House Passes Debt Ceiling Raise: To $2.5B

March 5, 2013

Last night Parliamentarians passed the Government Loans Amendment Act 2013, allowing for the Government’s authorized debt ceiling to raise from $1.45 billion to $2.5 billion. The raise does not mean the Government intends to immediately borrow this amount, it means it is legally permissible to. The bill still has to go to the Senate before it is finalized.

The Debt ceiling, or Legislated Limit, as it is called in the annual accounts has been raised before. In 2004 the limit was $250,000,000, in 2006 it went up to $375,000,000, in 2009 it was raised to $1,000,000,000, in 2011 it went up to $1,250,000,000, and in 2012 it was raised to $1,450,000,000.

In his recent budget statement, Finance Minister Bob Richards said, “In view of the forecast operating deficit, not only for the year under consideration, but for those forecast in the medium term plan, this authorized ceiling must be raised.

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

“Therefore, we will be laying legislation, for the approval by Parliament, to raise the authorized debt ceiling to $2.5 billion. 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.”

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  1. boss says:

    wtf this is the government that you voted in

    • Sandgrownan says:

      Clearing up the mess.

      • Jus' Askin' says:

        Do you honestly believe that this is helping us?
        Would you pay your mortgage with your credit card? ;-)

        • jt says:

          There is NO MONEY LEFT. ZERO. What else can be done until new revenue streams are established? Or did you think that was going to happen as fast as we lost all the money and ran up this debt in the first place?

          • Qball says:

            I guess they need this billion dollars to pay back the term limit application fees they promised to reimburse, and to pay for the revenue they cut on foreigners buying property from 25% to 8%. They are spending the billion dollars for the payroll tax holiday for companies who hire Bermudians, when these companies should be doing it anyway.

            • Black Soil says:

              They “need this billion dollars” to look after the bloated civil service which the PLP created – YA IDIOT!!!!!

        • Sandgrownan says:

          Ok, so what’s his option in the short term until receipts increase? Cut employment costs.

          We’ve been bled dry the disckheads in the previous administration. What exactly does he have to do to pay the immediate bills?

          • Soooo says:

            Sandg you are so right… Government needs to cut employment costs!!

            One of the biggest issues we have is theat Government is the larget employer in the island (more than the whole international business sector) with almost 4300 employees. This is over 10% of the working population !! These numbers just don’t work!!

    • ... says:

      how else we going to pay the PLP’s pensions?

    • Building a better Bermuda says:

      They are doing what is needed, the mess that was left to them, leaves them with little option but to borrow in order to pay the bills and still keep government going. The PLP’s policy of perpetually running a deficit, rather than tackle the deficit, coupled with their policy of paying the credit card bill with a credit card, has led Bermuda to this. The OBA’s strategy lies with the gaol of decreasing the deficit with each budget, but this unfortunately requires continued borrowing to keep the oversized governement they inherited going till they can get it managed.

      The other option is to start cutting huge amounts of governement programs and employees.

      Perhaps those that governed us into this state would like to forfeit their pensions and governement monies to help lower the annual costs faster. They would be hard pressed to convince anyone with a sense of fiscal responsibility that they deserve them after all.

  2. Out n about says:

    I listed to the debate last night for about 15 minutes, and didn’t here much about progress, instead, I heard what happened in the past.

    I would like to thank the Honorable Terry Lister for stating, in so many words, this finger pointing needs to stop. Basically, this history lesson was known to all in the house, and time was wasted rehashing it. He invited the correct Government to move forward, using the lessons learned.

    • Out n about says:

      sorry…meant to say current instead of correct

  3. The Road to Hell says:

    Wow. Live your life in chains people of Bermuda – your new government has now allowed you all to be in their debt financially for all of your life, all of your children’s lives and no doubt that of their children….unless they decide to raise taxes to pay for their exorbitant spending? I thought the last lot were dodgy, but this starts the ball rolling on a whole new level. I cannot wait to read what Larry Burchill has to say on this in the BDA Sun!

    • Sandgrownan says:

      So, he could not raise the debt ceiling and lay people off. Would you like that?

    • Pastor Syl Hayward says:

      @ the road to hell: 1)We will not be in debt to the government, but to the lenders. 2)In fact, we are already there, due to the “exorbitant spending” or the previous administration. This administration is trying to keep the lights on and pay the “exorbitant” pensions of the previous Premier (who sat in office just long enough to ensure she was entitled to it) and all the others.
      Actually, that is a question I hope someone can answer.
      Which of the Parliamentarians, Ministers and/or Senators are entitled to receive pensions? Those who retired? Those who were not re-elected? How long does one have to serve in order to be eligible for a pension? At what level will they be paid? What was current when they were in service, or is it related to today’s salaries? Is there anything we can do about this outrageous drain on the public purse?

