The experts hired to advise the Bermuda Government on its fiscal progress believe the island faces greater risks now than it did a year ago that leave it vulnerable to negative economic shock.

The Fiscal Responsibility Panel, which today published its second annual assessment, said that June’s Brexit vote, November’s US election outcome, and the impending evaluation of the island’s anti-money laundering/counter-terrorism financing regime all presented the island with new challenges.

“The current high level of government debt — combined with very large potential liabilities from government guarantees and underfunded public pension and health insurance schemes — means that any negative shock resulting from these or other factors, internal or external, could have very serious economic consequences,” the report states.

“Reducing government debt and debt service costs must therefore remain an overriding priority.”

The panel is chaired by David Peretz, an independent consultant on international financial issues who has worked in the UK Treasury, the International Monetary Fund and the World Bank.

The other members are Jonathan Portes, Principal Research Fellow at the UK National Institute of Economic and Social Research, and Peter Heller, retired deputy director of the Fiscal Affairs Department of the International Monetary Fund, who has written extensively on public finance issues, pensions and healthcare, and long-term demographic challenges.

The report welcomed the proposals made by Bob Richards, the Minister of Finance, in February’s budget, which laid out plans for balancing the budget by 2018/19.

But it spells out the potential difficulties in implementing payroll tax reform, a new services tax and “the structural change in the way services are delivered” that the panel says is necessary for the government to reduce expenditure significantly.

The panel also highlights the demographic challenge of an ageing population and recommends phased increases in the retirement age and a serious debate on how to meet the cost of healthcare for increasing numbers of elderly people. It also suggests a more strategic approach on immigration policy to bring in more people of working age to support the island’s economy and its social insurance arrangements.

The Finance Ministry said the panel was asked to “review progress towards the Bermuda Government achieving a balanced budget by 2018-19 … [and] prospects for further progress towards meeting the aims of reducing debt and debt service to less than 80 per cent and 10 per cent of revenues, and for implementing the rule that net borrowing can only be considered to finance capital spending”.

The panel met with various institutions and individuals during research in Bermuda last month.

The panel’s report will be tabled in the House of Assembly when it reconvenes in February.

The full report is available by clicking on the icon under the Related Media heading on this webpage.