IMF warns of challenges for Bahamian economic recovery

The International Monetary Fund (IMF) warned on Tuesday that worsened current account deficit and low international reserves would challenge the Bahamas' further recovery though the country's economic activities have been strengthened.

The multilateral financial institution lauded the Bahamian authorities' efforts in consolidating fiscal position with a successful implementation of the value-added tax.

However, this, along with lower oil prices and a capital inflow management policy, did not improve the current account deficit and international reserves, the IMF said in a statement.

Despite the U.S. recovery and an imminent opening of some tourist resorts, the IMF predicted the Bahamas' growth will remain well below pre-global crisis levels.

The Washington-based agency advised "strong and timely measures" to strengthen competitiveness and raise potential growth, including structural reforms, rebuilding fiscal and external buffers, and preserving financial sector stability.

To secure medium-term growth, the IMF said structural reforms are needed to address longstanding issues such as high unemployment, and that a diversification strategy should be introduced to explore added value in the tourism sector.

The IMF noted the fixed exchange rate between the Bahamian dollar and the international benchmarks constrains the country's monetary policy, leaving fiscal policy as the main instrument for macroeconomic stabilization.

Thus, it suggested a steadfast implementation of the tax strategy, expenditure rationalization, together with public enterprise reforms, to help rebuild fiscal buffers and support international reserves.

The IMF also advised the Bahamian government to take measures to resolve the country's debt overhang while further strengthening the banking system's regulatory and supervisory framework. Endi