## PREFACE and SUMMARY — Scoping Mission (The Bahamas)

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---

### Project purpose and scope
- Begin a capacity development (CD) project between the Institute for Capacity Development (ICD) of the IMF and the authorities of The Bahamas.
- Initiated at the request of the Central Bank of The Bahamas (CBoB) to operationalize the Debt-Investment-Growth and Natural Disasters (DIGNAD) model to:
  - assess the macroeconomic and sectoral impacts of natural disasters; and
  - evaluate policy responses, including trade-offs between adaptation and regular public investment, as well as broader policy reforms.

### Mission details and engagements
- Scoping TA mission conducted in Nassau, The Bahamas, from November 17 to 21, 2025.
- Mission team:
  - Mr. Karim Barhoumi (mission chief)
  - Mr. Ha Nguyen (senior economist)
  - Mr. Tolga Tiryaki (senior economist)
- Meetings with senior officials included:
  - Mr. John A. Rolle (Governor of the CBoB)
  - Mr. Allan S. Wright (Head of the Research Department)
  - core team from the CBoB and the Ministry of Finance (MoF) involved in macroeconomic forecasting and policy formulation.
- Delivered a two-day hands-on training workshop on the DIGNAD model to the core team.

### Report objectives and limitations
- Objectives:
  - Convey the mission team’s assessment of the current toolkit, capacity, and institutional mechanisms for analyzing macroeconomic impacts of natural disasters.
  - Record the action plan agreed with the authorities during the mission to guide TA delivery and work commitments.
- Findings and recommendations are based on information available at the time of the mission in November 2025 and reflect the views and assessments of the IMF mission team.
- Main conclusions and recommendations presented to senior officials; ad referendum agreement on next steps. Report shared with authorities for input and comments.

### Purpose of the scoping mission (summary)
- Assess authorities’ capacity to incorporate climate and natural disaster risks into macroeconomic and macro-fiscal projections.
- Review existing analytical toolkit and institutional mechanisms.
- Provide initial training on the DIGNAD model.

### Project objectives for the authorities (expected capacity improvements)
- Strengthen capacity to:
  - assess macroeconomic impacts of debt-financed public infrastructure investment following natural disaster shocks; and
  - evaluate macroeconomic sustainability and growth trade-offs under alternative scenarios.
- Expected improvements: macroeconomic analysis, climate-resilience policy design, and reporting for IMF consultations and domestic forecasting.

### Economic context motivating the project
- Tourism and financial services account for about 85 percent of gross domestic product (GDP).
- The Bahamas is highly vulnerable to natural disasters; ability to simulate and evaluate disaster-related scenarios is central to resilient and sustainable growth strategies.
- Key macro facts and risks:
  - Natural disasters have caused damages averaging 3.2 percent of GDP annually over the past decade.
  - Projections suggest damages could increase by over 30 percent under higher global warming scenarios (The Bahamas: 2024 Article IV Staff Report).
  - GDP growth: 3.0 percent in 2023 and 3.4 percent in 2024.
  - Tourist arrivals: 9.7 million visitors in 2023.
  - Overall deficit narrowed to 1.2 percent of GDP in FY24 from 3.7 percent in FY23.
  - Government debt declined to below 80 percent of GDP.
  - Authorities aim to reduce debt to 50 percent of GDP by FY31.
  - Resilience investment needs: additional 1.8 percent of GDP annually in capital spending through 2030 (The Bahamas: 2024 Article IV Staff Report).

### Institutional and toolkit observations — findings and gaps
- Institutional coordination:
  - No formal coordinating body or macroeconomic working group linking CBoB and MoF for disaster-related macro-fiscal analysis.
  - Inputs generally exchanged informally via email; limited formal cooperation during forecasting rounds.
- CBoB analytical capacity and tools:
  - Maintains full-fledged macroeconomic framework based on the IMF’s Comprehensive Adaptive Expectations Model (CAEM), with progress in DSGE modeling and nowcasting.
  - Nowcasting framework uses a factor model and a BVAR approach.
  - Publications: Quarterly Economic Review and Monthly Economic and Financial Development Report.
- MoF analytical practices:
  - Medium-term fiscal framework; fiscal projections prepared using Excel-based partial equilibrium tools and do not incorporate natural disaster shocks.
  - Publications: monthly and quarterly fiscal reports, and the annual fiscal strategy report.
- Toolkit gaps:
  - Current models do not systematically capture disaster shocks, parameter calibration, or debt-investment-growth linkages.
  - Staff have a low to intermediate level of familiarity with DSGE models.
  - MATLAB is available at CBoB, but authorities prefer spreadsheet-based tools for cross-agency accessibility.
  - Preliminary DIGNAD work in MATLAB and Excel exists but is not operationalized or integrated with official data systems.
  - Damage assessments are ad hoc and not systematically incorporated into forward-looking macro models.
  - Sectoral inputs (tourism, construction, financial services) are trend-based and not shock-responsive; tourism accounts for roughly 50 percent of GDP directly and indirectly.

