February 2019 was the last time a finance minister predicted a Budget surplus. Based on that prediction, we would have been well on our way to paying down our national debt. No one knew that a pandemic — a black swan — lurked. Now in 2024, another finance minister predicts a Budget surplus. This time, there are arguably more downside risks than in 2019.

This raises the question, how likely are we to realise an additional $780 million — a more than 50 per cent increase in tax revenue — through the untested corporate income tax? We should be cautious about counting our chickens — CIT of $375 million — before they are hatched in 2026.

And there are other questions about the degree to which the Government can meaningfully reduce the cost of living through tax breaks. Customs duties on most staples are already at zero and other foods are at 5 per cent. While cuts on fuel duties will bring immediate relief to all households, it will disincentivise the adoption of renewables — an indispensable feature of energy security and net zero.

A more effective way to address cost-of-living issues is to target the most vulnerable — not with tax relief, but with conditional cash transfers. Topping up low-income household budgets with additional income allows them to better afford expensive food and electricity. Tax cuts, on the other hand, are for everyone, regardless of their economic status.

The world is full of uncertainties but that does not mean we shouldn’t make predictions or fashion plans. Our international reinsurance sector, the source of economic growth, thrives in an uncertain world. But our plans must consider the fragility of relying heavily on one economic pillar and the rest of the world for life’s essentials.

Economic growth powered solely by international business cannot solve our problem of fragility. Nor can growth generate enough tax revenue to reduce the debt without first broadening the tax base. Economic growth powered solely by international business can make us more vulnerable as we rely more and more on one economic pillar for jobs, tax revenue, foreign currency and social stability.

The growth that we saw in 2021 (5.4 per cent) and 2022 (6.4 per cent), while impressive, has put international business as the No 1 private-sector employer and payer of more than half of all payroll taxes despite accounting for only 15 per cent of the labour force. International business also accounts for half of all foreign currency earned. Add to that the possibility of IB paying an additional $780 million in tax revenue. That would likely mean that more than half of all tax revenue will come from IB. Wisdom dictates that we should not put too many eggs in one basket; and that we not rely on one source for the lion’s share of tax revenue. Additionally, I don’t think we have thought through the political-economic implications of IB paying the lion’s share of our tax bill.

Moreover, the confluence of our inherent economic fragility with greater downside risks today than in 2019, with larger government debt, severely compromises our ability to borrow on international capital markets should another black swan grace our shores.

Unwittingly, our leaders committed the original sin: borrowing solely in US dollars to fund our $3.344 billion debt. The sin is the assumption that one Bermuda dollar will always exchange for one US dollar. It has been that way since 1970. Should the one-for-one relation slip, then the taxpayer will pay more Bermuda dollars for every US dollar owed to foreign investors. This is not pessimism; it is a recognition that we live in a world of extreme events, of black and grey swans. There is no threat to par at present. But our debt exists as US dollar bonds with ten-year lifespans. We consistently save more than $1 billion in foreign currency each year.

My concern is that we don’t get suckered into a false sense of security believing that we can keep calm and carry on. It’s for this reason that I argue that debt reduction is the No 1 economic priority.

• Craig Simmons is an economist and former lecturer at the Bermuda College