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Cox proud of debt record, at least for now

Government is pushing the statutory debt ceiling nearly to the limit in 2005/06 as Finance Minister Paula Cox vehemently denied the ?arrant nonsense? that public debt has increased under the PLP.

?When the Progressive Labour Party Government first assumed office in November 1998, it inherited a net debt of $150 million from the previous Government,? she stated to mock expressions of bemusement from her Government colleagues in the House of Assembly yesterday.

?The net debt position is calculated by subtracting the balance in the Sinking Fund from the total amount of outstanding debt and government guarantees,? she said.

?There is a perception that this Government has significantly increased the public debt since coming into office,? she added to growing murmurs of disbelief from the Government benches.

Cheers then broke out as she added: ?That perception is completely false. Nothing could be farther from the truth!?

In fact, net debt was reduced from that inherited $150 million to $123 million by the end of March, 2004, she said.

The net debt position at March 31, 2005, inclusive of guarantees of $9 million, was estimated to be $131 million, she added ? still lower than the inherited debt.

?But increasing,? Opposition members noted.

In the coming year, Ms Cox said it would borrow $85 million, raising the total level of debt to $215 million.

With excellent reviews from major credit rating agencies and a debt to GDP ratio of four percent, consultations with Bermuda?s financial sector considered the question of whether or not to raise the debt policy limit and statutory debt ceiling.

Currently the debt policy limit stands at ten percent of GDP ? a limit Government yesterday proposed to retain.

The statutory ceiling on public debt, on the other hand ? currently $250 million or 6.25 percent of GDP ? should now be raised as it is too restrictive, Ms Cox argued.

?It is now appropriate to set the statutory debt ceiling at a level that is consistent with the debt policy limit of ten percent of GDP taking account of the growth in our GDP since 2000,? she stated.

?Accordingly, Government proposes to raise the statutory ceiling to $375 million, which is the equivalent of nine percent of an estimated GDP of $4 billion in 2004.?

As the debt policy limit of ten percent remains one of the lowest ratios among developed modern economies, and the economy is predicted to expand and develop, Government declared there was little risk in the increase.

The increase would also allow for more flexible capital financing arrangements, including public-private partnerships and private financing initiatives, Ms Cox said.

However Opposition Finance Minister Grant Gibbons expressed some concern about the proposition yesterday, saying he has always been worried about the amount of borrowing projected on top of windfalls from underestimated revenues such as payroll.

Chairman of the Association of Bermuda International Companies (ABIC) David Ezekiel said the ABIC noted the proposition. ?We trust that the flexibility provided by this increase will be used carefully.?