The International Monetary Fund (IMF) has published its Article IV consultation with the Bahamas, noting that the territory’s public finances have suffered significant exposure to the financial crisis, particularly as a result of a fall in tourism receipts.
“The global crisis had a profound impact on the Bahamian economy. During 2009, tourist arrivals declined by 10% and foreign direct investment fell by over 30%, leading to a sharp contraction in domestic activity and an increase in unemployment,” the IMF report states.
“The downturn deteriorated the fiscal position. Revenues declined, while the authorities maintained spending broadly in line with the budget (strengthening the social safety net and accelerating investment spending) to mitigate the demand shock. As a result, the central government deficit rose by 0.5% to 5.3% of gross domestic product (GDP) in the fiscal year 2009/10.” This deficit was financed by way of an IMF loan, under a one-off Special Drawing Rights allocation of USD179m, which more than covered the current account deficit. The IMF added that: “Prudent macroeconomic policies have now laid the foundations of a recovery, but the outlook remains exposed to downside risks.”
