IMF Staff Concludes Visit to The Bahamas
IMF News, December 10, 2018
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- Published: December 10, 2018
Economic outlook and growth
- Visit dates: December 3-7, 2018.
- Real GDP growth projected to reach 2.3 percent in 2018 and 2.1 percent in 2019.
- Growth drivers identified:
- Increase in tourist arrivals.
- Expansion of hotel room and airlift capacity.
- Continued expansion of the U.S. economy.
- Policy guidance:
- Maintain strong fiscal and financial policies to bolster resilience and build buffers against less favorable external conditions.
- Advance reforms to achieve more inclusive growth over the medium term.
Fiscal developments and Fiscal Responsibility Law (FRL)
- Press Release No. 18/466; date: December 10, 2018.
- Fiscal performance:
- Fiscal deficit narrowed from 5.5 percent of GDP in FY 2017 to an estimated 3.3 percent in FY 2018.
- FY 2019 budget targets an overall deficit of 1.8 percent of GDP, supported by various revenue mobilization measures.
- FRL:
- Enactment of the Fiscal Responsibility Law (FRL) is welcomed as supporting fiscal sustainability and placing debt on a downward path.
- FRL implementation expected to increase transparency and enhance policy credibility.
- Expenditure and arrears:
- Fiscal consolidation should include decisive measures to contain expenditure growth in the short and medium term.
- Team welcomed transparent recognition of accumulated arrears and budgetary provisions to clear them, and plans to put in place robust expenditure control systems.
Financial sector health and reforms
- Banking system indicators (as of June 2018):
- Average capital to risk-weighted assets ratio across domestic institutions: 34 percent.
- Regulatory target ratio: 17 percent.
- Non-performing loans: 9.6 percent of total loans, down from 12.3 percent a year earlier.
- Recommendations and priorities:
- Speedy establishment of the credit bureau to enhance credit market efficiency, increase credit growth, and help financial inclusion.
- Recognize and manage risks from withdrawal of correspondent banking relationships.
- Sustain efforts to fully implement the Action Plan agreed with the Financial Action Task Force to increase compliance with international standards on Anti-Money Laundering and Combating the Financing of Terrorism.
Financial technology and central bank digital currency
- The Central Bank of The Bahamas is preparing to pilot a digital central bank currency.
- IMF team view:
- New financial technologies can foster financial inclusion.
- A gradual approach to piloting will help mitigate potential risks to the economy.
Disaster preparedness and risk-reduction
- Government plan to establish a disaster relief fund as part of a broader strategy for preparedness and risk reduction policies is welcomed.
Engagements and acknowledgements
- Mission led by Fabian Bornhorst.
- Meetings with:
- Honorable K. Peter Turnquest, Deputy Prime Minister and Minister of Finance.
- Mr. John Rolle, Governor of the Central Bank of The Bahamas.
- Other senior government officials and representatives of the private sector.
- Statement note: Views in the end-of-mission press release reflect IMF staff and do not necessarily represent the views of the IMF’s Executive Board; the mission will not result in a Board discussion.
Press Release No. 18/466 — International Monetary Fund, December 10, 2018.