Effective public debt management has emerged as a crucial issue for many governments as states increasingly seek to fund development while navigating transparency demands and rapid technological advancements. The case of The Bahamas offers a notable example of a nation that has successfully reformed its approach to debt management, positioning itself as a leader in market development and policy effectiveness.
In 2021, the Commonwealth Secretariat launched the ‘Strengthening of Public Debt Management Framework and Developing Government Bond Market in The Bahamas’ project, a collaborative initiative with the Government of The Bahamas. This project was implemented with technical support from the UNDP Jamaica Office and funding from the India-UN Fund. Over time, this initiative has evolved into a model of success, offering valuable insights for other nations, particularly in the Caribbean, that face similar market challenges.
A recent gathering in London saw senior officials from 15 Commonwealth nations come together to examine the key challenges and achievements of The Bahamas’ public debt management reforms. The event provided an opportunity for participants to engage in peer-to-peer learning, which The Commonwealth has championed as an efficient way to share best practices. The Commonwealth Secretary-General, the Rt Hon Patricia Scotland KC, emphasized the value of collaboration, stating that when one member country invests resources to develop a program, others can benefit without needing to replicate those investments.
Secretary-General Scotland highlighted that many small states face disproportionately high debt-to-GDP ratios, exceeding global averages. These countries also struggle with limited access to concessional development financing, which is essential for economic growth and resilience against external shocks. The lack of affordable financing options often forces small states to resort to less favorable borrowing terms, leading to a cyclical accumulation of high debt burdens. She described this situation as a “vicious cycle” that requires collective action and innovative solutions to break.
Representatives at the workshop also heard from Mr. Sujit Ghosh, Deputy High Commissioner of India to the United Kingdom, who underscored the importance of national ownership and leadership in addressing public debt issues. He advocated for greater solidarity among countries in the Global South as they seek to reverse the trend of unsustainable debt. Ms. Rabab Fatima, High Representative for the Least Developed Countries, Landlocked Developing Countries, and Small Island Developing States, and Ms. Dima Al-Khatib, Director of the United Nations Office for South-South Cooperation, delivered additional messages of support, urging for collective efforts in overcoming these challenges.
Over the course of the three-day event, discussions were held under the Chatham House Rule, allowing participants to share openly about the institutional obstacles they face. One of the recurring themes was the challenge of communicating debt management strategies to various stakeholders, particularly state-owned enterprises (SOEs), as well as the importance of enacting public finance management legislation to support these efforts.
Ms. Wendy Craigg, a consultant to the Ministry of Finance in The Bahamas and the in-country consultant for The Bahamas Project, provided further insight into the unique circumstances of her country. She noted that while many nations at the workshop were eligible to borrow from the World Bank, The Bahamas no longer qualified for such support due to its elevated GDP per capita. As a result, the country had to secure financing from commercial markets, which often carry higher interest rates.
Despite these challenges, Ms. Craigg explained that The Bahamas’ debt management program was able to progress smoothly thanks to the comprehensive support it received from The Commonwealth. She attributed the program’s success to the strong collaboration between stakeholders, clear objectives, and consistent monitoring of deliverables. However, she acknowledged that the absence of a formal legislative framework posed an initial obstacle.
In response, the Commonwealth Secretariat provided draft legislation to help solidify The Bahamas’ debt management system. According to Ms. Craigg, the introduction of this legislation served as a critical turning point, establishing transparency and unifying previously fragmented regulations into one cohesive document. This legislative framework, she noted, set the foundation for the project’s overall success.
The experience of The Bahamas offers valuable lessons for other small states grappling with public debt challenges. As countries work together to strengthen their debt management capabilities, the principles of transparency, collaboration, and legislative reform will remain essential in ensuring sustainable economic growth and financial stability.
