This year's double contributions to the Sinking Fund mean that for every $1 Government collects in revenue, eight cents is paid to service debt.

Minister of Finance Paula Cox revealed the news during an update on Government's accounts yesterday, when she also detailed plans to pay off $210 million in debt by the end of 2016.

The Sinking Fund was established in 1993 to reduce or cancel public debt. Ms Cox said that during the tenure of the current Government, the balance on the fund has grown from $17 million to $79.7 million as of March 31, 2009.

Last year, Government postponed its annual contribution to the fund, and drew $20 million from it in order to meet interest payments on long-term debts.

However, the situation was amended during the March Budget, with Ms Cox announcing that Government will pay $28 million into the Sinking Fund this year $10 million in respect to 2009/10 and a further $18 million as the 2010/11 contribution. That will leave the fund with a balance of $82 million.

The balance is projected to grow over the next few years to reach around $160 million in 2014.

Ms Cox said Government plans to pay off $210 million in debt by the end of 2016 $120 million worth of senior notes that mature in 2014 and a further $90 million that mature in 2016.

In finance, senior debt, frequently issued in the form of a senior note, is debt that takes priority over other unsecured debt owed by the issuer.

"This demonstrates and illustrates Government's commitment to a sustainable debt management policy. What this means in layman's terms is that the Government is continuing to pay down on outstanding debt," said Ms Cox.

She then cited two different methods of analysing debt sustainability, saying they demonstrate "our debt levels remain low when compared to other developed countries".

One method is to analyse Bermuda's position in terms of the ratio between interest on long-term debt plus Sinking Fund contributions relative to Government revenue collections.

"For this Budget year, even when including both Sinking Fund contributions, this amount will be approximately eight percent. What this means is that for every $1 collected, eight cents is paid to service debt. Again, I suggest this is manageable and sustainable," said Ms Cox.

Another method measures debt in the context of Bermuda's gross domestic product (GDP) a measure of the Island's wealth.

"At the end of fiscal year 2009/10 Bermuda's net debt, excluding guarantees, was $764 million. The actual net debt to GDP ratio was about 12.7 percent," she said.

"This is manageable and sustainable for a small country with a GDP of an estimated $6 billion."

In comparison, the Cayman Islands has a 23.5 percent debt / GDP ratio, Switzerland's is 44.4 percent, the UK's is 71 percent and the US's is 83.9 percent.

"I share the debt/GDP ratios of these other jurisdictions for comparative purposes only. There is no intent for Bermuda's debt to mirror such levels," Ms Cox stressed.

She said that Government's debt management record prior to the financial crisis hitting in fall 2008 was one of "prudence and restraint" with "relatively all" debt targets achieved.

Since the crisis, gross Government debt has increased by $481 million, and stood at $826 million at the end of the 2009/10 fiscal year.

Michael Fahy, of the Bermuda Democratic Alliance, said of Ms Cox's plans: "I think they are very robust and quite possibly incredibly optimistic. I don't see on the balance sheet and in the budget how that will be achieved. They are going to have to start cutting costs across the board to achieve that.

"If it is eight cents in every dollar, the people of Bermuda have to ask the question 'where's the money gone? What's it been spent on to have us spending eight cents in every dollar on debt servicing?'"