Finance Minister Bob Richards *Photo supplied
Finance Minister Bob Richards *Photo supplied

Government is to raise the debt ceiling to an all-time high of $2.5 billion, Finance Minister Bob Richards told MPs today.

Mr Richards said the increase – more than $1 billion up on the current ceiling – was a reflection of the grim state of the country’s finances.

And he said that the Government was set to borrow more than $330 million for the current financial year alone to cover a shortfall of income compared to expenditure.

He told MPs as he unveiled his first Budget statement: “It is the view of this Government that what has become the annual ritual of ratcheting up the debt ceiling gives the impression that there is indeed no debt management at all.

“This is a negative insofar as capital markets are concerned, the same entities we rely on to finance this debt.”

He added: “It is important to note that this only authorizes the limit of Government borrowing – it does not prescribe the actual amount of borrowing.

“We do not expect the borrowing requirement to take us to that level, but we want a level that is pragmatic, realistic and static.

“The only adjustment to this ceiling I would like to see is an eventual downward adjustment.”

And Mr Richards warned the House of Assembly: “Bermuda is facing one of the most serious challenges in its long history.

“The economic foundations of the island, which enable us to live our daily lives, must be strengthened and better protected.

“The OBA understands the scale and scope of the challenge and what needs to be done.

“Our goal is to create an economy that works for everyone, to lay a new foundation for broad-based prosperity.”

He was speaking as he unveiled an economic “two-track strategy” that the OBA hopes will help turn the island’s struggling economy around.

Mr Richards said: “The first track will implement specific pre-growth economic policies to stimulate much-needed foreign investment, restore confidence in the island as a place to do business and create new jobs.

“The second track will eliminate wasteful Government spending, thereby reducing our national debt over time.”

He added: “The projected borrowing requirement over the next year underscores the seriousness of the situation we face.

“Bermuda will need patience and the strongest commitment to changing the way we go about our business.”

But he said: “The Government cannot do it alone. It will take new levels of cooperation and teamwork from Bermudians in every sphere.

“The survival of the Bermuda economy is something we can and must all work for together.”

Government expects to take in more than $871 million in revenue in 2013-14 – but is likely to spend around $983 million.

Another $134 million will be spent on servicing Bermuda’s massive debt.

Mr Richards said that the economy was in its fourth straight year of contraction, while the island’s Gross Domestic Product had shrunk by 10 per cent since 2007.

He added that the “economic pie shared by all Bermudians is getting smaller, with less to go around.”

Mr Richards said the island had also experienced five years of Current Account deficits.

He added: “Year-to-year operating deficits have risen unchecked from a $19 million surplus in 2008 to a projected $247 million deficit in the upcoming financial year. This accelerating trend is unacceptable.”
And he said that debt had been growing since 2005, leaving the country around $1.45 billion in the red.

Mr Richards added that the level of debt was “a very large number for a small population, which will take many years to pay down”.

Mr Richards said: “We have cut back most Ministries’ cash requests by significant amounts during the budgeting process, but we have not had the time to really come to grips with cost structures within the Government.

“Moreover, with 71 departments, the organizational structure of the Government is unnecessarily cumbersome, a complexity that generates excess expense.”