Bermuda’s net debt has climbed to $3 billion with nearly $290 million spent by the Government in the wake of the global COVID-19 pandemic.
Finance Minister Curtis Dickinson told MPs the Government’s revenue was cut from $1.1 billion down to $960 million as a result of the pandemic, most notably – the loss of tourism revenue, lower payroll tax and Customs duty.
Delivering the 2021-2022 Budget Statement in the House on Friday (Feb 26), he said the cost of running government services for the past fiscal year set to end on March 31, was initially estimated to cost $935 million.
But the final figure will end up going over $1 billion.
An unbudgeted $127.2 million was spent on COVID-19 related expenses alone – that includes $56.8 million in emergency benefits for people left unemployed as a result of the pandemic.
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, with cuts in the “normal operating expenses of the Government” that were nearly 6 percent lower than the original estimate of $935.6 million.
Defunding vacant posts in the Civil Service would save the Government an estimated $20 million, he added.
“This will mean the public service will trim its sails to meet the actual tasks required, managing public expectations accordingly, and the funding that remains will be put to better use achieving greater value for money.
“Given the sustained impact of the COVID-19 pandemic, revenues are forecast to decrease by 11 percent or $123.3 million.
“The current account balance, after interest, is budgeted at a debt in the amount of $31.8 million.
“This represents a decrease in the current account surplus of $97.1 million when compared with the 2020/21 Budget, but a $143.5 million improvement over the revised Budget estimate for 2020/21.”
Overall, he said the deficit was $120.8 million less than the revised estimate of $245.5 million for this financial year.
“As of 31 March 2021, net debt will stand at $3 billion,” said the Minister.
“The Sinking Fund balance will be approximately $348.8 million, which will be used to help fund future deficits.”
“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 the road ahead will be difficult.
“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.”
Apart from the fee increase at the Registrar of Companies, he said: “There are no other meaningful increases to the cost of government services or other fees and taxes.”
“There is a fragility to local finances that cannot be further strained by increased taxes,” he added.
The slump in tourist arrivals, which is expected to continue, is expected to be down $20.7 million from the original 2020/21 Budget estimate.
According to the Minister, Bermuda’s public purse will not see a surplus until 2023/24.