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The Bahamas: Staff Report for the 2016 Article IV Consultation—Informational Annex

Author(s):
International Monetary Fund. Western Hemisphere Dept.
Published Date:
July 2016
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Fund Relations

(As of March 31, 2016)

Membership Status: Joined August 21, 1973; Article VIII

General Resources Account:
SDR MillionsPercent of Quota
Quota182.40100.00
Fund holdings of currency163.1289.43
Reserve position in the Fund19.2910.57
SDR Department:
SDR MillionsPercent of Quota
Net cumulative allocation124.41100.00
Holdings54.1543.50

Outstanding Purchases and Loans: None

Latest Financial Arrangements: None

Projected Payments to the Fund:

(SDR Million; based on existing use of resources and present holdings of SDRs):

Forthcoming
20162017201820192020
Principal
Charges/
Interest0.030.040.040.040.04
Total0.030.040.040.040.04

Exchange Rate Arrangement

The Bahamas has a conventional fixed peg arrangement, with the Bahamian dollar pegged to the U.S. dollar at B$1 per US$1. The Bahamas has accepted the obligations of Article VIII, Sections 2, 3, and 4 of the Articles of Agreement and maintains an exchange system that is free of restrictions on the making of payments and transfers for current international transactions. There have been no changes in exchange restrictions since the last Article IV consultation.

Assessment of Data Adequacy for Surveillance:

Data provision is broadly adequate for surveillance. In particular, all critical macroeconomic data, including comprehensive central government finance statistics, are regularly published in the Central Bank of the Bahamas’ “Monthly Economic and Financial Developments” and “Quarterly Statistical Digest”. However, the authorities have yet to develop the institutional capacity for the compilation of international investment position (IIP) statistics and general government accounts data. Also, The Bahamas has still not started compiling balance of payments statistics consistent with the Balance of Payments Manual 6. Staff continues to support the authorities’ efforts towards addressing data gaps, including continuing technical assistance to compile and publish quarterly national accounts and IIP statistics.

Last Article IV Consultation

The Bahamas is on a 12-month consultation cycle. The last Article IV consultation was concluded by the Executive Board on June 8, 2015 (IMF Country Report No. 15/75).

Technical Assistance
DepartmentDatesPurpose
CARTACJanuary 2011CPI Revision
CARTACApril 2011Revenue Mod./Forecasting
CARTACMay 2011PFM Reform Action Plan
STAOctober 2011Government Finance Statistics
LEGFebruary 2012Central Bank of The Bahamas Act
MCMFebruary/March 2012Public Debt Management
STAJune 2012Quarterly National Accounts
LEGJuly 2012Payment System Laws
STAJan 2013Government Finance Statistics
MCMFebruary 2013Financial Stability Reporting
FADApril 2013Tax Reforms for Increased Buoyancy
CARTACApril 2013Draft VAT Bill
MCMMay 2013Basel II Implementation
CARTACMay/September 2013Central Revenue Agency
CARTACJuly 2013Support for Customs and Excise Department’s Preparation of VAT
FADJanuary/February 2014Revenue Administration
FADMarch 2014Tax Administration Readiness to Successfully Launch and Administer VAT
FADMarch 2014Goods and Services Tax
FADMarch 2014VAT Revenue Projection
FADApril 2014Revenue Impact of Implementing VAT
MCMMarch 2014Financial Crisis Management Planning
MCMApril 2014Debt Management
CARTACJune 2014Price Statistics
CARTACAugust 2014Balance of Payment and International Investment Position
FADSeptember/October 2014Revenue Administration
FADOctober 2014Preparation To Launch a Value Added Tax
CARTACNovember 2014Quarterly National Accounts
CARTACDecember 2014Price Statistics
CARTACDecember 2014Risk-Based Supervision of the Securities Market
LEGMarch 2015Strengthening The Legal Framework for Bank Resolution and Crisis Management
CARTACAugust/September 2015Quarterly National Accounts
FADFebruary/March 2016Assessment of VAT Launch and Administration

Resident Representative: None

Financial Relations with the Inter-American Development Bank

(As of March, 2016)

Country Strategy with The Bahamas 2013–2017

The current Country Strategy supports the Government of The Bahamas (GoBH) efforts to ensure macroeconomic sustainability, social stability and employment, while focusing on resilience to mitigate the negative impact of natural disasters and climate change. The Bank is: (i) supporting the implementation of fiscal and debt sustainability reforms with an impact on public finances and public financial management; (ii) assisting with fostering social cohesion, with an emphasis on preventing crime and violence and strengthening the criminal justice system; (iii) assisting with modernizing the electricity sector and diversification of the energy matrix; (iv) facilitating diversification of both the economy and trading partners by enhancing areas of comparative advantage and removing constraints to private sector activity; and (v) building resilience to natural disasters through improved coastal zone management, incorporating disaster risk reduction and climate change adaptation measures in development planning, control and monitoring. The support is focused on the following priority areas: (1) Public Finances and Management; (2) Citizen Security and Justice; (3) Energy; (4) Private Sector Development; and (5) Coastal Risk Management and Climate Change Adaptation. Interventions will contribute to stemming the erosion of per capita incomes by protecting public investment and promoting growth. Efforts are made to generate non-sovereign guaranteed (NSG) lending that is closely aligned to the development and diversification of the private sector, as well as direct financing for alternative energy and energy efficiency. In addition, the IDB aims to support interventions in sectors where additional financial and non-financial resources may be leveraged.

