NASSAU, The Bahamas – Public debt management, or how a government manages debt incurred by the state to fund development, is under scrutiny, increasingly tested for transparency, and continuously challenged by technological advancements.
The Bahamas has bucked the trend and built a debt management framework that sets it apart in terms of effective market development and policies that have bolstered its capacity to manage sovereign debt.
In 2021, the Commonwealth Secretariat developed its ‘Strengthening of Public Debt Management Framework and Developing Government Bond Market in The Bahamas’ project for technical assistance with the government of The Bahamas, in collaboration with the UNDP Jamaica Office and India-UN Fund. This project has become a success story with learnings for other countries, especially those in the Caribbean that share similar market realities with The Bahamas.
For three days, senior officials from 15 Commonwealth countries met in London to unpack the challenges and achievements of The Bahamas’ public debt management reforms to identify shared debt management issues and economic vulnerabilities and explore solutions.
In frank conversation with participants, the Commonwealth Secretary-General, Patricia Scotland KC, remarked that peer-to-peer learning is a preferred strategy of The Commonwealth because, if one member country is spending money to develop a programme there should be no need for other member countries to do so too.
In her opening remarks, the secretary-general said:
“Across our small states, the average debt-to-GDP ratio is higher than the global average, which is further compounded by their restricted access to concessional development financing. This financing is critical for economic growth and for cushioning shocks, but the barrier to access is too high for too many – even for many of the most vulnerable.
“With no alternative, small states are often forced to obtain financing on unfavourable terms, resulting in an accumulation of high debt burden. This creates a vicious cycle.”
Sujit Ghosh, Deputy High Commissioner of India to the United Kingdom, spoke about the importance of national ownership and leadership in tackling public debt, and how countries across the Global South need to stand in solidarity in turning the tide.
Participants also heard encouraging and inspirational messages from Rabab Fatima, High Representative, Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States, and Dima Al-Khatib, director for the United Nations Office for South-South Cooperation.
Under the Chatham House Rule, discussions throughout the three days remained frank and participants shared institutional barriers and difficulties in communicating to stakeholders, especially state-owned enterprises (SOEs), and the need for or implementation of public finance management legislation.
On the sidelines, Wendy Craigg, consultant to the Ministry of Finance in The Bahamas and In-country consultant for The Bahamas Project, shared that many countries at the workshop could be eligible to borrow from the World Bank, while others may be unable to like The Bahamas. As its economy grew, The Bahama’s GDP per capita became too high for it be able to borrow from the World Bank, forcing it to instead borrow from the market, at commercial and therefore higher rates.
“We did not have specific challenges when we launched the comprehensive debt management programme with the support of The Commonwealth. We ensured all stakeholders were brought along, with everyone onboard. We set our objectives, and we kept pace with deliverables, knowing it was the only way to measure our success. But, what we needed was a legislative framework,” said Craigg.
The Commonwealth Secretariat provided draft legislation to assist the country, Craigg continued:
“Once we did that, it set the tone for the whole project. Transparency arrangements flowed from the legislation. And the beauty was that, in the end, it pulled together all these disparate pieces of legislation into one comprehensive document.”
For her, communication was key to get buy-in from stakeholders, including SOEs. Her advice to countries starting on the road to debt management is to consider the operational aspects from the beginning. “Don’t think it only comes at the end. That way, you are always planning according to resources.”
The ‘Strengthening of PDM [Public Debt Management] Framework and Developing Government Bond Market in The Bahamas’ project continues through a technical and policy assistance programme and has already allowed the Bahamian securities market to evolve into a model for other Small Island Developing States (SIDS) to emulate.
