The Tribune

BY NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

THE CENTRAL Bank’s governor yesterday said foreign exchange transactions underscore the Bahamian economy’s relative health with the 17.8 percent increase in bank purchases from the private sector to $4.6bn “far exceeding” 2025’s first-half growth.

John Rolle, speaking at the regulator’s half-year economic development briefing, added that increased demand for import payments also drove a 13.7 percent rise in foreign currency sales by the banks to businesses and individuals during the first six months of 2026 to end-June.

And, amid all this activity, The Bahamas’ foreign currency reserves - which ultimately support the parity one:one exchange rate peg with the US dollar - were more than $200m higher than the year-before point at end-July. As a result, Mr Rolle forecast that the reserves will likely finish 2026 at a level equal to, or slightly higher, than the prior year.

“The foreign exchange markets underscore significantly accelerated private sector inflows during the first half of 2026 compared to last year,” Mr Rolle said. “In particular, commercial banks’ total purchases of foreign currency from the private sector - from investment inflows, tourism and other exports - rose at a robust rate of 17.8 percent to $4.6bn in the first half of the year, far exceeding the 1.3 percent expansion in 2025.

“In line with increased demand for payments, mainly for imports of goods and services, total sales of foreign exchange to the private sector increased by 13.7 percent to $4.1bn. The resulting seasonal net inflow of foreign exchange through the banking sector was correspondingly two-thirds stronger than in 2025, contributing to significantly expanded net sales of foreign currency to the Central Bank.

“With the Central Bank’s net sales of foreign exchange to the public sector only marginally offsetting these net receipts from commercial banks, the external reserves growth through the first half of 2026 was boosted to $480m from the healthy, but more moderate, $355m in the same period of 2025,” the Governor added.

“Near the end of July 2026, external balances were estimated near $3.2bn compared to $2.97bn at the end of July 2025. Given current balances, external reserves are expected to end the year at stable to possibly improved levels in comparison to December 2025. This maintains a favourable support for the Bahamian dollar fixed exchange rate, and it leaves continued room for the Central Bank to accommodate strengthened private sector credit growth over the near and medium-term.”

As for Bahamian commercial bank credit activities, Mr Rolle added: “The pace of bank lending firmed over the first half of 2026, reflecting stronger net flows to the private sector and a recovery in net lending to the public sector.

“After adjusting for transactions which reclassified some commercial credit to public enterprise liabilities, the private sector continued to experience modestly firmer lending growth, including accelerated consumer credit increases and a nearly doubled net advance for commercial credit. Mortgages were mildly increased, but mainly denominated in foreign currency transactions.

“Compared to the same point a year earlier, lending risks also continued to subside - a benefit of both the healthy economic environment and effective ongoing management of delinquencies by banks. In particular, reflecting the reduction in private loans more than three months behind in payments, the non-performing loan ratio moderated by approximately a full percentage point since June 2025 to an estimated 4.4 percent.”

Pledging to take a “balanced approach” to support strengthened lending and ensure the foreign currency reserves remain stable, Mr Rolle added: “In the outlook, the pace of growth, as mentioned earlier, is expected to stay elevated above the estimated medium-term potential, but moderately tempered below 2025.

“For tourism, stopover momentum could strengthen moderately, particularly on the basis of appreciated pricing and some seasonably-improved forecast of average occupancy during the traditionally slower months in the second half of 2026. The foreign investment climate is expected to also remain relatively vibrant.

“The outlook also remains improved for employment. In addition, the pace of domestic credit growth is expected to be maintained at stable to strengthened levels, in line with the Central Bank’s policy posture to encourage firmer lending trends with a continued, very healthy outlook for the external reserves,” he said.

“Ample capacity exists in this credit and liquidity environment to accommodate increased government reliance on local currency financing, relative to foreign currency sources in its overall debt management operations.”

As for the challenges, the Governor added: “Downside risks and headwinds facing the economy remain elevated, given the spillover from wars in Ukraine and the Middle East, and from persistent tariff policy uncertainty. Tourism, in particular, faces some demand restraint from fuel cost pass-through into transportation and electricity costs, as well as the weighing down, particularly, of US consumer confidence because of the varied channels through which inflation has become heightened.

“In addition, higher inflation in the near-term continues to slow the pace at which international interest rates are expected to return to lower levels. This is forecasted to keep public sector foreign currency borrowing costs more elevated for longer than expected, and, on a protracted basis, make it more challenging for foreign investment activity to secure funding.”