### Planned TA sequence, deliverables, and timeline
- Multi-stage engagement across November 2025 to May 2026 with buffer into Nov–Dec 2026:
  - Mission 1: Scoping and Diagnostic (November 17–21, 2025) — completed.
  - Mission 2: Calibration and policy analyses (February 2026, 1-week virtual) — objectives:
    - Support calibration of DIGNAD to The Bahamas using historical macroeconomic, fiscal, and disaster damage data.
    - Develop baseline and initial disaster scenarios, including standard reconstruction versus resilient adaptation options.
    - Provide guidance on Bahamian-specific extensions (tourism shocks, financing constraints, donor support).
    - Initiate development of user manual tailored to The Bahamas.
    - Expected outcome: preliminary calibrated DIGNAD model producing preliminary results.
  - Mission 3: Finalization, Manual, and Policy Presentation (May 2026, 1-week in-person) — objectives:
    - Finalize calibration and customization; finalize user manual; support policy presentation to senior policymakers.
    - Expected outcomes: operationalized DIGNAD model institutionalized within CBoB and MoF; trained staff able to run scenarios independently; manual delivered.
  - Buffer time (Nov–Dec 2026) for follow-up and resolution of difficulties.
- Agreed alignment:
  - DIGNAD will serve as a satellite tool to the CAEM framework under a separate ICD TA project.
- Expected capability by May 2026:
  - Authorities expected to independently produce baseline and disaster scenarios using DIGNAD, supported by a customized user manual.
- TA program components:
  - (i) hands-on training on DIGNAD for staff from CBoB and MoF;
  - (ii) a virtual mission to support model calibration and shock scenario design;
  - (iii) a final in-person mission to finalize the model, deliver a user manual, and prepare authorities for independent use.

### Institutional capacity, staffing, and software
- Primary TA beneficiaries: Research Department of the CBoB and the Ministry of Finance (MoF).
- Current staffing and readiness:
  - CBoB Research Department operates the preliminary DIGNAD setup internally with a small team; staffing limited and specialized expertise in disaster modeling still developing.
  - MoF provides fiscal projections but lacks dedicated staff for disaster-related scenarios.
  - Introductory training during scoping mission included nine staff members from CBoB and MoF; agreed core team size: ten staff members (including one from the MoF), coordinated by Mr. Allan Wright.
- Software and hardware:
  - MATLAB access available at CBoB; MoF staff primarily use Excel and do not currently have MATLAB access.
  - No reported issues with computer hardware, meeting rooms, or workstations.

### DIGNAD model: functions, strengths, and technical stack
- Model features:
  - Extension of the IMF’s Debt-Investment-Growth (DIG) model for small economies prone to natural disasters.
  - Quantifies disaster impacts via damages to private and public capital, temporary productivity losses, declines in investment efficiency, and reductions in creditworthiness.
  - Simulates GDP, debt, fiscal balances, and investment outcomes under alternative scenarios (standard vs resilient infrastructure investment, efficiency-enhancing reforms, financing mixes such as donor grants, concessional or commercial debt, domestic revenue mobilization).
  - Can be customized to account for reliance on tourism, hurricane vulnerability, and potential financing constraints.
  - Unique module to quantify potential donor savings from ex-ante resilience investments.
- Technical stack:
  - Excel front-end supported by a MATLAB/Dynare back-end.
  - Includes modules for validating realism of assumptions, aligning projections with historical patterns, and simulating public investment efficiency reforms.
- Policy relevance:
  - Enables comparison of ex-ante resilience investment versus ex-post reconstruction.
  - Captures trade-offs between protecting output and maintaining debt sustainability.
  - Recent country applications: Vanuatu, St. Lucia, Samoa, and Seychelles.

### Institutional strengthening opportunities and recommended actions
- Establish a formal macroeconomic working group or joint working group between CBoB Research Department and MoF to:
  - formalize regular collaboration and shared methodology for disaster-related macro-fiscal analysis;
  - align post-disaster assessments, macroeconomic projections, and fiscal planning within an integrated framework;
  - create a central repository and commonly agreed methodology for translating physical damages into fiscal and debt dynamics.
- Ensure accessibility for non-technical users by developing spreadsheet-based interfaces and integrating DIGNAD outputs with official data systems.
- Embed probabilistic disaster risks and resilience investment needs into medium-term fiscal planning and the fiscal framework.

### IMF–ICD and authorities’ commitments
- IMF–ICD to:
  - assist core team in calibrating, operating, documenting, and institutionalizing DIGNAD across a one-and-a-half-year TA program with three missions (two in-person, one virtual), remote training, and frequent virtual engagements;
  - organize hands-on training on scenario design, calibration methods, data handling, and communication of results;
  - provide guidance in customizing DIGNAD reporting capabilities for internal and external reporting.
- Authorities to:
  - designate and retain a core counterpart group within CBoB Research Department and MoF; ensure participation in training and missions scheduled for February and later in 2026;
  - provide necessary hardware, software, and data resources, including access to licensed Microsoft Excel, MATLAB, and reliable internet connections;
  - share all relevant data in a timely manner (national accounts, fiscal accounts, debt statistics, sectoral information related to tourism, construction, and disaster damages);
  - foster inter-institutional coordination, define responsibilities, and establish procedures for information sharing.

