WASHINGTON, CMC – The Worldwide Financial Fund (IMF) says the Bahamian financial system has staged a outstanding restoration for the reason that COVID-19 pandemic, fueled by a robust rebound in tourism.
It’s mentioned that with financial exercise again to pre-Hurricane Dorian ranges, development is slowing, increasing by 1.8 % within the first half of 2024, constrained partly by restricted resort capability. Inflation is now modestly detrimental, however the price of dwelling stays excessive.
Nevertheless, the Washington-based monetary establishment mentioned that the fiscal place improved within the 2024 monetary 12 months, pushed by robust income efficiency and expenditure cuts. It mentioned the fiscal deficit narrowed to 1.3 % of gross home product (GDP) from 3.8 % of GDP within the 2023 monetary 12 months, whereas authorities debt fell to 78.8 % of GDP.
Financing prices have declined, pushed by international components, however gross financing wants stay excessive.
The IMF mentioned that development is anticipated to converge to its long-run potential of 1.5 % over the medium time period, and dangers to the outlook are balanced.
Capability constraints within the tourism sector are anticipated to turn into extra binding. Nonetheless, there are upside dangers from potential new resort development or a faster-than-anticipated growth within the short-term rental market.
The IMF mentioned fiscal vulnerabilities stay fixed threats primarily as a result of excessive gross budgetary financing wants and the ever-present danger from pure disasters.
The IMF’s govt administrators mentioned they agreed with the thrust of the workers appraisal, welcoming the “outstanding” restoration in tourism and financial exercise following Hurricane Dorian in 2019 and the Covid-19 pandemic.
Nevertheless, the administrators noticed that elevated public debt, structural bottlenecks to development, and excessive publicity to pure disasters proceed to pose important challenges and known as for sustained efforts to deal with these challenges.
They welcomed the Bahamian authorities’ dedication to scale back authorities debt to 50 % of GDP by the monetary 12 months 2031 and up to date steps to extend revenues. Nevertheless, they concurred that extra measures might be wanted to attain that focus on, together with introducing taxes on company and private revenue.
The administrators mentioned that these measures would additionally create house for precedence spending on infrastructure, training, and focused social applications. As well as, pension and state-owned enterprises (SOE) reforms could be important to comprise expenditure pressures.
The IMF administrators additionally welcomed efforts to enhance fiscal accountability, transparency, and effectiveness of debt administration operations. They beneficial that the reconstituted Fiscal Duty Council and the Public Sector Audit Committee be independently chosen.
They emphasised the necessity to restrict central financial institution financing to the federal government to assist scale back systemic liquidity and strengthen the credibility of the foreign money peg. They concurred that the monetary sector is resilient with ample liquidity and capital buffers.
The IMF administrators welcomed the progress in implementing the 2019 Monetary Sector Evaluation Programme (FSAP) suggestions. They inspired continued efforts to strengthen the Anti-Cash Laundering and Combating the Financing of Terrorism (AML/CFT) framework. Additionally they beneficial additional steps to develop monetary entry, corresponding to bettering information availability, investing in monetary literacy, and fostering monetary know-how innovation.
Additionally they emphasised that efforts to spice up long-term development ought to heart on structural reforms to enhance human capital, shut digitalization and information gaps, relieve capability constraints in tourism, scale back labor market informality, and struggle crime.
The IMF administrators welcomed the deliberate reforms to the electrical energy sector, given the anticipated constructive medium-term results on development and different macroeconomic indicators. Nevertheless, they pressured {that a} clear delineation of danger sharing between the non-public and public sectors is important to help these efforts.
