Bermuda’s net debt from 2012 through 2018, with projections. Chart extracted from Budget Statement.
Premier David Burt has repeated a pledge that 2019 is the year Bermuda’s debt will be brought under control by ending a ten year run of annual increases in net debt.
And in his first Budget Statement, he told the House of Assembly that, while the debt is just $60 million shy of the mandatory debt ceiling, Government will not increase the statutory maximum currently set at $2.5 billion.
“We acknowledge that there are sceptics, but let me be clear: this year will be the last year in which our debt will increase,” Premier Burt said this morning.
“Next year we will start reducing our debt. We will continue to reduce expenses where we can, but we will continue to invest to ensure that we can grow our economy and create jobs. The stronger our economic growth, the quicker we can repay our outstanding debt. “
The Chamber of Commerce sounded a slightly sceptical note in its otherwise positive response to the Budget Statement this morning, by questioning whether the finance ministry’s revenue and interest costs forecast were realistic.
Revenues in the coming year are forecasted to increase. Is that reasonable? On the expenditure side, interest on debt is forecasted to be $124 million. In an increasing interest rate environment, is this a realistic figure?
The Premier boasted that his administration had exceeded all the fiscal targets set by the former One Bermuda Alliance administration, and the overall deficit was $15 million less than projected consisting of:
- $1.9 million in additional revenue over estimates
- $2 million less operational expenses
- $7 million less in capital expenditure
- $4.5 million less in debt service costs
The overall deficit by March 31 is estimated at $119.2 million, a decrease of 35% compared to the 2016/17 deficit.
New borrowing in the next fiscal year is estimated at $85 million, taking net debt to $2.42 billion – $50 million lower than estimated by the former Government.
Annual cost of the debt – interest expense and sinking fund contributions (blue) – extracted from the budget statement. PLP years are in green, OBA years in red.
Mr Burt noted that the net debt/revenue (232%) and debt service cost/revenue (17%) ratios were trending downwards but “we must continue the work to bring our fiscal position in line with our targets of 80% and 10% respectively.”
With increases in government fees, elimination of self reported “notional” income for payroll tax purposes, a temporary 5% land tax on certain commercial properties and increases in cell phone fees, Government is banking on about $47.5 million in additional revenue (4.5%) over the current year’s estimates. About half of that increase will be generated by payroll and land taxes.
The goal of reducing the debt eluded the OBA government, which increased the debt ceiling from $1.45 billion when it took office in December 2012 to its current level of$2.5 billion by the end of its tenure in July last year.
Over the same period the net debt increased from $1.48 billion to $2.4 billion.
In 2008 the net debt was just under $280 million, the debt ceiling was $375million but was increased successively to over $1 billion by the then Progressive Labour Party administration until it lost office in 2012.
This article belongs to Politica ! The original article can be found here: Premier: Bermuda’s debt will be under control by 2019 – Budget 2018/19
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