By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

The Bahamian digital dollar is part of the government's strategy to create "sustainable solutions" for Dorian-type natural disasters, the deputy prime minister said yesterday.

K Peter Turnquest, addressing the RoyalFidelity Bahamas Economic Outlook conference, said: "As a country we are leveraging technological innovations to advance financial sector resilience. We are working with the Clearing Banks Association and domestic micro financing institutions to promote and facilitate the transition to a cashless economy.

"Cashless commerce and other innovative technological solutions can allow commercial banks to operate without the need for a physical presence, which is critical in our archipelagic context. As we know all too well, in disasters, banking services are often disrupted. On the other hand, telecommunications systems are often the first to be restored.

"With the move to cashless commerce, communities can have rapid access to the financial system to rebuild their lives. The Bahamas is truly leading the way in this respect, being the first country to introduce a digital currency. More specifically, a Central Bank digital currency, which is not to be confused with a cryptocurrency."

Referring to the launch of the Bahamian digital currency, known as Project Sand Dollar, in Abaco, Mr Turnquest described it as "a monumental initiative that will create sustainable solutions to the risk associated with natural disasters, strengthening financial inclusion and resilience".

He added: "The Sand Dollar is equivalent in every respect to the paper currency with its value fully-backed by the external reserves of the Central Bank. Through the Sand Dollar, Abaconians can now make payments at local grocers or gas stations right through their mobile devices in real time. The Sand Dollar also allows for fee-less peer-to-peer transfers."

Mr Turnquest said "legal frameworks and regulatory systems" are needed to support technological innovations in the financial sector, and added: "The Bahamas has been ahead of the curve as, in 2016, the Central Bank issued a set of technology-risk management guidelines to provide guidance and oversight for the advancements taking place domestically in social media, Internet banking and mobile technology. These guidelines help to mitigate IT and cyber security threats that undermine system soundness, customer data confidentiality and overall financial stability."

The deputy prime minister confirmed that The Bahamas is developing a comprehensive disaster risk framework for better fiscal management, which includes different types and sources of financing such as grants, loans, proceeds from dormant accounts in the commercial banking system, donations and catastrophic bonds

"The challenge we face is pushing multilateral bureaucracies to make changes to the institutional policies that determine which countries have a right to access concessionary financing. We need more equitable and accurate means of assessing countries, particularly SIDS (small islands developing states)," Mr Turnquest said.

"The rigid methodology that exclusively looks at GDP per capita is a poor proxy for determining the needs of countries, particularly those with heightened vulnerability to exogenous shocks such as catastrophic natural disasters.

"An effective response to the climate crisis demands a more holistic approach to graduation policies that factors in a range of vulnerability measurements, including exposure to natural disasters and the disproportionate economic impact they have."