The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank's governor yesterday reassured that $2bn in external reserves are enough to meet The Bahamas' foreign currency needs despite the "major reduction" projected due to the virus.

John Rolle, in e-mailed replies to Tribune Business questions, said the Central Bank's foreign currency reserves will be sufficient to meet import demand and other external obligations until the tourism industry and other exchange earners recover from the COVID-19 pandemic.

He added that traditional pressures on the reserves, such as the imports consumed by tourists and foreign travel by Bahamians, will not be present as long as the outbreak continues.

And reduced global oil prices, which were hovering at around $31 per barrel as Tribune Business went to press, and are projected to fall further as a result of lower global economic activity, will also "counter-balance" the external reserves as the cost associated with energy and transportation-related purchases.

"The Central Bank of The Bahamas does expect that there will be an important reduction in the external reserves from their current levels, which are around $2bn. This will support the foreign currency needs of the public whilst tourism recovers," Mr Rolle said.

"It should be noted that there is still a large self-regulating component in foreign exchange use, generated from the imports consumed by tourists. This demand falls away with the reduction in visitor presence.

"The health and safety concerns, which are scaling back travel demand by Bahamians, will also take some of the pressures off outflows. The Bahamas is also facing lower international fuel prices, which will ease the import burden."

Many observers are hoping that the sharp decline in global oil prices will provide at least some relief for hard-pressed Bahamian businesses and families as they contend with the huge earnings drop stemming from a coronavirus pandemic that has brought global travel and commerce to a grinding halt.

Depending on when Bahamas Power & Light (BPL) does its fuel purchasing, the reduced global oil costs could mean lower energy bills during the period of peak summer demand. Fuel costs typically account for 50-60 percent of the total bill. And businesses and households, especially those reliant on on transportation, could also enjoy reduced pressures at the gasoline pump.

Mr Rolle, meanwhile, said the Government retained foreign currency borrowing capacity to sustain the external reserved as needed. "The Government's current borrowing authority will allow it to obtain foreign currency loans that will help accommodate import financing," he added.

"Any support that the Government provides to the private sector will express itself in stimulus to local demand, for which some of the outlet will be spending on imports. The Government's capacity to provide stimulus in a sustainable way is therefore connected with the amount of foreign currency financing that the Government is able to secure."

The Central Bank governor, though, was quick to warn that the fall-out from the pandemic will spare no business or individual in The Bahamas. "There will be negative economic consequences for the Government, businesses and families," he reiterated.

"Our estimates, though, are sensitive to the likely duration of the tourism setback. It is difficult to project how long the industry will stay in a slump, since this will depend on the rate at which public health confidence is regained in the international community."

Many Bahamian businesses and households are likely to have minimal financial reserves on which to sustain themselves depending on how long the Covid-19 crisis lasts, especially if their income sources dry up or jobs are lost.

Significant numbers of Bahamians live from pay cheque to pay cheque, having built up minimal savings levels, leaving them especially vulnerable to an economic crisis of this nature.

Meanwhile Gowon Bowe, Fidelity Bank (Bahamas) chief financial officer, said payment system technology advances meant no Bahamian or household should experience problems in settling transactions locally or internationally during the coronavirus crisis.

"As it relates to being able to move money throughout the economy, I don't think think there are any issues of concern here or internationally about out ability to do so given the advances in technology over the last 10 years," he told Tribune Business.

Mr Bowe said the BISX-listed commercial bank had yesterday sent out an advisory to customers reminding them of the availability of online banking and other electronic means, such as credit and debit cards, as well as automated teller machines (ATM), through which they can conduct financial transactions as opposed to physically visiting a branch.

He added that Fidelity Bank (Bahamas) was also reviewing its business continuity planning should staff have to work from home, with even loan and mortgage applications able to be dealt with electronically.

Separately, banking industry sources said the Clearing Banks Association (CBA) had yesterday met with K Peter Turnquest, deputy prime minister, to ensure the continuity of financial services provision for as long as the coronavirus pandemic lasts. Discussions were also held between the industry and Central Bank.