Presented by The Ministry of Finance

Govt follows global standards for debt reporting and encourages the Opposition to do the same

Debt activity numbers are readily available on the budget website every three months

Central Communications Unit

June 9, 2020

OFFICIAL STATEMENT BY K. PETER TURNQUEST, DEPUTY PRIME MINISTER AND MINISTER OF FINANCE 

Bahamians should be able to trust that the numbers their political leaders are discussing are accurate representations of the country’s fiscal position. The Ministry of Finance’s record of transparently reporting on fiscal matters speaks for itself. 

In the past three years, we introduced quarterly budget performance reporting; we produced annual fiscal strategy reports; and we passed Fiscal Responsibility legislation that makes this kind of reporting a legal obligation for this and all future governments.

Accurate fiscal reporting is important to us, so we have published a wealth of information about the Country’s debt activity on the budget website (see charts below).  We have raised the bar on fiscal transparency in ways that literally no other administration can compare, so there is no hiding here. 

What is important to this Administration, in the midst of the crises we face, is not who borrowed more or less; after all, our objective continues to be balancing the budget and reducing our debt to GPD ratio or overall debt profile. What is important to this Administration is using government revenue and borrowed funds in an effective and responsible way—to invest in Bahamian families, communities, businesses and the nation as a whole. We only borrow when and what we need to invest in our priorities and nothing more. 

For the sake of public trust and financial literacy, it is our responsibility, however, to provide factual information and to inform the public about the global standards for calculating and reporting debt activity. 

10 FACTS ABOUT BORROWING

  1. Historically and presently, every jurisdiction across the world uses the concept of net borrowing in any discussion as to how much a government is borrowing. Up to now this has been the standard in The Bahamas and elsewhere. This is a fact that can be independently researched. 
  2. Gross borrowing is a misrepresentation of the impact of government financing activities on debt because it includes customary and typical government refinancing and interim borrowings that are repaid, which have no impact on the Government’s end of year debt.  Nobody that is credible would use gross borrowing if they understood these matters. 
  3. The technical name that we employ for Government Debt is the Direct Charge. These are the obligations that the Government is directly accountable for. 
  4. There is a standard calculation to determine how much money any administration increases the Direct Charge (or Government Debt) 
  5. During the last Administration, Government Debt increased by $2.6 billion.  This figure represents their net borrowing and not their gross borrowing. 
  6. During the Administration that governed between 2002-2012, Government Debt increased by $643 million
  7. The current Minnis Administration has increased Government Debt by $977 million in the first two years. 
  8. Given the misinformation being circulated in the Public, I presented a comparative chart in the House of Assembly yesterday, to accurately show net borrowing across administrations within the first two-years, to provide accurate data on government debt activity. 
  9. As is our standard practice, we will report the debt activity for the 2019/20 fiscal year when we produce our fourth quarter report at the end of August. 
  10. On the budget website, the Public can currently review the first, second and third quarter reports for this fiscal year up to March 2020. The last page of each Fiscal Snapshot shows the Government’s financing activity. 

I have seen a new meme circulating today where another incorrect comparison is being made between the former Administration and the current Minnis Administration. The proper net borrowing of the previous administration (over five-years) is being compared to the estimated gross borrowing (over 3-years) of the current administration. These are misleading apples to oranges comparisons and have no constructive merit. The author of that meme – like the members of the Opposition – clearly understand that the net borrowing figure is the appropriate figure, but they have opted to score partisan political point, just as they have opted to use the incorrect figure to reflect this Administration. 

My admonishment continues to be: If you know better, do better.   

WHAT DOES THIS MEAN? The bar chart shows Government Debte in dollars, and the line graph shows Government Debt as a percentage of the Gross Ddomestic Product (GDP). The technical name we employ for Government Debt is the Direct Charge. These are the obligations that the Government is directly accountable for. Debt on its own is not bad, but the Government should not borrow more than it can afford to pay back. Three is an optimal level of borrowing set out by the Fiscal Responsibility Act, 2018 (FRA), which is measured as a percentage of GDP. Why? Because, the Government's ability to pay its bills depends on the size of the economy and the level of economic activity that can generate revenue for the Government. The FRA requires the Government to reduce Government Debt over time until it reaches the target of a maximum of 50 per cent of GDP, the optimum level.  

WHAT DOES THIS MEAN? This graph shows a comparison of the debt activity of the first two years in each of the last three governments, which includes gross borrowing, debt repayment and net borrowing. 