### Sustainability, documentation, and follow-up TA
- Documentation deliverables:
  - Complete set of manuals to be prepared: “developer’s manual” and “operations manual” documenting DIGNAD customization and update procedures.
  - Manuals to include guidance for scheduling disaster scenario rounds from receiving new data to producing final outputs.
  - Introductory training recorded for onboarding.
- Integration into policy analysis:
  - Authorities to validate customized DIGNAD at project conclusion and commit to integrating it into macroeconomic decision-making processes.
- Further TA:
  - IMF–ICD will endeavor to provide follow-up TA for extensions and applications, subject to prioritization by the Western Hemisphere Department of the IMF (WHD).

### Risks and mitigation measures
- Risk: Low staff skills and limited DSGE experience.
  - Mitigation:
    - Careful selection of core team members based on backgrounds and training performance.
    - Several hands-on trainings (scoping mission and follow-up virtual sessions) to build capacity before customization.
- Risk: Staff turnover creating onboarding barriers.
  - Mitigation:
    - Document economic foundations, calibration rationale, and operating procedures from the first technical mission; record training to facilitate onboarding.
- Risk: Data availability and quality constraints.
  - Mitigation:
    - Data requirements discussed and agreed early to allow time for collection and validation.
    - Use reasonable proxies (comparable countries, regional averages, literature values) where series are unavailable, with clear documentation.
    - Employ sensitivity analysis to assess robustness to calibration choices.

### Appendix A — Preliminary Action Plan (mission-level summary)
- Mission 1: Scoping and Diagnostic (November 17-21, 2025)
  - Activities: two-day introductory training on DIGNAD with hands-on exercises.
  - Expected outcomes: time-bound action plan; appointment of core counterpart team; consensus on customization scope; identification of resource requirements; tentative schedule through end-2026.
- Mission 2: Calibration and policy analyses (February 2026, 1-week virtual)
  - Activities: calibrate DIGNAD, develop baseline and disaster scenarios, guidance on Bahamian-specific extensions.
  - Expected outcome: calibrated draft DIGNAD model producing preliminary results; agreement on additional customization needs; strengthened technical capacity.
- Mission 3: Finalization, Manual, and Policy Presentation (May 2026, 1-week in-person)
  - Activities: finalize calibration/customization; finalize user manual; prepare policy presentation for senior policymakers.
  - Expected outcome: operationalized DIGNAD institutionalized within CBoB and MoF; trained staff able to run scenarios independently; manual delivered; policy results presented.
- Buffer time (Nov–Dec 2026): resolution of additional difficulties; follow-up on institutionalization; possible additional missions.

*IMF | The Bahamas  Debt-Investment-Growth and Natural Disasters Scoping Mission — PREFACE and SUMMARY (tarea2026045)*

### PREFACE _________________________________________________________________________________________ 4

### PREFACE

### Project purpose and scope
- This report marks the beginning of a capacity development (CD) project between the Institute for Capacity Development (ICD) of the International Monetary Fund (IMF) and the authorities of The Bahamas.
- Initiated at the request of the Central Bank of The Bahamas (CBoB), the project aims to operationalize the use of the Debt-Investment-Growth and Natural Disasters (DIGNAD) model to:
  - assess the macroeconomic and sectoral impacts of natural disasters; and
  - evaluate policy responses, including trade-offs between adaptation and regular public investment, as well as broader policy reforms.

### Mission details and engagements
- Scoping TA mission conducted in Nassau, The Bahamas, from November 17 to 21, 2025.
- Mission team:
  - Mr. Karim Barhoumi (mission chief)
  - Mr. Ha Nguyen (senior economist)
  - Mr. Tolga Tiryaki (senior economist)
- Meetings with senior officials included:
  - Mr. John A. Rolle (Governor of the CBoB)
  - Mr. Allan S. Wright (Head of the Research Department)
  - the core team from the CBoB and the Ministry of Finance (MoF) involved in macroeconomic forecasting and policy formulation.
- Delivered a two-day hands-on training workshop on the DIGNAD model to the core team.

### Report objectives and limitations
- Objectives:
  - Convey the mission team’s assessment of the current toolkit, capacity, and institutional mechanisms for analyzing the macroeconomic impacts of natural disasters.
  - Record the action plan agreed with the authorities during the mission to guide TA delivery and work commitments.
- Findings and recommendations are based on information available at the time of the mission in November 2025 and reflect the views and assessments of the IMF mission team.
- The mission presented main conclusions and recommendations to senior officials of the CBoB and reached an ad referendum agreement on next steps. The report has been shared with the authorities for input and comments.

### Acknowledgements
- The mission team thanks the authorities for collaboration and the CBoB for organization and support.
- Administrative assistance acknowledged: Ms. Fatma Ibrahim (ICD).
- Guidance and support acknowledged: IMF Bahamas country team.

