Caribbean & Central America - August 2021

At the beginning of August, John Rolle, the governor of The Bahamas’ central bank said that The Bahamas began a slow recovery in the first half of 2021. Rolle said: “The rebuilding in tourism has been most marked in respect of the second quarter of 2021, although on a year-to-date basis, the half-year outcome is still lower than in 2020.”

The central bank is now projecting that the economy will grow by 2% in 2021, but Rolle pointed out that this is hardly world-shattering given that the comparison is with the dire year of 2020. He said: “The main determinant of how we do in regards to the GDP target is how much business the hotel sector is able to recover. Recall that for the hotel sector, anything that happens between now and the end of the year is compared to a period in 2020 when there was virtually no activity. So from that point of view 2% growth is not a high or an optimistic projection”.

Rolle added that 2023 “is likely when we see a full restitution”. The issue is that there has been a 16% reduction in economic activity compared with 2019, and “the base of 2019 signals when you have recovered all of those drawbacks”.

In the meantime, the government has revealed that it is to borrow US$892.4m from local markets and US$959.2m in foreign currency (the Bahamian dollar has a 1-to-1 peg with the US dollar). The details were published in the first Annual Borrowing Plan (ABP). The US$1.85bn in additional borrowing this fiscal year will be used to refinance maturing loans and securities and to cover the US$950m shortfall between revenue and expenditure in 2021/2022.

On the publication of the ABP, Minister of State for Finance Kwasi Thompson said: “The publication of our medium-term debt management strategy every November and our annual borrowing plan every July will clearly articulate how we intend to eventually attain sustainability in our debt position”.

• Corruption vulnerabilities

The latest US Investment Climate Report published by the US Department of State on 21 July argues that The Bahamas continues to face problems with corruption. Although anti-corruption laws are in place, the report says that there is only a “limited enforcement of conflicts of interest related to government contracts”.

The report warns: “The political system is plagued by reports of corruption, including allegations of widespread patronage, the routine directing of contracts to political supporters, and favourable treatment of wealthy or politically connected individuals”.

   The Free National Movement (FNM) government, which came to power in 2017, ran on a strong anti-corruption platform, and early in its term a number of former public officials were charged with corruption crimes, including extortion, bribery, theft through their employment, and defrauding the government.

   However, says the investment climate report, “the government reported no new cases of corruption in the executive, legislative, and judicial branches during 2020” despite the fact that three cabinet ministers had been forced to resign in the first three years of the administration under allegations of corruption

   The report argued that campaign finance needed better regulation, and that the procurement process “remains susceptible to corruption as it contains no requirement to engage in open public tenders”.