Government's net debt will have soared 42 percent in the space of 12 months by the end of this financial year, figures in yesterday's Budget statement revealed.

And over the next year it is projected to rise by another 37 percent.

Finance Minister Paula Cox said yesterday that net debt will stand at $282.5 million at the end of the financial year 2007/08, up from $198.1 million a year before, and is projected to reach $387.3 million by next spring.

Next year's estimated net debt would break through the current statutory borrowing ceiling of $375 million, to which Government is restricted under the Government Loans Act 1978. However, Ms Cox said told MPs yesterday that the ceiling would be raised, effective April 1, to $550 million — an increase of 46 percent.

Ms Cox said that, when measured as a percentage of Gross Domestic Product (GDP), the new borrowing ceiling was not excessive.

"As part of its long term financial planning, Government monitors the statutory debt ceiling in relation to growth in Bermuda's GDP," Ms Cox said. "GDP has risen since the statutory debt ceiling was adjusted to $375 million in 2005.

"At the end of 2007/08, Bermuda's net debt was $282 million. The long-standing policy of constraining debt to 10 percent of GDP has served Bermuda well. This ratio compares very favourably with many other countries that have debt/GDP ratios generally in the range of 25 percent to 65 percent.

"With GDP estimated to reach $6 billion in 2008/09, the statutory debt ceiling would represent 6.25 per cent of GDP. In keeping with the policy of periodically realigning the statutory debt ceiling to a position within the policy limit of ten percent of GDP, Government plans to adjust the statutory debt ceiling in 2008/09 to $550 million."

Increased debt has led to higher interest payments. Government's estimate of 2007/08 interest paid on debt is $16.8 million, a rise of more than 20 percent compared to the previous year's figure of $13.9 million. And the projected interest payment for next year will rise again, by more than a quarter, to $21.5 million.

The Island's booming economy helped to swell Government coffers with $12 million more in revenue than it had projected to raise. This was the sixth Budget in succession that Government had raked in more than expected, having underestimated its projected revenue by a combined $240 million or so over the past six years.

However this year's $12 million windfall has already been spent as current account expenditure was $19 million more than budgeted for, at $881 million.

Payroll tax was projected to bring in $292 million for this financial year, but that figure will be more like $320 million. And with a 0.5-percent increase in the payroll tax rate for next year, that figure is expected to rise to $335 million. Customs duty reaped $245 million, up $15 million on the previous year.

Company fees paid by international business also contributed $54 million, $2 million more than 2006/07.

Passenger taxes fell substantially from $30 million in 2006/07 to $25.5 million this financial year, while hotel occupancy revenue also fell by $1 million to $11 million.

Government had projected a substantial fall in Immigration Department receipts to $11.7 million for this year, but their revised estimate shows receipts increased by $2.7 million to $15.7 million.

Ms Cox said the Government had refinanced $140 million of its existing debt in a transaction executed in the US private placement market, arranged by HSBC Bank of Bermuda.