Other areas for future dialogue. In addition to the priority areas identified above, the Bank is supporting diagnostic and analytical work in the following dialogue areas: (a) Education: The provision of quality education services: (i) via strengthening capacity at the secondary education level to improve the transition from school to work, including potential areas for PPPs, and (ii) for special needs children and youth at all levels of the educational system and with an emphasis on the transition from school to work; (b) Food Security: Analyzing options to increase domestic food production and consumption of local goods, given the country’s heavy dependence on food imports; (c) Transport: An analysis of (i) the impact and opportunities from the completion of the Panama Canal, (ii) greater connectivity: how inter-island mobility could be made more efficient across the 28 inhabited islands; (iii) enhancing trade links with the rest of the Caribbean and Latin America; and (d) Informal Immigration.

Active Loans as of March 31, 2016(In millions of U.S. dollars)
ProjectNameApproval DateApprovedDisbursedAvailable
BH-L1027Air Transport Reform Program (PBL)Dec 14, 201147.515.032.5
BH-L1027Air Transport Reform Program (TC Loan)Dec 14, 20112.52.40.1
BH-L1028WSC Support Program—New Providence Water Supply and Sanitation Systems UpgradeNov 16, 201181.056.224.8
BH-L1016Trade Sector Support ProgramJul 18, 201216.54.212.3
BH-L1029New Providence Transport Program Supplementary Financing IISep 04, 201265.059.55.5
BH-L1030Social Safety Net Reform ProgramJul 18, 20127.51.65.9
BH-L1033Citizen Security and Justice ProgramJul 7, 201520.00.020.0
BH-L1035Performance Monitoring and Public Financial Management ReformNov 19, 201433.00.033.0
Total273.0138.9134.1
Net Flow of IADB Convertible Currencies(In millions of U.S. dollars)
Net Flow of IADB Convertible Currencies (US$ million)
2010201120122013201420152016 (P)
a. Loan Disbursements32.85761.949.430.411.017.2
PBL disbursements01500000
b. Repayments principal8.69.411.714.114.216.616.5
c. Net Loan Flow (a–b)24.247.650.235.316.2−5.60.7
d. Subscriptions & Contributions0.30.30.910.80.00.5
e. Interests & Charges5.65.76.46.86.86.66.9
f. Net Cash Flow (c–d–e)18.341.642.927.58.7−12.2−6.7
(p) Projected.

Financial Relations with the Caribbean Development Bank

(As of April, 2016)

Country Strategy with The Bahamas 2013–2017

The overriding aim of the CDB’s current Strategy for The Bahamas is to support the country’s advancement as a progressively stable and vibrant economy, as well as an increasingly safe society with enhanced opportunities for productive employment and improved living standards. An indicative programme of assistance was proposed to help the country achieve faster, more inclusive and environmentally sustainable development, buttressed by macroeconomic stability and citizen security. The Country Strategy responds to The Bahamas’ development priorities and is aligned with the Bank’s strategic objectives of fostering inclusive social development and promoting broad-based economic growth, as well as environmental sustainability. The Bank is supporting six development priorities: (i) improved access to, and quality of climate-resilient social and economic infrastructure; (ii) enhanced access to quality, and demand-driven post-secondary and tertiary education; (iii) increased social inclusion and citizen security; (iv) strengthened productive and managerial capacities of micro, small and medium-sized enterprises; (v) improved public finances and planning; and (vi) strengthened resilience to climate change and improved disaster risk management (DRM). A number of projects, along with associated technical assistance, are being taken forward to address these priorities.

Other areas for future dialogue: The Bank has already conducted a mid-term review of the existing strategy, with a view to shaping the rest of the strategy period, and thinking about the next, which is due to start in 2018. Discussions are likely to focus on consolidating the work of the existing strategy, with particular focus on the development needs in the Family Islands.