---

### SUMMARY

### Purpose of the scoping mission
- At the request of the CBoB, a TA scoping mission was conducted in Nassau from November 17 to 21, 2025.
- The mission assessed:
  - the authorities’ capacity to incorporate climate and natural disaster risks into macroeconomic and macro-fiscal projections;
  - the existing analytical toolkit and institutional mechanisms; and
  - provided initial training on the DIGNAD model.

### Project objectives for the authorities
- Strengthen capacity to:
  - assess the macroeconomic impacts of debt-financed public infrastructure investment following natural disaster shocks; and
  - evaluate macroeconomic sustainability and growth trade-offs under alternative scenarios.
- Expected improvements: macroeconomic analysis, climate-resilience policy design, and reporting for IMF consultations and domestic forecasting.

### Economic context motivating the project
- Tourism and financial services account for about 85 percent of gross domestic product (GDP).
- The Bahamas is highly vulnerable to natural disasters; ability to simulate and evaluate disaster-related scenarios is central to resilient and sustainable growth strategies.

### Institutional and toolkit observations
- Scope to strengthen institutional framework by formalizing regular collaboration between the CBoB’s Research Department and the MoF, potentially via a joint working group.
- CBoB maintains a full-fledged macroeconomic framework based on the IMF’s Comprehensive Adaptive Expectations Model (CAEM), with progress in DSGE modeling and nowcasting.
- Current toolkit gaps:
  - does not systematically capture disaster shocks, parameter calibration, or debt-investment-growth linkages.
  - staff have a low to intermediate level of familiarity with DSGE models.
  - MATLAB is available, but authorities prefer spreadsheet-based tools for cross-agency accessibility.
- MoF has a medium-term fiscal framework; fiscal projections are prepared using Excel-based partial equilibrium tools and do not incorporate natural disaster shocks.

### Planned TA sequence and deliverables
- Multi-stage engagement:
  - Second, virtual mission planned for February 2026 to support calibration of the model using Bahamian data and institutional inputs.
  - Third, in-person mission envisaged later in 2026 to finalize the model, produce a user manual customized for The Bahamas, and assist in presenting results to policymakers.
  - Mission buffers included to follow up on institutionalization of the DIGNAD tool.
- Agreed alignment:
  - DIGNAD will serve as a satellite tool to the CAEM framework, which is being developed through a separate ICD TA project.
- Expected outcomes and timeline:
  - By May 2026, the authorities are expected to be able to independently produce baseline and disaster scenarios using DIGNAD, supported by a customized user manual.
  - The program is expected to be completed in 2026.
- TA program components:
  - (i) hands-on training on DIGNAD for staff from the CBoB and the MoF;
  - (ii) a virtual mission to support model calibration and shock scenario design;
  - (iii) a final in-person mission to finalize the model, deliver a user manual, and prepare the authorities for independent use.
- Results framework summarized in Appendix B.

---

### SECTION I. BACKGROUND INFORMATION

### A. The Bahamas’ macroeconomic context — key facts and risks
- Economic structure and vulnerabilities:
  - Tourism and financial services together account for about 85 percent of GDP.
  - The narrow base makes the economy highly vulnerable to external shocks, including shifts in global travel demand and natural disasters.
- Natural disaster impacts and projections:
  - Over the past decade, natural disasters have caused damages averaging 3.2 percent of GDP annually.
  - Projections suggest damages could increase by over 30 percent under higher global warming scenarios (The Bahamas: 2024 Article IV Staff Report).
  - Rising sea levels threaten beaches, coral reefs, and mangroves central to tourism and fisheries.
- Recent macroeconomic performance:
  - GDP growth: 3.0 percent in 2023 and 3.4 percent in 2024.
  - Tourist arrivals: 9.7 million visitors in 2023.
  - Inflation: fallen sharply with global energy and food prices, even turning slightly negative in mid-2024.
  - Labor market: unemployment fell to single digits for the first time since 2008.
- Fiscal developments:
  - Overall deficit narrowed to 1.2 percent of GDP in FY24 from 3.7 percent in FY23.
  - Government debt declined to below 80 percent of GDP.
  - Authorities aim to reduce debt to 50 percent of GDP by FY31.
  - Achieving FY31 target requires sustained fiscal consolidation, including new revenue measures such as the recently approved 15 percent Qualified Domestic Minimum Top-Up Tax on multinationals and pension reform.
  - Gross financing needs remain elevated due to short maturities and high borrowing costs.
- Resilience investment needs:
  - Meeting resilience investment needs estimated to require an additional 1.8 percent of GDP annually in capital spending through 2030 (The Bahamas: 2024 Article IV Staff Report).
  - Without greater revenue mobilization and access to concessional climate finance, these needs will be difficult to reconcile with fiscal sustainability targets.