Gross borrowing is a misrepresentation of the impact of government financing activities on debt because it includes customary and typical government refinancing and interim borrowings that are repaid. These have no impact on the Government’s end of year debt. Debt repayment represents the amount the government has paid to its lenders. Historically and presently, every jurisdiction across the world uses the concept of net borrowing in any discussion as to how much a government is borrowing.

Net borrowing, the global standard for calculating and reporting debt activity, shows how much any government has increased Government Debt (or Direct Charge,  the debt obligations a government is directly responsible for). 

Source: Central Bank of The Bahamas and The Ministry of Finance, The Bahamas

WHAT DOES THIS MEAN? This graph shows a comparison of net borrowing in the first two years of each of the last three governments. Net borrowing, the global standard for calculating and reporting debt activity, is the gross or total borrowing minus the amount of debt that has been repaid. Net borrowing is an important number, because it shows how much each administration has increased Government Debt, also know as the Direct Chart (debt obligatons that the Government is directly accountable for).

This graph shows that the Minnis Administration added $977m to the Government Debt in its first two years. For comparison, in the first two years of the former administration, Government debt increased by $1.279b, and under the Government in power between 2007-2012, Government debt increased by $643m.

Source: Central Bank of The Bahamas and The Ministry of Finance, The Bahamas

Administration (2007-2012) - Debt Activity

B$Thousands
  2007/8 2008/9 2009/10 2010/11 2011/12 5 YEAR TOTAL FIRST TWO YEARS
Gross Borrowing 321,493 513,813 600,355 422,914 435,197 2,542,147 835,306
Debt Repayment (-) 83,565 108,324 284,105 269,267 84,065 952,294 191,889
Net Borrowing 237,928 405,489 316,250 153,647 351,132 1,464,446 643,417

WHAT DOES THIS MEAN? This table shows all the debt activity conducted by the Government in power during the five-year term between 2007 – 2012. It shows that the Government of the day increased the direct charge by $1.5 billion (or $1,464,446,000, excluding exchange rate adjustments, as shown on the chart).

The total is shown for the first years of debt activity to make a common comparison between three different administration, including the current Minnis Administration, which has only completed two full-years of fiscal reporting. In its first two years, the Minnis Administration increased Government Debt by $977 million. 

Source: Central Bank of The Bahamas and The Ministry of Finance, The Bahamas

Administration (2012-2017) - Debt Activity

B$Thousands
  2012/13 2013/14 2014/15 2015/16p 2016/17p 5 YEAR TOTAL 2 YEAR TOTAL
Gross Borrowing 1,031,834 973,243 727,663 666,940 1,175,439 4,575,119 2,005,077
Debt Repayment (-) 250,542 505,700 221,416 322,744 595,132 1,895,534 756,242
Net Borrowing 781,292 467,,543 506,247 344,196 580,307 2,679,585 1,248,835

WHAT DOES THIS MEAN? This table shows all the debt activity conducted by the Government in power during the five-year term between 2012 – 2017. It shows that the Government of the day increased the direct charge by $2.6 billion (or $2,679,585,000, excluding exchange rate adjustments, as shown on the chart). 

The total is shown for the first years of debt activity to make a common comparison between three different administration, including the current Minnis Administration, which has only completed two full-years of fiscal reporting. In its first two years, the Minnis Administration increased Government Debt by $977 million. 

Source: Central Bank of The Bahamas and The Ministry of Finance, The Bahamas

Minnis Administration - Debt Activity

B$Thousands
  2017/18 2018/19 FIRST 2 YEARS
Borrowing 1,986,958 1,094,193 3,081,151
Debt Repayment (-) 1,302,579 801,140 2,103,719
Net Borrowing 684,379 293,053 977,432

WHAT DOES THIS MEAN? This table shows all the debt activity conducted by the Minnis Administration between 2017 and 2019. It shows that the Minnis Administration has increased Government Debt by $977 million (or $977,432,000 excluding exchange rate adjustments as shown on the chart). The table only shows debt activity for two-years because the Minnis administration has only completed fiscal reporting for two full-years. 

Currently budget performance information is available for the first, second and third quarter of the 2019/20 fiscal year up to March 2020. VIIEW Q3 REPORT. The Government will publish the fourth quarter report, which will show the entire year's debt activity on July 31.

Source: Central Bank of The Bahamas and The Ministry of Finance, The Bahamas

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