    • Blankman says:

      What spending? This is only an increase in debt limit [much like increasing the limit on your credit card because the previous user of that card tapped out the existing limit].

    • Mad Dawg says:

      You do understand this did not increase debt don’t you?

      No, I ddn’t think so.

  4. Vote for Me says:

    All,
    It was clearly necessary to raise the debt ceiling to cover expected borrowing in the next year. The surprise for most people has been the amount of the increase in the debt ceiling. Although Minister Richards states that he does not expect for government to actually borrow that much, he has effectively raised the maximum debt to almost 45% of GDP which is dangerous.

    I think the better action would have been to raise the debt ceiling by say $350k this year, develop a 5 year plan and then decide what the 5 year limit would be. The focus has to be a general reduction in annual spending until the economy grows.

    In summary, the OBA and Bermudians in general are realising that at some point election promises must be fulfilled and the ‘piper must be paid’. I think we are in for an exciting 12 months to see how this government financial year ends.

    It will also be interesting to see how successful the OBA is with union negotiations, if you put recent comments from both the BIU and BPSU in context.

    • QBall says:

      You seriously believe this. Yes, maybe they needed to raise it a bit to cover upcoming expenditures, but are you seriously saying that you think it was ok to raise it $1,000,000,000 or $1 Billion dollars. Say it with me, $1 Billion dollars. So you expect them to spend $1 Billion dollars over the next year? LOL you guys keep pointing the finger at PLP that took 14 years to spend part of a billion dollars but give OBA a pass to prepare for $1 billion in spending. GTFOH

      • Sheeple says:

        IF, SOMEHOW, they manage to spend $1 billion dollars in the first FIVE YEARS, trust me, the OBA Supporters will have the balls to actually say something…not just sit back and say “oh well, cuzie’s got it covered,” as the PLP Supporters did; sat back and laughed as opposition supporters stood up for what was/is right: an accountable government. Not to mention they were referred to as a “Lynch Mob”.

        Elephant in the room: there is much spite towards white people in bermuda by older generations, instilling this spite in younger generations. now start the debate:

      • Argosy says:

        ….when your IQ reaches 14, I would sell!

      • Vote for Me says:

        @Qball
        Reread my post.

        It was necessary to raise the ceiling but I, like most people were surprised at the amount of the increase. I think it should have been raised to $1.75bn only. OBA need to do as they campaigned and reduce the spending. We all wait with baited breath to see what they will do.

        • Qball says:

          I see that now, my bad. Thanks for being civil about it….

        • Mad Dawg says:

          Let’s see what “support” they get from the PLP and BIU to reduce spending.

          My guess is there will be more green shirted bully loudmouths yelling at Ministers.

  5. Purple says:

    Was talking to my 15 year-old the other night. She was trying to understand this whole mess. I likened it to the movie “Unstoppable” with Denzel Washington & Christopher Pike. When an overweight train is speeding out of control, you can’t stop it on a dime. You have to slow it down while it’s still moving forward. She understood instantly. The PLP government has made committments into the future that the OBA cannot just drop. And in order to honour those committments, we need money. So rather than string us along year after year, it appears the OBA is allowing the train to move forward in an attempt to eventually slow it down. Our fault in this is that we allowed the train to get out of control and now we ALL are paying for it. Instead of jumping up and down and wanting the OBA to jacknife the train, give it some room and keep an eye on the slow-down. On another point, how much did we hear the PLP and her stalwarts say “before 1998″? And now they want the tune to be changed. ‘s funny.

    • QBall says:

      $1 Billion dollars though??????

      • Purple says:

        Which is exactly why we need to ask what was going on before December 17th.

        • Argosy says:

          No need to ask, Purple. We all know, including the qballs!

          • Qball says:

            Actually Argosy, I don’t know. Just like you don’t know what this billion dollars is going to be spent on by the OBA

            • Argosy says:

              Read Purple’s question.

              C’mon – we all know what was going on before Dec 17th.

              • Purple says:

                Well….we SUSPECT what was going on…we need it PROVEN…but being that this will need to be proven by the Auditor General, it would require the previous government releasing information they refused to release, but had the nerve to crow that no one could prove that there was anything going on. You can’t hide information and then claim to be innocent.

                To me, THAT will prove and justify the previous government’s demanding transparency of the current govenmnent.

                Anybody wanna wager that that will NEVER happen??

                But God is not asleep and time will reveal all things.

