Caribbean & Central America - April 2018 (ISSN 1741-4458)

*** IMF POINTS TO BRIGHTER FUTURE FOR BAHAMAS. An International Monetary Fund (IMF) team was in The Bahamas from 7-20 March for the 2018 Article IV consultation. It reported that the economy “has turned the corner but significant challenges remain”.

GDP is reported to have grown by 1.3% in 2017 and growth is expected to accelerate to 2.5% in 2018. The fiscal balance is set to narrow to 2.7% in FY2018 from 5.8% in FY2017. Another bright spot is the improving unemployment rate, partly as a result of the opening of the mega Baha Mar resort, which has created nearly 4,000 jobs so far. In November 2017, unemployment was 10.1%, compared with 11.6% a year earlier.

Debt remains a concern for the IMF. Central government debt had increased to 57% of GDP by the end of FY2017, up from 36.7% in FY2010. The IMF report declared: “Decisive fiscal consolidation efforts are needed to put the public debt-to-GDP ratio on a firmly downward trajectory”.

The IMF went on to say that fiscal consolidation efforts “need to focus on 1) trimming the wage bill, 2) turning state-owned enterprises (SOEs) self-sufficient, and 3) reforming the unsustainable civil servants’ pension system by moving to a contributory regime in the near term and to a defined-contribution scheme in the medium term”.

The other side of the fiscal equation is the need to raise taxes. Progress was made with the introduction of VAT in 2015, but, the IMF warns, “introducing exemptions for VAT should be avoided as there can be better-targeted instruments to assist low-income households”.

*** JAMAICA CABINET RESHUFFLE. In a surprise move on 27 March, Jamaica’s Prime Minister Andrew Holness replaced Finance Minister Audley Shaw with Nigel Clarke, who won a by-election on 5 March for the ruling Jamaica Labour Party (JLP). Previously, Clarke was deputy chairman of the Economic Growth Council. He was a JLP senator from 2013-2015. Shaw has been moved to the Ministry of Industry, Commerce, Agriculture and Fisheries.