The Bahamas has suffered “the largest relative increase in government debt levels” in the Caribbean over the past five years, with a Wall Street rating agency predicting central government debt will hit 60 per cent of GDP by 2015.
Moody’s, in its full country analysis on the Bahamas, said this nation’s central government debt (which excludes contingent liabilities) rose by a sum equivalent to 21.8 per cent of GDP between 2008 and 2012. Coming on top of a debt equivalent to 30.8 per cent of GDP pre-recession, this took the central government debt to 52.6 per cent this year.
While only Trinidad & Tobago and the Domincan Republic have lower debt-to-GDP ratios in the Caribbean, charts produced by Moody’s showed that the Bahamas came close to doubling its central government debt post-recession.
“The Government debt ratio has doubled over the past decade to nearly 54 per cent of GDP, and with government guaranteed debt this number becomes even higher,” Moody’s said.
“Debt accumulation has been driven by a deteriorating fiscal balance. Government deficits went to 6.3 per cent of GDP in 2012, from 1.6 per cent in 2008, and we expect large deficits to persist through 2015-2016….
“We project government debt to reach a historically high 60 per cent of GDP by 2015, up from 30 per cent in 2006, placing the Bahamas on par with peers with low government financial strength and above the median debt ratio for ‘Baa1’ rated peers.”
With government-guaranteed debt standing at around 7 per cent of GDP, the Bahamas’ total debt-to-GDP ratio stands currently at around 61 per cent, and – at least according to Moody’s – will hit 67 per cent by 2015.
Moody’s candidly asserted that the Christie administration had “yet to credibly commit to a fiscal consolidation plan”. And it noted that the large amount of tax incentives granted to the industry meant tourism – the Bahamas’ largest economic sector – only accounted for 11.2 per cent of total government revenues.