### B. The authorities’ technical assistance request
- CBoB formally requested TA from ICD in June 2025 to develop and operationalize the DIGNAD model for The Bahamas.
- Authorities’ rationale:
  - DIGNAD provides critical insights into macroeconomic implications of natural disasters given the country’s high vulnerability and reliance on tourism and financial services.
  - The model allows calibration to country-specific macroeconomic indicators and simulation of the size, timing, and transmission channels of natural disasters.
  - Particularly relevant for assessing trade-offs between debt-financed public infrastructure investment, fiscal sustainability, and growth resilience.
- Prior internal work:
  - CBoB Research Department initiated preliminary work using MATLAB and Excel interfaces but recognized need for IMF support to build staff capacity and adapt the toolkit.
- TA request specifics:
  - Multi-phase TA program beginning with scoping and training, followed by calibration support, and culminating in a fully customized model and user manual for integration into the policy framework.
- IMF response:
  - In August 2025, the IMF confirmed support for The Bahamas’ request. A technical team led by ICD will work with the Central Bank to establish a timetable and work program.

---

### SECTION II. SCOPING MISSION FINDINGS AND CONCLUSIONS

### A. Introduction — mission scope and methodology
- Scoping mission: five-day mission in Nassau between November 17–21, 2025.
- Inputs used: questionnaires provided by the CBoB, discussions with counterparts, feedback from participating institutions, and the scoping mission meeting agenda (Annex C).
- Focus: capacity to quantify macroeconomic and sectoral costs of natural disasters and evaluate policy trade-offs in building resilience.
- DIGNAD use cases examined:
  - simulate economic and fiscal consequences of disasters, including impacts on GDP, debt, deficits, and investment dynamics;
  - compare alternative policy responses, such as standard versus resilient public infrastructure investment, efficiency-enhancing reforms, and different financing mixes (grants, taxes, concessional borrowing, or commercial debt).

### B. Institutional setup — findings and gaps
- Current institutional arrangement:
  - CBoB and MoF are the main institutions involved; no formal coordinating body with a mandate comparable to a technical committee for disaster-related macroeconomic and fiscal analysis.
  - CBoB’s Research Department leads development of analytical tools (e.g., DIGNAD for CBoB forecasts/projections and publications).
  - MoF responsible for fiscal policy formulation, budget preparation, and the tagging of climate-related expenditures.
- CBoB analytical toolkit and outputs:
  - Macroeconomic framework based on the IMF’s CAEM used to produce macroeconomic forecasts; forecasts expected to be published in the near future.
  - Nowcasting framework using a factor model and a BVAR approach.
  - Publications: Quarterly Economic Review and Monthly Economic and Financial Development Report.
- MoF analytical practices and outputs:
  - Medium-term fiscal framework that incorporates climate and natural disaster mitigation and adaptation strategies.
  - Fiscal projections prepared using Excel-based partial equilibrium tools.
  - Publications: monthly and quarterly fiscal reports, and the annual fiscal strategy report.
- Coordination and data exchange:
  - No macroeconomic working group bringing together the CBoB and the MoF.
  - Formal cooperation and structured discussions during forecasting rounds are limited; inputs generally exchanged informally via email.
- Capacity and operationalization constraints:
  - Research Department is main custodian of macroeconomic modeling capacity; staff have uneven experience with DSGE modeling and nowcasting.
  - Preliminary adaptation of DIGNAD undertaken using MATLAB and Excel, but full operationalization requires broader institutional buy-in and cross-agency collaboration.
  - Need to ensure accessibility for non-technical users, particularly through spreadsheet-based applications.
- Institutional strengthening opportunity:
  - Establish a more unified process linking natural disaster shocks, resilience investments, and macroeconomic sustainability assessments.
  - Enhance collaboration across agencies to ensure consistent and coordinated analytical framework for debt projections, disaster risk analysis, and resilience planning.

### C. The TA beneficiary — status of current tools and readiness
- Existing analytical tools:
  - CBoB’s Research Department has developed elements of an integrated, full-fledged macroeconomic framework, but it is not calibrated to capture disaster-related shocks.
  - Preliminary work undertaken using MATLAB and Excel to adapt DIGNAD.
  - The tool has not yet been operationalized for policy use and is not integrated with official data systems.
- Readiness and next steps:
  - Full operationalization of DIGNAD requires:
    - broader institutional buy-in;
    - greater cross-agency collaboration (CBoB and MoF);
    - adjustments to ensure accessibility and integration with official data systems;
    - calibration with Bahamian data and institutional inputs (planned virtual mission in February 2026).

