The Bahamas' National Debt Ballooned Under Previous Government

by Leroy Baker, Tax-News.com, New York

13 June 2007

During the parliamentary debate on the recently announced Bahamas budget it was revealed that the territory's national debt has grown by $656 million or 29% over the last five years, and stands at US$2.9bn.

Minister of State for Finance, Zhivargo Laing, told parliament: “This represents an average annual increase of some 5.8%. This level of growth of the national debt has had the consequence of pushing debt servicing, in terms of interest payments upward from $103.4 million in 2002/03 to $141.4 million in 2006/07, an increase of some $38 million or 37%.”

The newly elected government has pledged to eliminate the budget deficit by 2011, and to reduce the national debt to 30-35% of GDP.

Laing said that these goals could be achieved without the need to raise taxation or cutting back government expenditure on essential services. Instead, he plans to improve revenue collection by ensuring that the present taxation system is strictly enforced: 'so that there can be no recourse to loopholes or other means of evading or avoiding taxation'.

There are no new taxes and no increases in taxes in the 2007/08 budget, and the government indicated plans to cut some existing taxes.

Delivering the budget, Bahamas Prime Minister Hubert Ingraham had said that confidence in the Bahamian economy requires that the government pursues sound fiscal policies to ensure rapid yet sustainable economic expansion, including keeping a watchful eye on public spending policies and trimming the present revenue structure with a view to closing loopholes. The government expects the GFS Deficit to be eliminated over time.

Citing International Monetary Fund statistics, Prime Minister Ingraham noted that projections for economic growth in 2007 and 2008 provide confidence that the growth strategy envisaged by the government will be successful.

Also announced during the Budget Communication were plans to introduce a mid-year budget review and report to parliament, to demonstrate transparency, accountability and the orderly budgeting of the Bahamas government. This report is expected to set out the economic background of the fiscal year-to-date, the fiscal performance in the first six months of the current fiscal year, and any proposed additions to expenditure for approval.

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