Government intends to pay back $210 million of public debt by 2016 by apparently almost emptying the Sinking Fund.Premier Paula Cox told the House of Assembly on Friday that the fund - established for the purpose of paying down Government debt - was projected to almost double in size to $160 million over the next three years.“At this time it is anticipated that the Fund will be used to pay off $75 million and $45 million senior notes that mature in 2014,” Ms Cox said.“Further it is anticipated that most, if not all, of the $90 million senior notes maturing in 2016 will be paid off at that time. Therefore, it is the Government’s plan to pay off $210 million in debt by the end of 2016.”If the projection of $160 million for the Sinking Fund is to be achieved by 2014, the fund would need to achieve net growth, through contributions and interest, of more than $25 million per year. Growth at a similar rate over the following two years would provide just enough funds to make the 2016 payment.However, it was not clear from Ms Cox’s words whether the intention was to actually clean out the fund.The Government Borrowing Sinking Fund was created in 1993 as a separate legal entity for the purpose of paying down public debt and was the brainchild of former Premier David Saul, who was Finance Minister at that time.Asked whether Ms Cox’s plans were how he had envisaged the Sinking Fund being used, Dr Saul said: “Yes.”“If the Premier decides to empty the Sinking Fund to pay off the debt to keep it at a reasonable level, then that would make perfect sense to me - provided that the intention was to contribute a significant amount to the fund, something like $100 million, the next year,” Dr Saul told The Royal Gazette.The former United Bermuda Party leader said the circumstances had been very different when he was pushing for the creation of the Sinking Fund. There was virtually no borrowing, which created difficulties in paying for major capital projects, he said.He recalled the construction of Watford Bridge in the West End, which cost around $9 million. “That was paid for in one fell swoop,” Dr Saul recalled. “Taxpayers had to swallow hard and pay that out in one year.“The argument I used was that it would make more sense to amortise it over time like a home mortgage.”The Sinking Fund had been designed to reflect the mortgage model, he added, to be used specifically for major capital projects and not for operating expenses. The aim was to ensure that at any point in time, the Sinking Fund contribution level would be sufficient to pay back the public debt within a 20-year period.“At the time we had a limit that Government borrowing should not exceed 10 percent of the previous year’s gross domestic product,” Dr Saul said. “Of course, they ran a coach and horses through that long ago.”The planned $210 million repayment amounts to about one fifth of the projected $1.05 billion total Government debt outstanding at the end of this month, which is also the end of the current fiscal year.On Friday, the Government tabled the Fund’s financial statements from the past two years, which showed a balance of $70.83 million at the end of March 2010, down nearly $9 million from a year earlier.Under the Government Loans Act, Government is required to pay the equivalent of 2.5 percent of public debt to the Sinking Fund at March 31, the end of each financial year. Hence, as the debt outstanding has increased, so has the required payment into the fund.In 2010, Government took the option allowed under the Act to delay payment to the Sinking Fund for 12 months without incurring any interest. It also took the option to draw money from the fund to make interest payments totalling $28 million.During the 2010/11 fiscal year it paid some $28 million into the fund, $10 million representing the suspended payment from the previous year and the other $18 million relating to the current year. Government has projected that the fund’s balance will be $82.8 million at the end of this month and plans to pay $25.75 million into the fund next year.