Government has raised its statutory debt ceiling to $1.25 billion — up 25 percent.

Bermuda governments have traditionally tried to keep the limit inside 10 percent of gross domestic product, but the latest rise takes it to more than 20 percent.

The move, announced by Finance Minister Paula Cox yesterday, came as the Government's debt and guarantees outstanding reached almost $990 million. In the next financial year, that figure is expected to top $1.1 billion.

This number includes the $200 million guarantee of Butterfield Bank's preference share issuance last year, which is accounted for as a liability even though it has not actually been paid out.

The increase "will provide an additional buffer of $250 million" to the statutory debt ceiling, Ms Cox said yesterday.

As the debt rises, so will the cost of servicing it. Interest paid on debt is projected to total $38.4 million in 2010/11.

Minister Cox said there had been "a concerted team effort across all Ministries to keep the purse strings tight while trying to address the heightened demands for public services in these difficult times".

However, expenditure for the year ending March 31, 2010, is estimated at $987.7 million — $21 million more than projected in last year's Budget, but $6.3 million less than the previous year's spending.

Government intends to ramp up spending by a further $70 million next year — an increase of 7.1 percent.

It has earmarked $144 million for capital expenditure, mostly to fund construction projects that are already under way.

Last year the Government drew $20 million from the Sinking Fund — established in 1993 for the purposes of paying off principal of long-term debt — to meet interest payments.

Ms Cox said the Government will pay $28 million into the Sinking Fund — $10 million in respect to 2009/10 and a further $18 million as the 2010/11 contribution, leaving the Fund with a balance of $82 million.

The interest payment and the Sinking Fund payment account for most of the $69 million increase in the Finance Ministry's budget for next year to $196.2 million.

The Budget figures show that Government is planning to raise 21 percent more from international company fees.

Projected revenue show that fees would rise by $11.8 million next year to $67.8 million, from an estimated $56 million in the current financial year.

Last year revenues from international company fees slumped more than 13 percent.

Shadow Finance Minister Bob Richards said he was concerned by the rising public debt.

"This amounts to a foisting off of current problems onto the next generation — and I don't think that's a fair thing to do," the United Bermuda Party MP said.

"We are spending about $40 million a year in interest at a time when interest rates are at historic lows.

"The chairman of the US Federal Reserve has said he won't be raising interest rates in the foreseeable future, but if the recovery starts to take place in the US, then rates will go up."

The debt had accumulated over the years as a result of a series of bad judgments made by the Government, he said.