NASSAU, Bahamas — Minister of State for Finance Zhivargo Laing has defended The Bahamas government’s recent borrowing and current debt levels, and stressed that the Ingraham administration is under no threat of defaulting on its loans.
His comments came after the lead economic specialist for the Caribbean at the Inter-American Development Bank (IDB) told Guardian Business that there was concern that as the country’s public debt mounts, its debt-to-GDP ratio could reach precarious levels if preventative measures are not taken.
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Minister of State for Finance Zhivargo Laing
Laing added that if the IDB was genuinely worried about The Bahamas’ debt levels it would not continue to lend money to this country at the rate it has.
“I don’t want to take out of context what the IDB representative said, but I would think that the same IDB that’s lending us the money for the projects, if it thought that we were in trouble, as a financial institution would [not] be willing to lend us the money,” he told The Nassau Guardian.
“It doesn’t make sense for a financial institution to think that you are in danger in respect of your debt levels and continue to lend you monies, when you have to pay back that money to that institution. The fact of the matter is The Bahamas is in no danger of being unable to service its debt obligations, not now and not into the foreseeable future. We are mindful of our need to curb our debt growth and when circumstances permit we will continue to do the things necessary to ensure that doesn’t happen. But what we are now doing in respect to the borrowing is an investment into the future economic prospects of the country and we’re going to continue to do that within the bounds of fiscal prudence. But I do not want the Bahamian public to have any alarms about our ability to service our debt now or into the foreseeable future.”
Last week Prime Minister Hubert Ingraham announced that government will borrow an additional $50 million from the IDB to cover cost overruns in the New Providence Road Improvement Project. Government also signed two IDB loan agreements last week for an $81 million upgrade to the Water and Sewerage Corporation (WSC) and $50 million in improvements in the aviation sector.
On Sunday the Progressive Liberal Party’s Member of Parliament for Elizabeth Ryan Pinder said the decision to borrow more money to cover cost overruns in the NPRIP is evidence of the Ingraham administration’s “mismanagement” of the economy.
“That seems to be irresponsible management of the road project,” said Pinder.
He said with a small revenue stream government will be forced to cut funding from social programs in order to repay its mounting debts.
“Between the additional $50 million for the roads, the $50 million he announced for (aviation) air travel and the $81 million for the water pipes, that’s an additional $180 million on top of $120 million for the road works, on top of $80 million for the airport road project – that’s $380 million in the last year. It’s irresponsible borrowing by the government with not one utterance of plans of how we’re gong to repay those loans back.
“They are putting handcuffs on generations of Bahamians to come. Because there are no plans to diversify or expand the economy, we’re dealing with a narrow revenue stream for government and when you do all of this excessive borrowing, your obligation is to pay the interest on this loan back. That money has to come from other sources; it is going to come from education, social services. It’s the Bahamian people that are going to suffer.”
The Nassau Guardian
