Government plans to raise the debt ceiling by $200 million to accommodate its soaring borrowing requirements, after revenue fell short of projections while expenditure was higher than planned.The legal limit on what Government can borrow will rise to $1.45 billion from the current statutory limit of $1.25 billion, after Government yesterday projected its net cumulative debt would rise to $1.41 billion during the next fiscal year.With the latest increase, the ceiling has risen by more than $1 billion in the past four years, from the $375 million it was before the 2008 increase to $550 million.The April 1 increase in the debt ceiling will bring Bermuda’s debt to gross domestic product (GDP) ratio up to 24 percent.Ms Cox announced several ways in which Government would handle the rising debt, including the issuing of a local bond later this year and $50 million taken from the Sinking Fund to help make interest payments.“Debt is a natural and unavoidable part of economic life,” Ms Cox said in her statement to the House of Assembly yesterday. “It is neither good nor bad. The key is to ensure that borrowed funds are within an affordability limit and that the funds are used wisely.”Figures in yesterday’s Budget statement showed that the revenue and expenditure estimates made in last year’s Budget were each off by $70 million, according to revised estimates for the fiscal year ending March 31, 2012.The impact is a widening of the Budget deficit, which is set to exceed quarter of a billion dollars for the second year running in the current fiscal year. The revised estimate of $267 million is some $131 million greater than expected and greater even than the $254 million deficit recorded the year before.Revenue for the current fiscal year is expected to come in at $870 million, compared to the $940 million projected in last year’s Budget. For next year, Government expects revenue to rise to $910 million.Payroll tax, which was ten percent lower this year than had been forecast at $315 million, accounted for half the revenue shortfall. Next year, payroll tax is expected to bring in $312 million.The revised estimate for current expenditure this year is $971 million, while next year Government projects expenditure of $934 million.Major overspending areas this year included Hospitals, which was $18 million higher than estimated, Financial Assistance ($12 million higher), the Police ($11 million) and the Department of Education ($11 million).Interest on debt for this fiscal year was $70 million, in line with original estimates. In order to help service next year’s debt, Ms Cox announced she would use $50 million from the Sinking Fund to meet interest payments. Additionally, $35 million in interest payments will be paid out of the Consolidated Fund.The Sinking Fund was founded in 1993 for the purposes of paying off long-term debt principal. Next year Government will pay a contribution of $30.7 million to the Sinking Fund.“Is Bermuda’s national debt manageable?” Ms Cox said. “Yes. It can and will be paid off over time through the Sinking Fund and the development of new revenue streams.”Government is due to pay back the principal on two senior note issuances totalling $120 million in 2014. “The plan is to pay down both issues from proceeds in the Sinking Fund,” Ms Cox said.In 2012/13, Government expects to run a Budget deficit of $172 million.“Government proposes to finance this deficit in part by the issue of a local bond at a competitive rate of interest,” Ms Cox said. “This policy choice is intended to spur more economic activity in Bermuda and to stimulate local capital markets.“Surplus deposits in the banking system will likely achieve higher returns by transferring to the local government bond when it is issued later in 2012.”The Chamber of Commerce welcomed the idea.“The Chamber was particularly heartened by the announcement of the introduction of a public bond issue,” said economist Peter Everson, speaking on behalf of the Chamber.“This is something we have been very actively encouraging Government to consider since 2009. The bond issue will strengthen the investment sector and stimulate the capital markets, and provide much needed diversification in the investment industry.”However, the Chamber was less impressed with the use of $50 million from the Sinking Fund for interest payments on debt.“The Government’s intention to take money from the Sinking Fund to pay interest, and borrow from the pension funds, does nothing to change the reality that Government is spending far more than taxpayers can afford to pay,” Mr Everson added.“Government can only service its debt by reducing spending and increasing revenues and there are no signs of plans to do either in this budget.”