IMF Staff Concludes Visit to the Bahamas

IMF News, December 20, 2017

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IMF Staff Concludes Visit to the Bahamas

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Bibliographic details

• Published: December 20, 2017

Economic outlook

• The Bahamas’ real GDP is projected to grow 1.6 percent in 2017 and 2.5 percent in 2018.
• Growth drivers cited:
  • Stronger U.S. economy.
  • Phased opening of Baha Mar (opened its second hotel in mid-November, creating 3,500 jobs so far; third and final hotel on track to open in the Spring of 2018).
  • Foreign direct investment (FDI) related construction activity.
• Policy-enabled support for medium-term growth:
  • Expected introduction of a credit bureau—with legislation currently in Parliament—should help improve the private sector’s access to credit and support growth in the medium term.
• Quoted assessment:
  • “Lifting growth in the medium term requires decisive action on structural reforms, particularly in the Energy sector and in improving the business environment.”

Fiscal position and public finances

• Fiscal outcomes and commitments:
  • Fiscal deficit rose sharply to 5.8 percent of GDP in fiscal year 2017.
  • The new administration has committed to reduce the fiscal deficit to sustainable levels and has announced expenditure cuts across the board.
• Fiscal policy priorities and measures recommended:
  • Fiscal consolidation should have a strong focus on reducing current expenditure.
  • Turn state-owned enterprises self-sufficient.
  • Reform the public pension system to ensure long-term fiscal sustainability.
  • Introduce an effective fiscal rule as part of a fiscal framework to enhance fiscal discipline.
• Market signal and reserves:
  • A recent successful foreign placement of a US$750 million bond reflects market confidence in the government’s commitment to fiscal discipline.
  • The placement has also helped strengthen foreign reserves.

Financial sector health and risks

• Commercial banks:
  • Commercial banks remain well capitalized and liquid.
• Non-performing loans (NPLs):
  • NPLs declined to 9.5 percent of total loans as of September, down from 11.3 percent in June, reflecting mainly a large disposal of NPLs by the Bank of The Bahamas.
  • The Central Bank has stepped up efforts to encourage banks to speed up the resolution of remaining NPLs.
• Correspondent banking and financial integrity:
  • Strong compliance with anti-monetary laundering and counter financing of terrorism (AML/CFT) and tax transparency standards should help mitigate the withdrawal of Correspondent Banking Relationships and safeguard the integrity of the financial sector.
  • Planned and recent steps to strengthen AML/CFT and tax transparency:
  • Planned addition of continuous AML/CFT supervision.
  • Planned development of a permanent AML analytics unit.
  • Recent signing of the OECD’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

Structural reforms and policy recommendations

• Key reform priorities emphasized by the mission:
  • Decisive action on structural reforms in the Energy sector.
  • Improvements to the business environment to support medium-term growth.
  • Passage and implementation of credit bureau legislation to improve access to credit.
  • Measures to make state-owned enterprises self-sufficient.
  • Reform of the public pension system.
  • Adoption of an effective fiscal rule within a fiscal framework.
  • Strengthening AML/CFT supervision and establishing a permanent AML analytics unit.
  • Continued progress on tax transparency (OECD convention signing).

Mission details and engagements

• Mission timing and purpose:
  • An IMF team led by Fabian Valencia visited the Bahamas from December 12 to 18, 2017, to review latest economic developments and lay the groundwork for the 2018 Article IV consultation (expected to take place in March 2018).
• Meetings:
  • The mission met with the 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.
• Acknowledgement:
  • “The mission would like to thank the authorities and other interlocutors for their gracious hospitality and frank and open discussions.”

Press Release No. 17/513 — December 20, 2017

References

• The Bahamas and the IMF
• Press Releases
• PRESS CENTER
• https://www.imf.org/en/home