Government officials have continued to point out that there is no cause for any great alarm.
According to the latest report from the Central Bank of The Bahamas, which is a condensed version of the Quarterly Overview of Domestic Economic Developments released on May 1, the national debt was $2.7 billion last year. However that figure was .4 percent lower than what it was in the third quarter of 2005, an achievement that was precipitated by a lowering of the government’s contingent liabilities, Bank analysts explained in the report.
The growing debt brings the country close to the danger level as it relates to the ratio of government debt to the Gross Domestic Product [GDP] which is headed toward about 39 percent of GDP.
“Generally speaking, we don’t like to see in developing countries debt to GDP ratios climbing over 40 percent,” the Minister of State in the Ministry of Finance James Smith explained. “We get into what’s called debt dynamics because you’re beginning to spend too much money servicing the debt as opposed to applying it to education, welfare or security services and that for a developing country could be a very critical area.”
But he said in The Bahamian context, the accumulation of debt is not at a dangerous pace because the economy is also growing at a good rate. The Bahamian economy, according to officials, grew by 3.5 percent in 2005 and is expected to grow by at least that this year.
He also admitted in an earlier Bahama Journal interview that he did not expect the national debt to come down significantly – if at all – over the next year. However, Minister Smith said there is good reason for that.
There is still a need for a tremendous amount of government capital expenditure or investments in improving infrastructure, doing a lot of maintenance work and also preparing The Bahamas for other large investments, he explained.
Additionally, the government has already poured $40 million into certain upgrades at Nassau International Airport and other airports around the country. Also, enhancements to the road network in New Providence are necessary.
The national debt is a figure that government officials are keeping a keen eye on, especially as fiscal and financial architects craft a new budget for the upcoming fiscal year which is expected to be presented to Parliament this month.
The Central Bank report noted that according to preliminary estimates, the deficit on the government’s budgetary operations widened to $50.9 million for the second quarter of the 2005/2006 fiscal year from $36.6 million in same period the year before.
Total revenue rose by 8.3 percent to $273.0 million, comprising a 4.5 percentgrowth in tax receipts to $250.9 million, a $9.1million rise in non-tax revenue to $21.1 million and grants totaling $1 million.
However, Central Bank analysts also pointed out that total expenditure also expanded by 12.2% to $323.9 million, with a 17.0 percent hike in current outlays to $286.1 million, and a 44.1 percent
increase in capital investments to $23.6 million.
“In contrast, net lending to public enterprises contracted by almost 50 percent to $14.3 million,” the report noted. “On the financing side, government borrowed mainly from local sources in the form of short-term advances from commercial banks. A much smaller portion was derived from external creditors, while repayments, which went mainly towards retiring Bahamian dollar debt, totaled $11.1 million.”
It contributed to the Direct Charge on Government declining by .4 percent to $2.2 billion over the previous quarter.
By: Tameka Lundy, The Bahama Journal