---

*IMF | The Bahamas  Debt-Investment-Growth and Natural Disasters Scoping Mission — PREFACE and SUMMARY (tarea2026045)*

### 20. The Central Bank’s Research Department operates the preliminary setup internally, but

### 20. The Central Bank’s Research Department operates the preliminary setup internally, but

### Institutional capacity and coordination
- Current setup:
  - The Central Bank of The Bahamas (CBoB) Research Department operates the preliminary DIGNAD setup internally, but broader institutional participation remains limited.
  - No meetings of an informal macroeconomic working group focused on disaster-related scenarios currently exist.
  - Coordination across institutions is absent, with no shared methodology for incorporating natural disasters into fiscal and debt projections.
- Primary beneficiaries of the TA:
  - Research Department of the CBoB and the Ministry of Finance (MoF).
  - Strengthening these institutions’ capacity to apply the DIGNAD model is expected to enhance cross-agency collaboration on disaster costing and macroeconomic risk analysis.
  - Staff from both institutions expected to benefit from capacity development (CD) in scenario design, model-based policy analysis, and assessment of climate-related macroeconomic risks.
- Staffing and institutional roles:
  - CBoB Research Department plans to manage preliminary DIGNAD setup with a small team of economists; staffing remains limited and specialized expertise in disaster modeling is still developing.
  - MoF provides fiscal projections but does not yet have dedicated staff working on disaster-related scenarios.
  - Authorities expressed interest in strengthening staffing resources over the course of the project, subject to budgetary and administrative approvals.
  - Introductory training delivered during the scoping mission included nine staff members from the CBoB and the MoF.
  - Agreed core team size: ten staff members (including one from the MoF), coordinated by Mr. Allan Wright.

### Material resources and software
- Software access:
  - MATLAB software availability is essential for conducting and executing simulation analyses using the DIGNAD toolkit.
  - CBoB staff have access to various numerical packages, including MATLAB.
  - MoF staff primarily use Excel for data management and forecasting and do not currently have access to MATLAB.
- Hardware and facilities:
  - Both agencies reported no issues regarding access to computer hardware, meeting rooms, or workstations.

### Existing disaster-related tools and practices — limitations and gaps
- Current practices:
  - CBoB and MoF do not currently use a standardized tool to quantify macroeconomic costs of natural disasters.
  - Damage assessments are typically undertaken by the Disaster Risk Management Authority after major hurricanes using ad hoc methods or externally provided estimates.
  - A team is dispatched to assess loss and damage after every natural disaster and estimates are reported to the Government to inform response and recovery efforts.
  - These assessments are not systematically incorporated into a forward-looking model to evaluate macroeconomic consequences.
- Major limitations:
  - Absence of a structured framework to distinguish baseline projections, disaster shocks, and policy responses, hindering assessment of incremental fiscal costs and comparison of resilience strategies.
  - Translation of physical infrastructure damages into debt dynamics, fiscal balances, and growth trajectories remains inconsistent across institutions.
  - Current tools do not systematically capture policy trade-offs involved in disaster response and adaptation, including no framework to compare standard reconstruction with resilient investment options or to assess financing-mix efficiency (e.g., grants, concessional loans, domestic borrowing, or revenue mobilization).
  - Sectoral inputs relevant for disaster analysis (tourism, construction, financial services) are primarily trend-based and do not incorporate potential shocks.
  - Tourism accounts for roughly 50 percent of GDP directly and indirectly and is especially vulnerable to hurricanes and storm surges; this exposure is not explicitly modeled in current projections.
  - Department of Tourism collects monthly tourist-arrival data, which can support more dynamic and shock-responsive forecasting.
- Institutional strengthening opportunities:
  - Align post-disaster assessments, macroeconomic projections, and fiscal planning within an integrated framework supported by a central repository and a commonly agreed methodology.
  - Streamline data flows, clarify institutional responsibilities, and embed disaster scenarios within a unified analytical tool to improve efficiency, institutional learning, ownership, and policy usability.
  - Integrate probabilistic disaster risks and resilience investment needs into the fiscal framework and medium-term fiscal planning.

### Proposed Action Plan (timing, missions, and expected outcomes)
- Overall program:
  - Structured capacity-development program centered on the Disaster-Investment-Growth-Natural Disasters (DIGNAD) model.
  - Program period: November 2025 to May 2026.
  - Consists of three missions and includes buffer missions; phased approach with remote support through videoconferences and written exchanges.
- Mission 1: Scoping and Diagnostic (November 17-21, 2025)
  - Objectives:
    - Assess current practices for quantifying disaster-related costs and evaluating policy trade-offs.
    - Review existing use of post-disaster assessments and macroeconomic risk reporting.
    - Assess data quality and availability (e.g., GDP, debt, fiscal accounts, disaster damages).
    - Evaluate institutional setup, capacity, coordination and information-sharing mechanisms between CBoB, MoF, Department of Statistics, and Ministry of Disaster Preparedness, Management and Reconstruction (or DRM authority).
    - Deliver a two-day introductory training on the DIGNAD toolkit with hands-on exercises using sample data.
  - Expected outcomes:
    - Agreement on a time-bound action plan detailing commitments of authorities and IMF–ICD.
    - Appointment of a core counterpart team within CBoB and MoF with a designated project lead.
    - Consensus on scope of customization for The Bahamas and identification of resource requirements.
    - Tentative schedule of virtual and on-site assistance through end-2026.
- Mission 2: Calibration and policy analyses (February 2026, 1-week virtual)
  - Objectives:
    - Support calibration of DIGNAD to The Bahamas using historical macroeconomic, fiscal, and disaster damage data.
    - Develop baseline and initial disaster scenarios, including standard reconstruction versus resilient adaptation options.
    - Provide guidance on Bahamian-specific extensions (tourism shocks, financing constraints, donor support).
    - Initiate development of user manual tailored to The Bahamas (led by authority).
  - Expected outcome:
    - Preliminary calibrated DIGNAD model producing preliminary results; agreement on additional customization; strengthened technical capacity of counterpart team.
- Mission 3: Finalization, Manual, and Policy Presentation (May 2026, 1-week in-person)
  - Objectives:
    - Finalize calibration and customization of DIGNAD, incorporating agreed extensions and refinements.
    - Finalize development of user manual tailored to The Bahamas (led by authority).
    - Support authorities in preparing a policy presentation of DIGNAD results for senior policymakers and stakeholders.
  - Expected outcomes:
    - Operationalized DIGNAD model institutionalized within CBoB and MoF.
    - Trained staff able to run scenarios independently; manual delivered; policy results presented to decision-makers.
- Buffer time (Nov–Dec 2026)
  - Objectives: resolution of additional difficulties, follow-up on institutionalization, possible additional missions.
- Remote support:
  - IMF ICD TA team to provide remote assistance between missions through videoconferences and written exchanges.
- Commitments by authorities during program:
  - Provide data, allocate staff, coordinate across agencies; ensure participation in training, virtual missions, and TA missions scheduled for February and later in 2026.

