Ferguson: Foreign borrowing not sustainable

The government should consider more carefully its philosophy for borrowing externally, CFAL President Anthony Ferguson warned yesterday, stating that continuing on this current borrowing trend will lead to severe repercussions.

The government has already borrowed $2.1 billion so far this fiscal year. Ferguson is of the view that it would have to borrow at least another $1 billion to make it through the fiscal constraints caused by the COVID-19 pandemic.

“We have been borrowing faster than our economy is growing and that is not sustainable. It has to be addressed. It will be addressed. Personally, I would prefer if we addressed it internally, as opposed to having agencies external to The Bahamas cause us to address it,” he said while appearing as a guest on the Guardian Radio talk show “Z Live”.

All the borrowing has led to a widening of the fiscal deficit, which currently stands at $736.1 million.

The national debt, which hovers just above $9 billion, is expected to surpass $10 billion in the next fiscal year, according to the government.

“Our total GDP, if we take in the 16-plus percent decline right now, stands at about $11.37 billion. That’s actually increased by $2 billion-plus. Our total debt is now close to $10 billion, our total GDP is a little over $11 billion. Our total VAT receipts have declined, the high was $896 million and that’s after the 60 percent increase from 7.5 percent to 12 percent. On the face, that looks really good. However, when you break down our total debt, over $4 billion is in US dollars,” Ferguson said.

He continued, “So, we have to be very mindful of the continued foreign borrowing based on why it’s being done. But I think we are at a point where we really need to take a hard look at that philosophy, because it has severe repercussions.

“So, where is the economy today? We are down, we probably will grow one percent this year, if that much, as the economy opens up; that’s assuming we can be open by the middle of the year.”

The government has borrowed $1.095 billion in Bahamian dollars and $445.7 million in foreign currency this fiscal year.

As it stands, 45 percent of government borrowing is in the form of loans, with 36 percent in bonds, 15 percent in treasury bills and 4 percent accounting for advances.

The government has not announced any plans for further borrowing this year, but is facilitating a rate reduction bond for Bahamas Power and Light.

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source https://thenassauguardian.com/ferguson-foreign-borrowing-not-sustainable/