The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank's governor yesterday said "savings bonds" are being eyed to boost financial resiliency after it was revealed less than four in 10 Bahamian households had sufficient reserves when COVID hit.

John Rolle told Tribune Business that the creation and roll-out of such a vehicle, which would allow Bahamians to build up savings through investments in government debt securities, would likely "get some attention in 2021" as part of the Central Bank's strategy to boost the national savings rate.

He spoke after an Inter-American Development Bank (IDB) survey of 910 Bahamian households revealed that just 37.9 percent, or less than four out of every ten, confirmed they had "enough savings to cover an unexpected expense" when COVID-19 struck in mid-March.

Defining an "unexpected expense" as being equivalent to one month's Bahamian minimum wage, which is $840 or $210 per week, the IDB assessment said: "Households’ preparedness varied by pre-pandemic income level. Households that reported higher total household income in January 2020 were more prepared to cover immediate expenses.

"Only 1.9 percent of low income households (those earning below the minimum wage) reported having enough savings for an emergency expense, whilst 29.9 percent reported having enough savings to cover one week or more of basic expenses.

"Comparatively, 92.8 percent of households earning 11 times or more the minimum wage reported having enough savings to cover an emergency expense, and 94.4 percent reported having enough savings to cover one week or more of basic expenses."

Mr Rolle, acknowledging that the absence of savings on a national, household and individual level has been sharply exposed by COVID-19, said improvements in this area were "very high on the list" among the top five to ten economic priorities for the Central Bank and policymakers.

"From our end, we want to make sure that beyond financial literacy we continue to address financial inclusion to that people are able to participate in mechanisms that allow them to save," the Central Bank governor told Tribune Business.

"Over time we see that evolving into a savings bond for Bahamians, or some type of mechanism that allows them to save. That is something being explored externally, and is an example of the inclusion we expect to see for The Bahamas.

"There are many other types of vehicle, but certainly the equivalent of a mechanism that allows people to pool their savings with the purchase of government bonds, that is certainly something that will help in The Bahamas.

While investments in government debt securities worldwide have traditionally been viewed as the safest, most secure opportunities, some observers will likely argue that placing funds into Bahamian government bonds is becoming increasingly risky as the national debt heads towards the $10bn mark post-Dorian and COVID-19.

And Mr Rolle was quick to point out that the "savings bond" vehicle was geared to benefit investors/savers first, not generate money for the Government, as the amounts invested would be relatively small. "We've discussed it with the Ministry of Finance officials, so it's only a matter of time before we move ahead with it," the governor added of the "savings bond".

"Not necessarily as a means to provide substantial resources to the Government... It's primary focus would be giving individuals a safe, good-yielding form of investment similar to the way those with larger amounts of money are able to invest in government securities," he continued.

"I think when we get to 2021 we should be able to give this some more attention. One of the early deliverables was to get some of the other developments in the government securities market out the way; the creation of the Government securities depository, the listing of government debt on BISX.

"Once we have those foundational issues addressed we can begin to look at the idea of savings bonds and push it forward." Mr Rolle, though, said he did not want to downplay other forms of savings and investments available to Bahamians, adding that persons should be "enabled and encouraged" to make equity investments in the shares of companies and investment funds.

He added that increased focus on financial education and literacy would also help Bahamians to adopt savings habits as "lifelong behaviour", as well as better understand and exploit available investment opportunities.

Besides giving Bahamian households "more cushion" against financial shocks such as COVID-19 and hurricanes, and "greater control over their affairs", Mr Rolle said development of a savings "culture" will also translate into reduced consumption and foreign exchange-earning investments at the national level that boost the external reserves.

However, the IDB survey's findings also revealed the extent to which COVID-19 has strained the fabric of Bahamian society at all income levels. Women have born the brunt of the pandemic's fall-out, with the survey of 910 households revealing an 11.3 percent increase in domestic violence compared to pre-pandemic levels - with the greatest rise in this scourge experienced by high income families.

"The pandemic has negatively impacted Bahamians’ quality of life, particularly that of women. The distribution of domestic chores has been significantly disproportionate. As the figure below shows, women bore a significantly higher burden of domestic chores since the restrictions were implemented in mid-March," the IDB survey found.

Women assumed the bulk of duties when it came to caring for the elderly, children and babies, home schooling, cleaning and cooking, and worse was to follow. "In addition to this, 11.3 percent indicated an increase in domestic violence within their household since the beginning of the pandemic," the IDB report said, "with a higher prevalence in high income households (13.9 percent) compared to low- and middle-income households (10.3 percent and 10.1 percent respectively)."

The IDB acknowledged that the increase in domestic violence since the COVID-19 pandemic started was likely higher than allowed for by the survey findings, as it added: "In April 2020, 49.1 percent of households reported eating less healthy meals than usual, and 5.5 percent went to bed hungry."

More than one in every five Bahamian households reported requesting loans, transfers or remittances from family and friends to aid their financial survival since the COVID-19 lockdowns and restrictions began in mid-March.

"During the pandemic, 22.2 percent of Bahamian households requested loans, transfers, or remittances from family or friends," the IDB survey noted. "The incidence was higher in low income households: 37.7 percent of households earning less than the minimum wage requested a loan compared to 13.3 percent of households earning more than four times' the minimum wage.

"Financial support from employers to cover household expenses was slightly higher for middle income households (27.6 percent) than for low and high income households (23.3 percent and 22.7 percent, respectively)."

As for government assistance, the IDB report said 46.3 percent of low income households benefited from social programmes implemented in response to the pandemic. It assessed monthly food vouchers, unemployment benefits from the National Insurance Board (NIB), and meal vouchers for students who depend on school meals.

With coverage having "significantly increased", the survey added: "Although some high income households are beneficiaries of pre-existing and newly developed social programmes, the programmes within the economic support package seem to have improved targeting to low and middle income households."

Coverage of low income households had increased from 30.4 percent aided by social programmes pre-pandemic. As for middle income families, the coverage ratio rose slightly from 34.4 percent to 35.6 percent, while for higher income earners it actually dropped from 25.7 percent to 24.4 percent.