### DIGNAD model: functions, strengths, and alignment
- Model description:
  - DIGNAD is an extension of the IMF’s Debt-Investment-Growth (DIG) model for small economies prone to natural disasters.
  - Quantifies disaster impacts via damages to private and public capital, temporary productivity losses, declines in investment efficiency, and reductions in creditworthiness.
  - Simulates GDP, debt, fiscal balances, and investment outcomes under alternative scenarios (standard vs resilient infrastructure investment, efficiency-enhancing reforms, financing mixes such as donor grants, concessional or commercial debt, domestic revenue mobilization).
  - Can be customized to account for reliance on tourism, hurricane vulnerability, and potential financing constraints.
- Policy relevance and applications:
  - Enables comparison of costs and benefits of investing in resilience ex-ante versus financing reconstruction ex-post.
  - Captures trade-offs such as protecting output versus maintaining debt sustainability, or higher debt now versus potentially higher debt later if disasters strike.
  - Recent applications include analyses for Vanuatu, St. Lucia, Samoa, and Seychelles.
  - For The Bahamas, disasters can cause losses averaging over 3 percent of GDP annually, highlighting the need to embed such a framework into the policy toolkit.
- Toolkit features and technical stack:
  - Excel front-end supported by a MATLAB/Dynare back-end.
  - Includes modules to validate realism of assumptions, align projections with historical patterns, and simulate public investment efficiency reforms.
  - Unique module to quantify potential donor savings from ex-ante resilience investments.
  - Supports customized scenarios, robustness checks, and communication of policy trade-offs to domestic and international stakeholders.
- Alignment with other projects:
  - DIGNAD will serve as a satellite tool to the CAEM framework currently being developed through a separate ICD TA project, providing disaster-risk inputs to CBoB’s medium-term forecasts and macroeconomic policy decisions.

### IMF–ICD and authorities’ commitments
- IMF–ICD commitments:
  - Assist a core team from CBoB and MoF in calibrating, operating, documenting, and institutionalizing DIGNAD tailored to the Bahamian economy through a one-and-a-half-year TA program encompassing three missions (two in-person, one virtual), remote training, and frequent virtual engagements.
  - Organize hands-on training covering scenario design, calibration methods, data handling, and communication of results; finalize training to guide authorities in producing and presenting policy scenarios.
  - Provide guidance in customizing reporting capabilities of DIGNAD to support internal policy discussions and external reporting (e.g., IMF Article IV consultations, macroeconomic assessment, climate finance negotiations).
  - Ensure timely delivery of the agreed action plan, including training, customization, documentation, outputs, and integration into policy processes.
- Authorities’ commitments:
  - Ensure retention of essential staff and designate a core counterpart group within CBoB Research Department and MoF; members should participate fully in training sessions, virtual missions, and TA missions scheduled for February and later in 2026.
  - Provide necessary hardware, software, and data resources, including access to recent licensed versions of Microsoft Excel, MATLAB and other tools compatible with the Excel-based DIGNAD toolkit, and reliable internet connections for virtual missions.
  - Share all relevant data for calibrating and operating DIGNAD in a timely manner, including national accounts, fiscal accounts, debt statistics, and sectoral information related to tourism, construction, and disaster damages.
  - Foster inter-institutional coordination, define responsibilities, establish procedures for information sharing, and review progress to provide feedback at key steps (calibration, scenario testing, reporting).

