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Net debt hits $3 billion mark

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Bermuda's debt from 2013-2022
Finance minister Curtis Dickinson (File photograph by Blaire Simmons)

Government’s net debt has risen to $3 billion, the finance minister revealed yesterday.

But Curtis Dickinson said the landmark figure could have been higher had Government not put the brakes on spending after the Covid-19 pandemic struck.

Mr Dickinson said the pandemic response had cost almost $290 million as he outlined the Government’s financial performance over the last 12 months.

He said the coronavirus lightened the Government’s purse in two ways – a reduction in revenues coupled with increased expenditure.

Mr Dickinson added that Government’s 2020/21 revenue had been cut from $1.1 billion to $960 million.

He said the reduction was “due mainly to the impact of the Covid-19 pandemic on just about all of the Government’s revenue sources, the primary impacts being lower payroll tax, Customs duty, and the loss of most tourism-related taxes and levies”.

Mr Dickinson added expenditure estimates for the year were also sabotaged by the pandemic.

The cost of running government services for the 12 months to the end of March 2021 was at first estimated at $935 million.

But the final figure is now expected to top $1 billion.

Mr Dickinson said Government spent an unbudgeted $127.2 million on Covid-19- related expenses, including a $56.8 million emergency benefits programme for people thrown out work as a result of the pandemic.

He added: “Once the decision was made to shut down our island economy, we had less than one week to get money to our people who were sacrificing so much.

“It is no exaggeration to say that we had to break it to make it.

“Bureaucratic machinery is not made for quick pivots.

“However, we achieved our objective – to provide timely and much needed help to our people in an unprecedented crisis.“

Mr Dickinson told MPs that the Government was forced to slash spending on non-essential services.

He said that a freeze on the funding of vacant posts, a ban on Government travel and reductions in discretionary spending such as training, had resulted in savings of more than $55 million – cuts that meant the “normal operating expenses of the Government” for the year came in almost 6 per cent lower than the original estimate of $935.6 million.

Mr Dickinson added: “Given the projections outlined above, the revised estimate of the overall deficit for 2020/21 is $245.5 million, or $225.7 million more than the $19.8 million deficit that was originally projected.

“As of 31 March 2021, net debt will stand at $3 billion. The Sinking Fund balance will be approximately $348.8 million, which will be used to help fund future deficits.”

Mr Dickinson said he was “proud” that the island had coped with the crisis “with humanity and discipline … grace and fortitude”.

He added: “As challenging as this time has been, we have navigated this pandemic well and avoided some of the devastation and confusion that have plagued so many of our international neighbours, large and small.”

But he warned that, although Bermuda was at “the cusp of a clear path to recovery”, major problems remained.

Mr Dickinson said: “Today, we have significant financial commitments, including approximately $3 billion in net public debt, financial guarantees for the new airport and acute care wing and the block grant which covers health services.

“There are also significant actuarial funding gaps in the public sector superannuation fund, the Government Employees Health Insurance Fund and Bermuda’s Contributory Pension Fund.

“Increased spending resulting from the pandemic and funding economic recovery is driving further near-term deficits and increased pressure on public finances.”

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Published February 27, 2021 at 8:58 am (Updated March 12, 2021 at 5:22 pm)

Net debt hits $3 billion mark

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