Tuesday, December 11, 2018
Tuesday, December 11, 2018
The International Monetary Fund (IMF) has commended the government for several key policy initiatives, including the Fiscal Responsibility Act, 2018, and the strategic plan to create a Disaster Relief Fund.
This comes after a recent review of The Bahamas by the IMF.
In response, Deputy Prime Minister and Minister of Finance Peter Turnquest said: “The government will stay the course with its fiscal strategy to boost economic growth, strengthen the fiscal balance and increase transparency and government accountability.”
The Minister of Finance’s full response follows:
“The Government will stay the course with its fiscal strategy to boost economic growth, strengthen the fiscal balance and increase transparency and government accountability,” said K. Peter Turnquest, Deputy Prime Minister and Minister of Finance [pictured].
This comes after a recent review by the International Monetary Fund (IMF) that commended the government for several key policy initiatives, including the Fiscal Responsibility Act, 2018, and the strategic plan to create a Disaster Relief Fund.
Resulting from its December visit, which was conducted to review the latest economic developments and to prepare for the April 2019 Article IV Consultation, the IMF published favorable feedback in an interim report that highlighted the positive strides made by the government.
“Our policies are starting to pay a dividend in terms of transforming the way government operates. We are pleased to see that the efforts are being recognized by the IMF and others. However, our economic recovery still is not as buoyant as we would like to see it; we recognize that our policies, which are really groundbreaking in many respects, still need to fully set in.”
“It has not been easy to cut the fiscal deficit by some 37 percent in one year – down from $661 million to $415 million. But the simple truth is that we have to stay the course as there is a tremendous amount of work left to do to quicken and strengthen the ongoing recovery, and to ensure long term fiscal stability and economic resilience, said Minister Turnquest.
“We take our commitment to balancing the budget very seriously, which means there are still some hard decisions to be made. The IMF noted the need for decisive measures to contain expenditure growth in the short and medium term. This is something we identified and acted on in the last fiscal year, and we will continue to consider all necessary option as we also recognize that containing our expenditure is critical,” continued Minister Turnquest.
There are several new modernization initiatives in the pipeline, including important new legislation that is scheduled for the coming few months: Public procurement legislation, public financial management legislation and public debt management legislation.
The government is also implementing significant reforms to facilitate an ease of doing business, including a simplified business license process, and the establishment of the credit bureau without delay to enhance credit market efficiency and increase credit growth.
“We also anticipate significant improvements around our tax collection, accounting and auditing functions as a result of bolstered staffing and process reform. This will help to reduce revenue leakage, build internal capacity and strengthen compliance opportunities,” said Minister Turnquest.
Key economic indicators noted by the IMF Mission:
- The Bahamian economy continues to recover, with real GDP growth projected to reach 2.3 percent in 2018 and 2.1 percent in 2019.
- The fiscal deficit narrowed from 5.5 percent of GDP in FY 2017 to an estimated 3.3 percent in FY 2018.
- In the budget for FY 2019 the government committed to further fiscal consolidation, targeting an overall deficit of 1.8 percent of GDP.
- As of June 2018, the average capital to risk-weighted assets ratio across domestic institutions was 34 percent, above the regulatory target ratio of 17 percent.
- Non-performing loans declined to 9.6 percent of total loans, from 12.3 percent a year earlier.
Key policy initiatives noted by the IMF Mission
- Fiscal Responsibility Law (FRL) is a welcome development that supports the government’s efforts to secure fiscal sustainability and put debt on a downward path. Implementation of the FRL framework will also increase transparency and enhance policy credibility.
- The government’s plan to establish a Disaster Relief Fund as part of a broader strategy for preparedness and risk reduction policies is a welcomed step.
- The team welcomed the government’s transparent recognition of accumulated arrears and the budgetary provisions to clearing them, as well as the plans to put in place robust expenditure control systems.
- The team recognized the role new financial technologies (such as the Central Bank’s digital currency) can play in fostering financial inclusion, and concurred that a gradual approach will help mitigate potential risks to the economy.
- The mission welcomed the government’s firm commitment to a well-regulated international financial and business sector, and recognized the significant steps taken to increase compliance with international standards on Anti-Money Laundering and Combating the Financing of Terrorism.