Loans as of April 14, 2016(In millions of U.S. dollars)
ProjectNameApproval DateApprovedDisbursedAvailable
Active Loans
9/OR-BHAFamily Islands Transport Sector Enhancement ProjectMar 11, 201010.16.33.8
10-OR/BHACollege of The Bahamas Transformation ProjectMar 13, 201416.2016.2
Active Loans 226.36.320.0
Pending Loans
Technical and Vocational Institute Enhancement ProjectDec 11, 20144.704.7
Water Supply Improvement ProjectDec 10, 201528.3028.3
Pending Loans 233.0033.0
Total Loans 459.36.353.0
Net Flow of CDB Convertible Currencies(In millions of U.S. dollars)
2009201020112012201320142015
a. Loan Disbursements000.065.060.721.150.11
…PBL disbursements0000000
b. Repayments principal0.680.900.900.690.480.800.02
c. Net Loan Flow (a–b)−0.68−0.90−0.854.370.240.350.08
d. Subscriptions & Contributions1.471.473.363.363.363.363.36
e. Interests & Charges0.160.150.170.190.280.890.39
f. Net Cash Flow (c–d–e)−2.31−2.52−4.390.82−3.40−3.90−3.67

Statistical Issues

Statistical data are broadly adequate for surveillance purposes, but some weaknesses remain in both coverage and timeliness, partly reflecting capacity constraints. The central bank produces annual, quarterly, and monthly reports on macroeconomic developments, and monetary and fiscal data, and is the main source of economic information. The operations of public corporations are not compiled into a consolidated set of public sector accounts, although their debt is included in the public debt data. Thus, a presentation of the general government accounts, including revenue, expenditure, and overall balance is not available.

In March 2015, the Department of Statistics (DoS) updated the CPI methodology with technical assistance from CARTAC. Using the results of the 2013 Household Expenditure Survey, it revised the CPI weights to 2013 from 2006 and changed the base period to November 2014 from February 2010. The coverage was expanded to include new local and foreign items reflecting current expenditures by households. New sample outlets were also introduced to reflect those that are frequently visited by Households.

The DoS continues to develop the Export-Import Price Indices (XMPIs) to meet international standards. CARTAC missions have assisted in compiling the XMPIs, including Tourism Services Price Index (TSPI) on quarterly basis. New XMPIs for goods and major services have been developed, while procedures for systematic re-sampling and re-weighting were modified in order to keep the market basket representative of what is being measured. The DoS is also receiving technical assistance from CARTAC to produce quarterly GDP estimates, and they are expecting to start publishing quarterly data in October 2016. The Bahamas does not prepare data covering the economy-wide external debt position, nor an international investment position (IIP), although they have stated their intention to do so. In August 2014, a CARTAC mission advised the authorities on the requirements for transitioning to Balance of Payments Manual 6 (BMP6) and disseminating statistics on the IIP. The mission noted that most of the conversion from BPM5 to BPM6 is straightforward and some of the data required, such as reserve assets and public sector debt, are already available. However, the authorities will need to collect new data on the nonbank private sector. Capacity constraints at the Central Bank have led to little progress in this project. The authorities plan to start publishing BPM6 statistics in September 2016 and IIP statistics in March 2017.

The Inter-American Development Bank (IDB), with the technical support of the United States Census Bureau (USCB), has promoted the development of a methodology called “Tool for Assessing Statistical Capacity” (TASC). This is a self-assessment instrument, the general purpose of which is measuring and evaluating the statistical capacity of a country’s National Statistical System (NSS), and more specifically, the operational capacity of its National Statistical Office (NSO), to produce and disseminate basic statistics drawn from censuses, surveys and administrative records. There was a mission to The Bahamas to meet with the Department of Statistics and other agencies that produce statistics to apply the TASC in late November, 2013. As part of the statistical component of the IDB’s Public Financial Management reform program (PFM) with the government, the TASC assessment will be applied again to assess how things have evolved since 2013.

The Bahamas began participating in the General Data Dissemination System (GDDS) in 2003. Its metadata were posted on the Fund’s Dissemination Standards Bulletin Board on February 14, 2003.

The Bahamas: Table of Common Indicators Required for Surveillance(As of April 20, 2016)
Date of Latest Observation (mm/yy)Date ReceivedFrequency of Data7Frequency of Reporting7Frequency of Publication7
Exchange RatesFixed
International Reserve Assets and Reserve Liabilities of the Monetary Authorities13/1604/16MMM
Reserve/Base Money2/1604/16MMM
Broad Money2/1604/16MMM
Central Bank Balance Sheet2/1604/16MMM
Consolidated Balance Sheet of the Banking System12/1504/16MMQ
Interest Rates23/1604/16MMM
Consumer Price Index12/1503/18MMM
Revenue, Expenditure, Balance and Composition of Financing3—General Government4NANANANANA
Revenue, Expenditure, Balance and Composition of Financing3—Central Government12/1502/16QQQ
Stocks of Central Government and Central Government-Guaranteed Debt512/1502/16QQQ
External Current Account Balance12/154/16QQQ
Exports and Imports of Goods and Services12/154/16QQQ
GDP/GNP201403/15AAA
Gross External Debt12/1502/16QQQ
International Investment Position6NANANANANA

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).

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