By NEIL HARTNELL
Tribune Business Editor
The Bahamas’ national debt was just shy of $10bn at year-end 2020, the Central Bank revealed yesterday, having increased by $1.4bn during the previous 12 months.
The figures, disclosed in the regulator’s economic review for the 2020 fourth quarter, provide further insight into the debt and deficit blow-out produced by the combination of COVID-19 and Hurricane Dorian plus the ever-increasing strain being placed on Bahamian taxpayers to service this burden.
The report revealed that the government’s debt increased by more than half a billion dollars in the 2020 final quarter, due to the collapse in its revenues and increased social spending to mitigate the pandemic’s worst effects, with total liabilities finishing the year just $143.3m below the $10bn mark.
“The national debt - inclusive of contingent liabilities - rose by $510.4m (5.5 percent) over the three-month period, and by $1.399bn (16.5 percent) on an annual basis to $9.857bn at end-2020,” the Central Bank revealed.
“As a ratio to GDP, the direct charge increased by an estimated 12.4 percentage points on a yearly basis to 69.4 percent at end-December. The variation also reflected an estimated significant contraction in the denominator, the GDP, for 2020. In addition, the national debt-to-GDP ratio increased to an estimated 72.6 percent compared to 62.3 percent in 2019.”
The scale of the deterioration in the Government’s finances and key ratios is not surprising given the deep economic contraction sparked by COVID-19, but it illustrates just how much work is now required to stabilise the fiscal position and get it back on track with the targets established by the Fiscal Responsibility Act.
“Budgetary financing for the second quarter of the 2020-2021 fiscal year was dominated by external borrowings, which totalled $886.5m, inclusive of issues of international bonds proceeds of $825m and $61.5m in project and policy-based loans,” the Central Bank said.
“Further, $307.6m was obtained from domestic sources in the form of bonds ($191.4m); loans and advances ($94.9m) and net Treasury bills/notes ($21.3m). Debt repayment for the period totaled $692.3m, of which the largest share (63.3 percent) went towards retiring Bahamian dollar debt.
“As a consequence of these developments, the direct charge on the Government grew by $513.9m (5.8 percent) over the previous quarter, and by $1.685bn (21.8 percent) year-on-year to $9.418bn,” the Central Bank added. “A breakdown by component showed that Bahamian dollar obligations constituted 55.3 percent of the total, while foreign currency liabilities accounted for the remaining 44.7 percent.
“A further disaggregation by creditor revealed that private and institutional investors held the largest portion of local currency debt (41.6 percent), followed by banks (42.4 percent), public corporations (11.1 percent) and the Central Bank (4.9 percent).
“A breakdown by instrument type showed that Government bonds comprised the largest share of domestic currency debt, at 73.2 percent, and featured an average maturity of 10.5 years, compared to 9.8 years in 2019. In addition, Treasury bills and loans and advances accounted for smaller shares of 17.7 percent and 9.1 percent, respectively.”
The Government’s contingent liabilities, meaning debt it has guaranteed on behalf of the public corporations, fell by $285.3m or 39.4 percent year-on-year to $438.7m due to the refinancing of legacy Bahamas Electricity Corporation (BEC) debt.
As for the country’s foreign currency debt, the Central Bank added that this rose by $635.2m (15.3 percent) to $4.784bn during the 2020 fourth quarter. “In comparison to the same quarter of 2019, total foreign currency debt service payments rose sharply to $340.5m from $79.7m, attributed in large part to a $248m refinancing of Government’s short-term external debt obligations,” it said.
“Net of the refinancing, the comparable serving was still expanded at $92.5m. Underlying this outturn, the Government’s debt service payment increased to $321.5m from $58.1m last year, as amortisation payments advanced to $254.3m and interest charges moved higher by $16.8m to $67.2m.
“In contrast, the public corporations’ segment decreased by $2.6m (11.8 percent) to $19.1m, with interest charges lessening by $5m (35.7 percent) to $9.1m, outstripping the $2.5m (33.3 percent) rise in amortisation payments to $10m.
“Exclusive of refinancing activities, the Government’s debt service to revenue ratio stood at 18.3 percent at end-December, an increase of 7.6 percentage points over the previous year, while the debt service ratio rose to 41.8 percent from 8.4 percent in 2019.”