National debt rises over $5 bil. mark
The national debt rose by 16 percent year-over-year in the first quarter of 2013, breaching the $5 billion mark, according to The Central Bank of The Bahamas.
The latest Quarterly Economic Review issued by the central bank reveals that the government’s overall deficit for the third quarter of the 2012/2013 fiscal year grew by 54.2 percent ($40.4 million).
This indicates that the government’s spending outstripped its revenues by $115.1 million. Expenditures for the three-month period reached $457.2 million – a 10.6 percent increase over the same period last year – while revenues fell by 6.1 percent to $342.1 million.
Correspondingly, the national debt grew to $5.1 billion – a 55 percent debt-to-GDP ratio based on 2012 GDP figures.
The Quarterly Economic Review, which covers the first three months of 2013, describes a “relatively subdued” level of domestic economic activity during the period.
“Tourism output softened due to a decline in the high-value added stopover segment of the market and slowed growth in sea visitors. In a modest offset, foreign investment-led projects sustained gains in construction output, however, domestic building activity remained relatively weak,” it states.
The review indicates that the government experienced a 28.6 percent rise in the interest payments on its debt in comparison to the same period during the previous year. These payments alone rose to $53.4 million.
Total debt service payments rose by 57.7 percent ($8.6 million) to $23.5 million – an almost four-fold hike in debt repayment over last year’s first quarter, according to the Central Bank.
Rising interest payments may continue to be a problem for the government, given that the report states that it utilized mainly short term debt instruments to finance its deficits during this period.
Further describing the nature of the government’s borrowings during these three months, the central bank notes that of $192.9 million in borrowings in the quarter, the proportion of foreign currency debt as a proportion rose slightly, by 0.3 percent, or $6.2 million.
According to the central bank, government spending growth contributing to the significantly enlarged deficit was “broad-based”, and included a 17.1 percent jump in support to public corporations, at $12.4 million. Falls in revenue were attributed in part to seasonal declines in import and excise tax receipts, in addition to a 27.4 percent reduction in property tax-related revenue, and a 9.2 percent fall in motor vehicle taxes. Departure taxes “firmed” by 14.1 percent – $3.9 million – to $31.6 million.
Overall, debt service as a proportion of government revenue increased by 2 per cent to 2.6 percent during the period, states the report.
Messages left for Minister of State for Finance Michael Halkitis, were not returned up to press time.