plus total public sector debt ratio had given him “an empty feeling in my stomach”.
“No one should be happy with that,” he added, “because you are getting to very dangerous levels of debt-to-GDP.”
Mr Myers said the total public sector debt figures appeared to be getting closer to an accrual-based, rather than cash-based, accounting of the Government’s finances where all liabilities are known.
“Now we understand the real debt, inclusive of contingent and non-contingent liabilities,” he added, “and we can see how concerning that is at 90 per cent debt-to-GDP.
“We can only say that that number has to come down. It’s not an option. The Government, and any future government, if fiscal prudence is not on their agenda and manifesto, they are not the Government for the Bahamas.
“And it has to be so significant and of major urgency to send the right message to the voters and to the international community that we’re serious about getting our house in order.”
Mr Myers praised the Central Bank for disclosing the figures, adding: “We cannot fix this if we’re pulling the wool over our eyes. This is not a government problem, not a national problem.
“We’ve got to encourage whoever the Government is to do right by us. We’ve got to stop pointing the finger and start rolling up our sleeves and doing something about it.”
The Central Bank said that Government’s direct debt decreased by $75.5 million during the 2016 second quarter, but had risen year-on-year by $315.1 million or 5.6 per cent to $5.953 billion.
As for the national debt, this, too, fell by $84.3 million during the 2016 second quarter, but was up $330.7 million year-over-year to $6.695 billion.
This was all despite the $600.3 million in gross Value-Added Tax (VAT) receipts generated during the 11 months to end-May 2016.