NASSAU, BAHAMAS- A top financial expert said yesterday that the International Monetary Fund’s (IMF) recently released statement on the annual Article IV consultation with The Bahamas presented as “nothing new”, although it suggests that while the country is moving in the right direction there are still a significant amount of risks to address.
Gowon Bowe, Fidelity Bank’s CEO commenting on the Washington-based Fund’s latest statement on The Bahamas told Eyewitness News, “There is nothing new in Article IV which is a good thing, meaning they have previously highlighted some of the threats emerging from the COVID environment, our growth projections and initiatives that we needed to put in place. I think there is a tremendous amount of excitement about conversations regarding income tax and the unlikely meeting of fiscal projections but these have been issues raised previously. I think the sober and balanced analysis of the report suggests the country is moving in the right direction but slowly with a significant amount of risks to address.”
The IMF estimated that the current fiscal year’s deficit will be “considerably larger than that expected in the Budget” at a sum equal to 2.6 percent of gross domestic product (GDP).
It noted, “While the objectives of the authorities’ medium-term fiscal plan are laudable, staff assesses that more policy measures will be needed to achieve this targeted adjustment. In particular, based on current policies, the fiscal deficit is expected to be 2.6 percent of GDP in 2023-2024, considerably larger than that expected in the Budget. Over the medium-term, debt would fall to 78 percent of GDP by 2027-2028 but gross financing needs would remain high for the next several years at around 20 percent of GDP.
Bowe noted, “All the people who analyzed the targets felt they were overly ambitious. If the government meets them then great credit to them. I think the IMF’s musings are not to be alarmed at or are ones we should get excited about. If something the IMF said was very shocking to us then we would have to take a very hard look at our political leaders because it means that they have not been preparing the country adequately for the realities we face. The IMF is only making assessments based on the information provided. If we are honest and brutal with the analysis of our own circumstances all of the recommendations and views should be ones we have considered even if we have a different viewpoint.”
The Office of the Prime Minister in a statement noted that the IMF has revised its economic growth projection for the Bahamian economy to 2.3 percent, an improvement over its previous forecast.
Minister of Economic Affairs Michael Halkitis stated, “Previously they were estimating 1.8 percent. Now they are estimating that the economy will grow in 2024 by 2.3 percent. That’s an increase of 0.5 percent. To go from 1.8 to 2.3 percent they are raising their projected growth rate by 28 percent. That’s a massive revision.”
Minister Halkitis explained that the projection reflects that the economy of The Bahamas continues to grow and inflation is down. He emphasized that the government’s fiscal strategy has surpassed many expectations, performing well on fiscal goals such as cutting the debt-to-GDP ratio, which exceeded 100 percent two years ago and has now been reduced to 84 percent.
“We have met or beat every single deficit projection that we have given over the last two years so we are very, very confident that our projections for 2024 will be realized,“ said Minister Halkitis.
Regarding IMF estimates for the 2022/2023 deficit, Min. Halkitis noted that the IMF has consistently underestimated revenue performance.
“What you see is an opinion of the IMF that our revenue will not come in as well as we estimate that it will. We have a difference of opinion. Remember that since 2021, we have had the IMF and the rating agencies consistently underestimating how our revenue can perform. Our experience has shown that our revenue along with the growth in the economy has performed very well. We believe that will continue,” Minister Halkitis said.