Govt Debt Down To 73.2% of GDP as of March

  • The Inter-American Development Bank (IDB), in its recently published Caribbean Economics Quarterly Bulletin for August 2026, said government debt in The Bahamas declined to 73.2 per cent of GDP as of March, and is on a “declining path”.
  • Government debt declined from a peak of 91 per cent of GDP in FY2020/2021 to 74 percent in FY2024/2025. The International Monetary Fund (IMF) expects it to fall to 72% this fiscal year (FY2025/2026) and reach 62% in FY2030/2031, assuming that GDP growth converges toward 1.5% through 2027–2030,” the report said.
  • While the trajectory is firmly downward, debt remains slightly above the Latin American and Caribbean average of 73% of GDP and above pre-COVID levels, limiting the fiscal space to absorb a severe and prolonged external shock.
  • Interest payments reached 4.1% of GDP in FY2024/2025 but are estimated to decrease to 3.9% of GDP by FY2027/2028 as deficit reduction, concessional financing, and improved market access, signalled by sovereign credit upgrades, translate into more favourable refinancing conditions.
  • The IDB also pointed to the fuel hedging strategy employed by Bahamas Power and Light at the end of 2025 as an effective cost-saving strategy, while noting that prudent risk-sharing policies have paid off. In December 2025, two months before the Iran conflict escalated, BPL locked in approximately 2.5 million barrels of fuel oil at US$65 per barrel. This provides 365 days of protection through calendar year 2026 at a time when Brent crude prices averaged US$100 per barrel for three months, and remained well above US$70 for most of the first half of 2026
  • The hedge decouples domestic electricity tariffs from global spot prices, shielding households, hotels, and businesses from energy-driven cost pressures. Fuel costs represent approximately 74 per cent of total consumer electricity bills in The Bahamas, making the hedge’s coverage directly consequential for disposable income and operating margins.
  • As a result, The Bahamas is projected to save US$43Mn (0.25% of GDP) with respect to expected post-shock bills using IMF oil price forecasts.
  • However, the hedge will only provide electricity price insulation through the end of calendar year 2026. If Brent crude oil prices remain above US$65, the full cost adjustment will hit in 2027 unless the hedge is renewed and widened.
  • Therefore, the fiscal and tourism competitiveness implications of the expiration of the hedge without a successor strategy represent the most significant medium-term risk.

(Source: The Nassau Guardian)