      • Building a better Bermuda says:

        That rise in the ceiling wasn’t for this year, it is at the top end of their projections over the next 5+ years. What they did rise it high enough that they won’t have to go back every couple years to rise it again. In fact the minister even stated that the next time they go to change it, they hope to be lowering it. As Purple stated, they can’t put the brakes on this train that is the running deficit, but to slow it each year till it stops. Their budget graphs for their plan shows that they hope to not need more than that debt ceiling before they can actually start paying off the debt.

        Remember, the PLP made no moves to pay off the debt, but kept borrowing more to service it. Anybody in finance will tell you, if you have reached a point where you are getting another credit card to pay for your previous, then you are in trouble unless you start making some financial management strategies. If he PLP had any, hey weren’t showing them to the people, and given their track record, I have doubts that hey had any coming into the election. Every budget they had formed showed a more wait and see strategy than anything that translated to proactive budgeting.

  6. US Observer in Pink Sand says:

    Obviously some of you responding have no experience or education on economics. Read the budget statement…maybe even two or three times over to fully comprehend.

  7. In Mark's Opinion says:

    With all of this borrowing the people of Bermuda will be slaves for the money lenders for ever.

    • Blankman says:

      We already are – thank EFB and the Cog for that.

  8. Plato says:

    This is not a surprise I suggest, we combine Amsterdam and Californians marijuana model and implement it here to revive our tourism industry, also our water rights can be exploited by allowing commercial fisheries, more importantly fish farms which would be perfect because we have no significant coast line to pollute as we are in the middle of the ocean.

    I propose private prisons to more “efficiently” make use of our prisoners time, offshore oil exploration with bermuda being the trade hub, all of these will help revive Bermuda Inc.

  9. Concerned says:

    Are some Bermudians that illiterate??????????????? You have to raise the debt ceiling in order to have new streams of money coming in!! When President Obama took office he had no other choice but to raise the debt ceiling!! It’s scary that ya’ll don’t understand how this stuff works!! Same thing with Term limits….without them more people will come to the Island and open companies and hire BERMUDIANS!!! Why are ya’ll acting so dang ignorant!! Are there any intelligent Bermudians??? When you are in dead, wouldnt it make sense for you to borrow money to help your situation or stay in debt!!!

    • QBall says:

      Yeah but they raised it the same amount as the PLP did in over 14 years and they did it in one swoop.

      • Orbit says:

        Because they had to you dummy in order to make correct the wrongs of the last 14 years.

        • QBall says:

          Why are you calling me a dummy? 14 years brought the debt to 1.45. OBA is saying they need to cover this and what is to come. So you are telling me, that it took PLP between 1998 and 2012 to get to 1.45 billion and during the last fiscal year they raised it by another billion dollars? No, OBA plans on spending over what will be needed to pay.

          • Come Correct says:

            I guess you missed the part where the debt is actually higher than the previous administration led us to believe…probably why they called you that.

          • Building a better Bermuda says:

            Also misses the fact that the PLP were borrowing just to try and pay the interest. The debt doesn’t stop, if your not paying the interest it continues to climb exponentially, so it may have taken about 10 years (14 years is not the correct number but the way, the PLP started putting us in the hole around 2003 I believe as they had been running an annual deficit almost with their first budget, as it took a couple of yeas for them to spend the surplus) to get to $1.4B, it would take less to time to double that if you don’t tend to both the debt and it’s interest.

            The OBA hope to have it under control before it can go much higher than $2B, they just can’t stop it in its tracks with out majorly gutting the current government infrastructure, and that is not something anybody want to do.

          • Building a better Bermuda says:

            If you do not pay off the interest plus the principle, the debt will continue to climb with out you borrowing more.

      • Sheeple says:

        Now you’re starting to understand the mess the PLP has got us in…what was it prior to that 14 years?

  10. Concerned says:

    Correction *debt not dead*

  11. Spilt milk says:

    1 billion! I asked the bank what I need to to get more money for a mortgage they said u need to make more.. Gov needs more money for a mortgage they just take more.. Talk about slap in d face.. Soon we’ll all be saying ” I just live here” we don’t own anything anymore that’s for sure. I’m a very good tenant I pay before due date! Wsup gov. ??? At least the new gov. Isn’t myopic.. They know they’ll be broke so they went well above the previous increases..

  12. I jus don't understand says:

    Lenders are looking at our previous history….300M here, 200M there, 100M here. It doesn’t make sense to borrow like that, it gives a very unstable appearance. Like uncle Bob says, we probably won’t need to spend it all, but just in case he can’t cut the fat out of the payroll and SAGE don’t recommend cutting the workforce deeply enough, he may need to use every penny of that loan…..thanks PLP, I hope the MP pension scheme is changed as I don’t believe in being rewarded for poor performance.

