The Tribune

By NEIL HARTNELL Tribune Business Editor A WELL-KNOWN former banker yesterday expressed concern over how the more than $800 million spent on oil imports in 2011 had depleted the Bahamas' foreign exchange reserves, arguing that foreign direct investment (FDI) inflows were not large enough to counteract this trend. Al Jarrett, the former BEC chairman and FINCO head, who many see as an unofficial economic adviser to Perry Christie and the Opposition PLP, told Tribune Business that information he had received suggested the Bahamas attracted an "anemic" $385 million in FDI inflows during 2011, just $45 million of this sum coming from the $2.6 billion Baha Mar project. Wendy Craigg, the Central Bank of the Bahamas governor, told Tribune Business in an interview published yesterday that the FDI figures for 2011 were still being tallied and assessed. She added that FDI, which increased last year compared to 2010, was expected to exhibit the same trend in 2012 by continuing to increase. However, Mr Jarrett stuck to his guns when it came to the $385 million figure he quoted to Tribune Business. He noted that the Bahamas' foreign currency reserves had declined in line with the rise in global oil prices, dropping from a $1.14-$1.138 billion peak in April-May 2011, something that was confirmed by the Central Bank governor. Mrs Craigg had told Tribune Business that the nation's foreign reserves had fallen by between $240-$245 million from that peak, now standing at just over $895 million, still a healthy number and ahead of the three months' worth of imports threshold recommended by the likes of the International Monetary Fund (IMF). The Governor said oil imports were one factor behind the foreign reserves decline, but Mr Jarrett told Tribune Business that the problem had been "exacerbated" by the relatively low FDI inflows, saying they "could not even cover our oil bill". "The impact of high-priced oil is going to do us quite a bit of damage moving forward if it stays at this level," Mr Jarrett told Tribune Business, arguing that its inflationary impact, and effect on the Consumer Price Index (CPI), could take a substantial bit out of GDP growth projections and the Government's own fiscal forecasts. Mr Jarrett estimated the Bahamas' total oil imports for 2011 as at $750 million, but newly-released statistics from the Central Bank yesterday showed the actual bill was $804.744 million. He described this as the Bahamas' second highest-ever oil import bill, behind only the $1 billion-plus spent in 2008 when oil prices hit their peak of around $147 per barrel. Meanwhile, the same Central Bank data also showed that the Bahamas suffered an almost $60 million year-over-year increase in its national debt, which hit $4.343 billion at year-end 2011. This compared to $4.285 billion the year before. While seemingly a relatively modest rise at first glance, the Government's revenues in fiscal 2010-2011 benefited from the receipt of $206 million in gross sales proceeds from the Bahamas Telecommunications Company (BTC) privatisation, plus associated Stamp Duty, and one-off inflows associated with the BORCO purchase by Buckeye Partners and Baha Mar project. Collectively, these one-off events generated some $350 million in additional revenues, implying that without them the national debt may well have come close to hitting $4.7 billion by 2011 year-end. The $206 million BTC receipts were likely used to pay down the national debt, given that it fell from $4.311 billion at the end of the 2011 first quarter to $4.116 billion at the end of the following period, a timescale that coincided with the sale's completion. At the 2011 year-end, the direct charge on government amounted to $3.793 billion, with some $551 million in contingent liabilities (borrowing by public agencies and corporations that is guaranteed by the Government" lying on top.