The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas will not be taking up the International Monetary Fund's (IMF) offer of up to $200m in concessionary funding for Hurricane Dorian recovery, the deputy prime minister confirmed last night.

K Peter Turnquest told Tribune Business via a messaged reply to its questions that the fund's proposal was "not part of the financing mix" the Minnis administration is using to cover its net $508m fiscal deficit blow-out and essential reconstruction costs.

"Yes, the IMF has offered unconditional rapid financing at concessional rates," he said. "This financing offer is not part of the financing mix currently contemplated."

Marlon Johnson, the Ministry of Finance's acting financial secretary, similarly affirmed: "We don't intend that as part of our financing mix. We have sufficient interest from our partners who do financing, so that is not required for this particular operation."

He explained that the $200m facility offered was part of the typical financing instruments that the IMF makes available to countries that have suffered natural disasters, as The Bahamas did with Dorian, to assist their reconstruction efforts and economic recovery.

Explaining that it was different from the assistance provided to states undergoing structural reforms, or encountering balance of payments difficulties, Mr Johnson added: "They do have these facilities available for countries going through what we did with Dorian in terms of providing short-term financing.

Both men spoke after the IMF, in a statement on its week-long visit to The Bahamas that ended on January 31, dangled the carrot of up to $200m in financial assistance from its so-called Rapid Financing Instrument.

"The IMF stands ready to support The Bahamas, including through its emergency financing facilities," its Bahamas team leader, Fabian Bornhorst, said. "Through the IMF's Rapid Financing Instrument up to US$ 200m could be available to The Bahamas at low cost and without policy conditionality."

While that has been politely rejected, Mr Turnquest told Tribune Business that the government and IMF were "completely aligned" in other areas including the latter's call for a "timely return" to fiscal consolidation efforts once post-Dorian reconstruction was behind it.

The IMF's statement, indicating that its visit was not surprisingly consumed by Dorian-related fall-out, added that the speedy processing of construction permits and sufficient labour supply will be key to the pace of reconstruction in Abaco and Grand Bahama.

While restoring "financial buffers" and ensuring The Bahamas becomes more resilient to natural disasters were identified as key medium-term objectives, the Fund also urged the Government to "accelerate" structural reforms to enable the economy to achieve its growth potential.

This is effectively 'code' for realising the Government's long-stated objective of improving the "ease of doing business" by removing regulatory bottlenecks, while also enhancing energy supply reliability and lowering costs.

"We are confident that the people of The Bahamas will rebuild a stronger and more resilient economy," Mr Bornhorst said: "Hurricane Dorian devastated parts of Abaco and Grand Bahama, resulting in a sharp fall in tourists visiting these areas.

"Nevertheless, a gradual recovery is already underway, and tourism to other islands of the archipelago is holding up. The still-favourable economic outlook for tourism source countries will support the process. A mild economic contraction is projected in 2020, [and] growth is expected to pick up once the infrastructure and tourism capacity is rebuilt.

"The pace of recovery will depend on the implementation of the reconstruction plan. Critical elements include the rebuilding of infrastructure, the expeditious processing of construction permits, the availability of labour, and the availability of private and public financing."

Mr Bornhorst and the IMF backed the Government's decision to "activate the escape clause" in the Fiscal Responsibility legislation post-Dorian to "allow a temporary deviation" from the consolidation targets so that reconstruction can take place.

"Public debt is projected to be higher in the medium term, underscoring the need for a timely return to the fiscal targets, and for accelerating the implementation of structural reforms to realise the economy's growth potential," he added.

"The financial resilience to natural disasters built in the recent past - a contingent credit line, sovereign insurance against natural disasters, and a natural disaster relief fund - has proven to be an important buffer.

"Together with substantial private insurance payouts, these flows underpin the robust increase of foreign exchange reserves ahead of an import-heavy reconstruction process. Gradually restoring the financial buffers and rebuilding the infrastructure in a more resilient way will be key to mitigate the impact of future disasters."

Turning to the launch of the Bahamian digital dollar, Mr Bornhorst added: "The Central Bank of The Bahamas launched the Sand Dollar in Exuma to modernise the payment system and increase its resilience to natural disasters.

"The design of this Central Bank Digital Currency will allow for offline transactions, interoperability with the existing payment system and can boost financial inclusion by easing access to digital payments. The pilot project will allow the Central Bank to refine the design to further mitigate financial stability, financial integrity and cybersecurity risks."