NASSAU, BAHAMAS — The country’s external reserves grew by just $117 million in the first half of this year, far less than the $788 million buildup in 2022 Central Bank Governor John Rolle noted yesterday.
Rolle, while speaking at a press briefing on the regulator’s Monthly Economic and Financial Developments report for June, noted that with regards to the foreign exchange indicators and external reserve trends, over the first six months of 2023 total inflows through the banking system—which capture impacts from tourism, foreign investment spending, and other private sector activities—increased by 3.8 percent to $3.8 billion. This is compared to a recovery-related rebound of 50 percent in 2022.
Rolle noted however that inflows were expected to have been stronger, given the extent of strengthening in tourism indicators. “This underscores the importance of boosting domestic retention from all subsectors in which there is growth,” said Rolle.
“As expected, the growth in spending on imports of goods and services and portfolio investments was stronger than trends on the inflow side, increasing by 11.1 percent in the first half of 2023. On a net basis, therefore, the private sector retained less foreign exchange, contributing to a smaller boost in the external reserves.
“In particular, the net amount of foreign exchange that commercial banks sold to the Central Bank was one-third less than in 2022. In addition, the volume of foreign currency-denominated borrowing by the Government was sharply reduced in comparison to 2022, resulting in the public sector, on net, repaying some foreign currency debt and being a net purchaser of foreign exchange from the Central Bank,” Rolle revealed.
As a result, the external reserves grew by just $117 million in the first half of 2023, compared to a $788 million buildup in 2022.
Governor Rolle further noted that at the end of July, the external balances were approximately $2.7 billion, with not much changed from the end of June.
“These balances remain healthy, relative to the support that they provide for the Bahamian dollar fixed exchange rate. Over the remainder of 2023, the Central Bank will continue to plan for and to accommodate a net reduction in the external reserves, which would place the end-of-year balances below the closing levels of 2022.
“This remains consistent with an increased capacity, on net, for the Government to borrow in local currency, more room for growth in private sector credit, and other increased spending by residents from accumulated liquidity,” said Rolle.
