Burt gives assurance that national debt is ‘manageable’
The Island's national debt is “manageable” and “sustainable” when compared to other modern and developed economies, according to Junior Finance Minister David Burt.
Senator Burt made the statement during a debate on the Government Loans Amendment Act 2011 in the Senate, where he said Bermuda's debt levels remained low compared to places like the Cayman Islands, Switzerland, United Kingdom, United States, Barbados and Bahamas.
He said as of the end of this month, the net debt would stand at $1.175 billion, approximately $75 million below the $1.250 billion ceiling.
And net debt, excluding guarantees, would stand at $964.4 million, approximately 17.2 percent of Gross Domestic Product (GDP).
The Government Loans Amendment Act 2011 will amend the 1978 act so that only Government guarantees that become due and payable can be charged against the statutory debt ceiling, explained Sen Burt.
This approach will allow Government to avoid having to continually amend the act to account for guarantees that have very little chance of being called, he said.
“For instance the Government guarantees of the $200 million Butterfield Preference Share Offering is currently counted towards the debt ceiling, despite the fact there is little chance of being called, following Butterfield's successful capital raised last year and the de-risking of their balance sheet,” said Sen Burt.
Opposition Lead Senator Jeanne Atherden questioned why Government was seeking to exclude guarantees in the total debt figures, yet had not sought to also reduce the total borrowing amount.
She said: “I think I have to remind the Senate and the people of Bermuda that last year we were asked by the Government to increase the public debt ceiling up to $1.250 billion.”
Sen Burt did not comment after Sen Atherden's remarks.
However, he said earlier in the debate it was important to reassure the public that Government was committed to “sensible, long-term, financial planning” and “to maintaining a sustainable, debt management policy”.
“Bermuda has an investment grade sovern credit rating, which means lenders have a firm belief that loans will be repaid when they fall due,” said Sen Burt.
He said it was important the level of debt is managed “carefully and prudently”, as a general principle the level of debt should not exceed the capacity to pay.
“The Ministry of Finance has responsibility for the management of public debt in Bermuda. The Ministry's prudent handling of Bermuda's public debt has been reviewed by external objective credit rating agencies”, he said, and in each and every case the score card has been on the high end of satisfactory.
“This is a manageable and sustainable figure for a small country where the GDP is estimated at $5.6 billion,” he said, adding that other countries, which Bermuda is often compared, have a much higher debt to GDP ratio.
For the Cayman Island's this ratio is 25 percent of GDP; in Switzerland it is 37.8 percent; it is 84.5 percent in the United Kingdom and 94 percent in the United States; Barbados 73.3 percent; the Bahamas 49.7 percent; Qatar stands at 21.8 percent; and the UAE is 21.3 percent.
Sen Burt said: “I share the debts to GDP ratios in these other jurisdictions for comparative purposes only.
“There is no intent for Bermuda's debt to mirror such levels, but for context and balance, I thought the Senators here and the listening public would find the information useful.”