The Bahamas: Staff Report for the 2016 Article IV Consultation—Informational Annex
Author: International Monetary Fund. Western Hemisphere Dept.
Publication Date:
13 Jul 2016
eISBN:
9781498356794
ISBN:
9781498356794
Language:
English
Keywords:
ISCR; CR; budget communication; deficit; authority; budget projection; CARTAC mission; development priority; financial asset; Public Financial Management reform program; trade sector support program; Loans; International investment position; Reserve assets; Climate change
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This 2016 Article IV Consultation highlights that economic growth in The Bahamas is estimated to have stalled in 2015, as a modest increase in air tourism arrivals was not sufficient to offset a contraction in domestic demand and weak exports of goods. Private consumption and investment were weighed down by headwinds from fiscal consolidation, as well as an end to construction. Inflation was moderate at 1.9 percent on average in 2015. Growth is expected to strengthen to about 0.5 percent in 2016, supported by continued growth in air tourist arrivals and moderating headwinds to private consumption and investment.

Abstract

This 2016 Article IV Consultation highlights that economic growth in The Bahamas is estimated to have stalled in 2015, as a modest increase in air tourism arrivals was not sufficient to offset a contraction in domestic demand and weak exports of goods. Private consumption and investment were weighed down by headwinds from fiscal consolidation, as well as an end to construction. Inflation was moderate at 1.9 percent on average in 2015. Growth is expected to strengthen to about 0.5 percent in 2016, supported by continued growth in air tourist arrivals and moderating headwinds to private consumption and investment.

Fund Relations

(As of March 31, 2016)

Membership Status: Joined August 21, 1973; Article VIII

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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):

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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

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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)

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Net Flow of IADB Convertible Currencies

(In millions of U.S. dollars)

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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)

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Net Flow of CDB Convertible Currencies

(In millions of U.S. dollars)

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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)

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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).

Same Series

Other IMF Content

Other Publishers

Cover IMF Staff Country Reports
The Bahamas: 2016 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for The Bahamas
Author: International Monetary Fund. Western Hemisphere Dept.
Volume/Issue:
Volume 2016: Issue 224
Publisher:
International Monetary Fund
ISBN:
9781498356794
ISSN:
1934-7685
Pages:
69
DOI:
https://doi.org/10.5089/9781498356794.002