The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A prominent Caribbean economist yesterday omitted predictions that The Bahamas will require an International Monetary Fund (IMF) restructuring programme for the first time since the COVID-19 pandemic began.

Marla Dukharan, the former Royal Bank of Canada (RBC) chief economist for the Caribbean, in her April economic forecast projected that Bahamian economic output will expand by 5 percent this year and a further 4 percent in 2023, leaving the country some 7 percent below pre-COVID gross domestic product (GDP) at the latter year’s end.

These estimates are only slightly below the IMF’s, as she acknowledged, saying: “We expect the economy to grow 5 percent in 2022 and 4 percent in 2023, backed by reconstruction and continued tourism recovery, leaving the level of economic activity around 7 percent below its 2019 level. The IMF forecasts 6 percent growth for 2022, 4.1 percent for 2023, averaging 1.5 percent to 2027.”

However, what may be most important was what Ms Dukharan did not say. For there was no mention, for the first time since early 2020, of her ‘doomsday’ prediction that The Bahamas will require an IMF bail-out and/or restructuring within one to two years due to the likelihood of what she suggested would be a balance of payments “crisis”.

She had doubled down on her long-standing prediction that The Bahamas will have to restructure its debt and follow Barbados in seeking IMF help “in the next year or two” as recently as January 2022. Ms Dukharan said then: “We expect a debt restructure and an IMF programme in the next year or two. The high level of external debt (43 percent of central government debt) would make a [currency] devaluation very costly in terms of the overall debt burden.

“In 2020, the IMF assessed that the currency was overvalued by 6-9 percent. The alternative to currency devaluation is an internal devaluation much like the IMF BERT programme in Barbados, lowering labour costs and the overall cost of doing business through reforms, and raising taxes.”

There was no mention of this yesterday. Ms Dukharan said February 2022’s stopover arrivals totalled 173,712, equivalent to 62 percent of pre-COVID levels from the same month in 2019. Cruise visitors recovered to 57 percent of pre-COVID numbers, standing at 528,751.

“Moody’s maintained its ‘ba3’ rating with a negative outlook in March, again highlighting climate risks as 72 percent of The Bahamas’ landmass is within five metres above sea level,” she said. “Moody’s highlighted low debt affordability, as the debt-to-revenue ratio reached 5.9 percent at the end of fiscal year 2021.

“Government has revised its revenue forecast for fiscal year 2022 upwards to 20 percent of GDP, largely by improving tax administration, removing some zero-rated VAT items and reducing leakages. The fiscal consolidation is expected to return the deficit to less than 2 percent of GDP by 2024.

“The IMF projects that the primary deficit will decline from 9 percent of GDP to around 3 percent this fiscal year, mainly the result of an expanding denominator. Continued rehiring in tourism and job creation in construction associated with foreign direct investment (FDI) projects and hurricane reconstruction will help strengthen labour markets and boost activity. The IMF projects inflation will average 7.3 percent this year.”