HAMILTON – Premier David Burt announced Friday that his Progressive Labour Party (PLP) government has negotiated a US$135 million loan agreement with Butterfield Bank.
Burt, who is also Minister of Finance, said the loan, which will cover the 2017-18 fiscal year and a portion of the 2018-19 year, was called for under the previous One Bermuda Alliance (OBA) administration.
He told legislators that the government “has not borrowed US$135 million” but that the funds would be drawn on if needed.
Bermuda’s net debt stands at US$2.5 billion, up from US$277 million in March 2008 – 10 years after the PLP ousted the now defunct United Bermuda Party, which had run the country for 30 years. The OBA narrowly defeated the PLP in 2012 but was crushed by the PLP in July’s general election.
Bermuda is currently paying out US$500 000 a day to service its national debt.
Burt told MPs “considering the government’s current debt profile and the size of the borrowing requirements, the strategy for 2018/18 is to borrow in Bermuda on a short-term basis.”
He said the Ministry of Finance had been looking at strategies to meet government’s financing needs for this financial year since April, adding that a three-strong public debt management advisory group had been chosen after a request for proposal was put out.
“The main objective of this group was to ensure that the government’s financing needs are its payment obligations are met in the most efficient manner possible over the short to medium term, consistent with a prudent degree of risk.
“It is anticipated that, despite unbudgeted commitments of the former administration, this transaction will meet government’s total financing requirements for fiscal year 2017/18 and a portion of the 2018/2019 deficit.
“The loan matures in 2019 and government has the option to either refinance this debt or it can be paid off using the sinking fund. The decision taken will be dependent on market conditions at the time of refinancing and the balance in the sinking fund,” Burt added.
The PLP and OBA both entered into similar loan agreements with the bank in the past as the national debt ballooned. (CMC)
