Press Release No. 17/513

IMF Staff Concludes Visit to the Bahamas

December 20, 2017

• The Bahamas’ real GDP is projected to grow 1.6 percent in 2017 and 2.5 percent in 2018.
• Turning state-owned enterprises self-sufficient and reforming the public pension system remain critical to ensure long-term fiscal sustainability.
• Strong compliance with anti-monetary laundering and counter financing of terrorism and tax transparency standards should help mitigate the withdrawal of Correspondent Banking Relationships and safeguard the integrity of the financial sector.

An International Monetary Fund (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).

At the conclusion of the visit Mr. Valencia issued the following statement:

“After a prolonged period of stagnation, The Bahamas’ real GDP is projected to grow 1.6 percent in 2017 and 2.5 percent in 2018 on the back of a stronger U.S. economy, the phased opening of Baha Mar, and foreign direct investment (FDI) related construction activity. Baha Mar opened its second hotel in mid-November, creating 3,500 jobs so far, and is on track to open its third and final hotel in the Spring of 2018. However, lifting growth in the medium term requires decisive action on structural reforms, particularly in the Energy sector and in improving the business environment. The 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.

“Following a sharp increase in the fiscal deficit to 5.8 percent of GDP in fiscal year 2017, the new administration has committed to reduce it to sustainable levels and has announced expenditure cuts across the board. As noted during the 2017 Article IV consultation, fiscal consolidation should have a strong focus on reducing current expenditure. In addition, turning state-owned enterprises self-sufficient and reforming the public pension system remain critical to ensure long-term fiscal sustainability. Introducing an effective fiscal rule, as part of a fiscal framework, should enhance fiscal discipline. 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 strengthening foreign reserves.

“Commercial banks remain well capitalized and liquid. Non-performing loans (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 non-performing loans (NPLs) by the Bank of The Bahamas. The Central Bank has also stepped up efforts to encourage banks to speed up the resolution of remaining NPLs.

“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. The planned addition of continuous AML/CFT supervision; the planned development of a permanent AML analytics unit; and the recent signing of the OECD’s  Multilateral Convention on Mutual Administrative Assistance in Tax Matters are welcome steps in this direction.

“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. The mission would like to thank the authorities and other interlocutors for their gracious hospitality and frank and open discussions.”