The Tribune

By YOURI KEMP

Tribune Business

Reporter

ykemp@tribunemedia.net

OPPOSITION leader Michael Pintard has warned of “grave concern” over the government tapping into $232m International Monetary Fund (IMF) special drawing rights (SDR), warning of the “equivalent of printing money”.

In a release to the media, Mr Pintard says the FNM “registers its grave concern about the reported planned use by the government of up to $232.8m worth of IMF Special Drawing Rights (SDRs) which are held as part of the external reserves of the Central Bank.

“When the government borrows from the Central Bank, it is the equivalent of printing money. This is why the Central Bank Act 2020 (Section 21) limits the types and amounts advances by the Central Bank to the Government. As such an action is only used judiciously and within the legal limits.”

The Central Bank of The Bahamas said it made arrangements with the Ministry of Finance for the government to have direct access to the $174.8m in SDRs allocated to The Bahamas by the International Monetary Fund (IMF) in 2021.

In August 2021, the IMF made a $650bn general allocation to 190 of its member states, of which The Bahamas was allocated $174.8m at a 0.05 percent interest rate, which converted to about US$247.5m.

At the time, the Central Bank said the funding would be used to bolster external reserves. As of this month, the bank said the allocation was valued at $232.8m.

Mr Pintard added: “The Central Bank notes in its November 2022 Monthly Economic and Financial Developments Report that the use of these funds ‘create a direct foreign currency liability of the Government to the Central Bank’. In other words, this is an advance or loan from the Central Bank to the government and must be subject to the provisions of the law as prescribed in the Central Bank Act.

“Section 21 of the Central Bank Act only permits the Bank to offer short term loans and advances to the government which must be subject to prevailing market interest rates, and for a period not exceeding 91 days. In fact, Section 21 subsection 1 says that aside from the limited exceptions noted above, the Central Bank shall not make any direct or indirect advances to the government or any state-owned enterprise.

“So we demand that the Minister of Finance explain what the legal basis is for this loan from the Central Bank that allows the government to borrow these IMF-issued SDRs. We note also that this facility and related facility was not announced by the government - which is curious given their endless public relations exercises.

“We note that the intent to take out this Central Bank loan was not mentioned in its annual borrowing plan published just a few months ago. Could it be that the Davis administration is finding that it cannot raise the money it had planned from its domestic sources and so has chosen to borrow from the foreign reserves instead, and outside the established legal parameters?”

Mr Pintard added: “It appears that the government is using a Central Bank loan facility to access more than $200m IMF provided-resources and has failed to inform the Bahamian people of the details of this transaction. There are several crucial questions that must be answered! How long is the loan for? What are the repayment terms? How will this be accounted for by the Central Bank and by the government? What is the state of the country’s finances that necessitated this irregular decision? What has changed over the last several months that has caused this apparent reversal in the Central Bank’s position?

“As always, this administration pays lip service to the notions of accountability and transparency, but consistently hides all serious and material matters from the Bahamian people.

“This is a grave matter and the Bahamian people must be assured that the government is undertaking all of its financial matters fully consistent with all applicable Bahamian laws and for the benefit of the Bahamian people.”