### Sustainability, documentation, and follow-up TA
- Documentation:
  - IMF–ICD will guide the core team in preparing a complete set of manuals, including a “developer’s manual” and an “operations manual,” documenting how DIGNAD is tailored to the Bahamian economy and how it can be updated.
  - Manuals will include guidance for scheduling disaster scenario rounds from receiving new data to producing final outputs for policymakers.
  - Introductory training delivered during the scoping session will be recorded.
- Integration into policy analysis:
  - At project conclusion, authorities will validate the customized DIGNAD and commit to integrating it into macroeconomic decision-making processes, defining processes for scenario analysis and outputs to inform policy debates and planning.
- Further TA:
  - IMF–ICD will endeavor to provide follow-up TA for further extensions and applications, at authorities’ request and subject to prioritization by the Western Hemisphere Department of the IMF (WHD).

### Risks and mitigation measures
- Identified risks:
  - Low staff skills: core team has diverse backgrounds and limited prior experience in DSGE models; potential disincentives and lack of motivation could hamper commitment.
    - Mitigation measures:
      - Careful selection of core team members based on backgrounds and demonstrated skills during introductory training.
      - Several hands-on trainings starting from the scoping mission and follow-up virtual sessions to build solid understanding before customization.
  - Staff turnover: technical nature may create entry barriers for new staff joining the core group or those operating the model after project conclusion.
    - Mitigation measures:
      - Document economic foundations, calibration rationale, and operating procedures throughout the project; begin documentation from the first technical mission; review progress and provide feedback after each mission; recorded introductory training to facilitate onboarding.
  - Data availability and quality: some data gaps may remain despite commitments, potentially constraining calibration choices or delaying customization steps.
    - Mitigation measures:
      - Data requirements discussed and agreed early in the scoping mission to allow time for collection and validation.
      - Use reasonable proxies where key series are unavailable or incomplete (comparable or neighboring countries, regional averages, standard literature values), with clear documentation of assumptions.
      - Employ sensitivity analysis to assess robustness of results to alternative calibration choices.

*IMF | The Bahamas Debt-Investment-Growth and Natural Disasters Scoping Mission (selected sections).*

### APPENDIX A: PRELIMINARY ACTION PLAN

### APPENDIX A: PRELIMINARY ACTION PLAN

### Mission 1: Scoping and Diagnostic (November 17-21, 2025)
- Objective: Assess current practices for quantifying disaster-related costs and evaluating policy trade-offs.
- Assessment areas:
  - Existing use of post-disaster assessments and fiscal risk reporting
  - Data quality and availability (e.g., GDP, debt, fiscal accounts, disaster damages)
  - ✓ Institutional setup and capacity of officials in charge of macro-fiscal analysis
  - Coordination and information-sharing mechanisms between the CBoB, MoF, Department of Statistics, and Ministry of Disaster Preparedness, Management and Reconstruction (or, DRM authority)
  - ✓ Integration of disaster analysis into policy formulation and decision-making
- Activities:
  - Deliver a two-day introductory training on the DIGNAD toolkit, with hands-on exercises using sample data.
- Expected outcome: Agreement on a time-bound action plan detailing the commitments of the authorities and IMF–ICD, including:
  - ✓ Appointment of a core counterpart team within CBoB and MoF to operate and curate the DIGNAD model, with a designated project lead
  - ✓ Consensus on the scope of customization needed for The Bahamas
  - ✓ Identification of resource requirements, including data access, software, and connectivity
  - ✓ Tentative schedule of virtual and on-site assistance through end-2026

### Mission 2: Calibration and policy analyses (February 2026, 1-week virtual mission)
- Objective: Support calibration of the DIGNAD model to The Bahamas and develop initial scenarios.
- Activities:
  - Support calibration of the DIGNAD model using historical macroeconomic, fiscal, and disaster damage data.
  - Develop baseline and initial disaster scenarios, including standard reconstruction versus resilient adaptation options.
  - Provide guidance on incorporating Bahamian-specific extensions, such as tourism shocks, financing constraints, and donor support.
- Expected outcome:
  - A calibrated draft DIGNAD model producing preliminary results
  - Agreement on additional customization needs
  - Strengthened technical capacity of the counterpart team

### Mission 3: Finalization, Manual, and Policy Presentation (May 2026, 1-week in-person mission)
- Objective: Finalize and institutionalize the DIGNAD model and deliver operational tools and communications materials.
- Activities:
  - Finalize calibration and customization of the DIGNAD model, incorporating agreed extensions and refinements.
  - Develop a user manual tailored to The Bahamas (led by authority).
  - Support the authorities in preparing a policy presentation of DIGNAD results for senior policymakers and stakeholders.
- Expected outcome:
  - Operationalized DIGNAD model institutionalized within the CBoB and MoF
  - Trained staff able to run scenarios independently
  - Manual delivered
  - Policy results presented to decision-makers

### Buffer time (Nov –Dec 2026)
- Purpose:
  - Resolution of additional difficulties in the operation of the tool
  - Follow-up on the institutionalization of the tool
  - Possible additional missions

*APPENDIX A: PRELIMINARY ACTION PLAN*

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_Source: https://www.imf.org/-/media/files/publications/tar/2026/english/tarea2026045.pdf_