  13. Argosy says:

    The ignorance is mind blowing!

  14. Pastor Syl Hayward says:

    @ I just don’t understand: Your name is a misnomer. It appears to me you understand very well, and explained it very well too! Thank you!

  15. Concerned says:

    Are some Bermudians that illiterate??????????????? You have to raise the debt ceiling in order to have new streams of money coming in!! When President Obama took office he had no other choice but to raise the debt ceiling!! It’s scary that ya’ll don’t understand how this stuff works!! Same thing with Term limits….without them more people will come to the Island and open companies and hire BERMUDIANS!!! Why are ya’ll acting so dang ignorant!! Are there any intelligent Bermudians??? When you are in dead, wouldnt it make sense for you to borrow money to help your situation or stay in debt!!!

  16. Bullseye says:

    While people don’t like the borrowing there is no choice and the train analogy is a good one. We don’t want to jackknife the train.

    Those screaming about the future of our kids should realise that we are living in the PLP’s future right now. The next 3 years will be the results of the seeds sown by the PLP. Things do not happen overnight. This is going to be a tough tough year. Remember who put you here.

    • Argosy says:

      ….and the BIU are only waiting for the weather to warm up before they get started! KFC, the docks, the BPSU being asked to take cuts and/or shorter work week….won’t be long. Then we will be treated to some really ugly green giants marching.

      • Building a better Bermuda says:

        You forgot about the start of the cruise ship season and the annual bus strike that accompanies that, just to make our valuable visitors feel more welcome.

  17. Privatize…that’s what the OBA NEEDS to do. They can privatize one or two schools (education isn’t free, tax payers pay for schools to operate and the pass rate is less than 50%)that will get rid of some waste.

    Privatize trash collection, small construction (PW takes months to build a bus stop, road paving, mechanics, transportation and a few other departments.

    The govt needs to become more mobile so that it can manuever in this economic depression that we are in. Yes, it was created by the previous party. We are sinking and very fast. Over one-third of the new billion will be used this fiscal year alone.

    OBA, you were voted into power because we didn’t like the way the previous govt was operating..we trusted that you had a plan. We hope this isn’t your plan.

    • Bullseye says:

      Privatization is on the table I am sure. BUT – the Unions will not be invited. Companies cannot run like Government does. Companies close under financial stress. A privately run bus company will not tolerate a drunk driver, or failure to show up to work or excessive unwarranted sick days for such behavior hurts the clients and the company. The Unions do not care about that. I do not see how privatisation can occur here unless Furbert is gone and someone with a more realistic approach to labour comes on board. Labour is now protected by it’s history instead of respected for it’s productivity and that is a huge problem.

  18. Bermudian says:

    PLP, I hope you are satisfied that you ruined this Island that you claim to love. I don’t like the road that OBA has had to take, but I understand its needed. IF and when u get us out of the ever drowning mess that the PLP left us in, please don’t squander our money as the previous Government did. Lord, I pray that the unqualified & incompetent PLP NEVER be voted back in. People, give the OBA a chance. They haven’t even been in power for 3 months.

    • For the record says:

      Did anybody hear the shadow minister asking to see the numbers.
      Nobody has shown us the numbers in the last 14 years.
      Except a dock that should have cost 30 mil, ended up costing 60 and will now need at least another 22 mil to be fixed. And yes the first ship will be here in about a month and I don’t see much happening up their.
      So it will cost us MORE money.
      We are going to loose a huge amount of revenue in fees, the businesses in dockyards will suffer.
      And yes the Taxi and Busses are still not sorted out.

  19. Future says:

    For all the parrots stating this raising of the ceiling was required due to the borrowing of the previous government, where does the rationalization end? Will the post-OBA government be justified in raising the ceiling to $4,000,000,000 because of the mess and inability to pay off even he interest payments “caused” by the OBA which was caused by the PLP which was caused by…the sheeple don’t seem to realize the debts are secured against not the government but YOU as a people including “YOUR” property. They also haven’t noticed yet how transient governments are and how accountability is completely incompatible with transients. In other words, the PLP have been kicked to the curb and the voters celebrate…yet are still stuck with $1.5b in debt and climbing. What good is accountability for those not around to be accountable?

    Hint: those spending this money, yesterday, today and tomorrow remain disconnected from the source and thus unaccountable. Stop and contemplate an entirely different governmental structure and arrangement based on a higher moral code of ethics. Otherwise, we will be having these same conversations for decades. And then we’ll have that conversation.

    Being able to blog and blame will be no consolation.