The In­ter­na­tion­al Mon­e­tary Fund (IMF) says The Ba­hamas econ­o­my re­mains re­silient even as it ac­knowl­edged that growth is ex­pect­ed to de­cel­er­ate slight­ly in 2025.

An IMF mis­sion, which end­ed a two-week as­sign­ment here, said that re­al gross do­mes­tic prod­uct (GDP) was ro­bust in the first se­mes­ter and is pro­ject­ed to grow by 2.8 per cent in 2025, main­ly dri­ven by con­struc­tion and buoy­ant cruise tourism.

“Growth is pro­ject­ed to con­tin­ue mod­er­at­ing in 2026, part­ly due to rel­a­tive­ly stag­nant stay­over tourism. Over the medi­um term, growth is ex­pect­ed to slow to­ward the as­sessed po­ten­tial growth rate of the econ­o­my, 1.5 per cent,” said Jorge Salas, the se­nior econ­o­mist of the IMF’s West­ern Hemi­sphere De­part­ment.

“The un­em­ploy­ment rate de­clined to 9.3 per cent in the sec­ond quar­ter of 2025, with an im­prove­ment in the la­bor force par­tic­i­pa­tion rate. Against the back­ground of sub­dued glob­al en­er­gy prices, in­fla­tion re­mains low and is pro­ject­ed to be be­low one per cent in 2025,” Salas added.

Re­gard­ing the macro-eco­nom­ic out­look for the coun­try, Salas said that the risks are broad­ly bal­anced and down­side risks stem from a po­ten­tial glob­al slow­down, which would have ad­verse im­pact on Ba­hami­an tourism, tighter glob­al fi­nan­cial con­di­tions, or nat­ur­al dis­as­ters.

“Up­side risks in­clude the pos­si­bil­i­ty of re­sults from ef­forts to di­ver­si­fy tourist source-coun­tries and greater-than-ex­pect­ed ef­fects of pub­lic and pri­vate in­fra­struc­ture projects linked to tourism and the en­er­gy sec­tor re­form. Risks to in­fla­tion are broad­ly bal­anced,” the leader of he IMF del­e­ga­tion said.

He said that pub­lic fi­nances have con­tin­ued to strength­en and that in re­cent years, the econ­o­my has ben­e­fit­ed from tourism-re­lat­ed rev­enue flows, and steps have been tak­en to re­duce deficits and pub­lic debt.

Salas said that a pri­ma­ry sur­plus was achieved in the fi­nan­cial year 2024-25 for the third con­sec­u­tive fis­cal year.

In June this year, a US$1.1 bil­lion Eu­robond is­suance al­lowed for a buy­back of near­ly US$0.8 bil­lion in more ex­pen­sive ex­ter­nal oblig­a­tions, Salas said, not­ing that while de­clin­ing, cen­tral gov­ern­ment debt re­mains el­e­vat­ed at 74 per cent of GDP, and fur­ther fis­cal con­sol­i­da­tion is re­quired.

He said that the 2025-26 fi­nan­cial year bud­get tar­gets an over­all fis­cal sur­plus, sup­port­ed by the in­tro­duc­tion of the Do­mes­tic Min­i­mum Top-Up Tax on large multi­na­tion­al cor­po­ra­tions.

“Achiev­ing the au­thor­i­ties’ 50 per cent of GDP tar­get for cen­tral gov­ern­ment debt in fi­nan­cial year 2030/31 is es­ti­mat­ed to re­quire ad­di­tion­al mea­sures. In ad­di­tion to sus­tained ac­tions to im­prove tax ad­min­is­tra­tion and com­pli­ance, quick­ly re­duc­ing cen­tral gov­ern­ment debt to 50 per cent of GDP should be pri­ori­tised by adopt­ing new rev­enue-en­hanc­ing and ex­pen­di­ture-op­ti­miz­ing mea­sures.

He said these poli­cies in­clude re­plac­ing the busi­ness li­cense fee with a new cor­po­rate in­come tax, in­tro­duc­ing a pro­gres­sive per­son­al in­come tax, re­duc­ing tax ex­pen­di­tures, no­tably ex­emp­tions to the val­ue added tax (VAT) and cus­toms du­ties as well as elim­i­nat­ing the ceil­ing on the prop­er­ty tax, rais­ing the stan­dard VAT rate to around 15 per cent and im­prov­ing the op­er­a­tions of state-owned en­ter­pris­es (SOEs) and re­duc­ing fis­cal trans­fers to them, es­pe­cial­ly the health and wa­ter en­ter­pris­es.

Salas said that these mea­sures would al­low for a re­duc­tion in the fis­cal deficit but would al­so give some space to in­vest more in ed­u­ca­tion, so­cial pro­tec­tion, and hard­en­ing in­fra­struc­ture for nat­ur­al dis­as­ters.

The IMF of­fi­cial said that up­grad­ing fis­cal in­sti­tu­tions is crit­i­cal to mit­i­gate fis­cal risks. He said ef­forts to re­duce debt rollover risks, in­clud­ing by mo­bi­liz­ing do­mes­tic fi­nanc­ing at longer ma­tu­ri­ties, should con­tin­ue.

“It will be key to ac­cu­rate­ly as­sess and mit­i­gate fis­cal risks aris­ing from SOE(state owned en­ter­pris­es) through en­hanced mon­i­tor­ing and reg­u­lar pub­li­ca­tion of SOEs’ au­dit­ed fi­nan­cial state­ments. The planned re­form to civ­il ser­vice pen­sions should be sup­ple­ment­ed with more holis­tic changes that can lessen the ac­tu­ar­i­al im­bal­ance of the civ­il ser­vice pen­sion sys­tem.”

Salas said ad­vanc­ing plans to adopt an ac­cru­al-based ac­count­ing sys­tem for the bud­get would be im­por­tant to im­prove fis­cal trans­paren­cy and de­ci­sion-mak­ing.

The IMF said that in­creased use of pub­lic-pri­vate part­ner­ships (PPPs) to de­vel­op in­fra­struc­ture should go hand in hand with stronger PPP gov­er­nance.

“PPPs can be use­ful for meet­ing the coun­try’s in­vest­ment needs, in­clud­ing in en­er­gy, roads, and cli­mate-re­silient in­fra­struc­ture. En­sur­ing that PPPs de­liv­er pub­lic val­ue with­out cre­at­ing hid­den fis­cal li­a­bil­i­ties re­quires clear le­gal frame­works; trans­par­ent pro­cure­ment; proac­tive fis­cal risk man­age­ment; and prop­er bud­get­ing, ac­count­ing, and re­port­ing stan­dards. An im­me­di­ate pri­or­i­ty should be to im­prove fis­cal re­port­ing and en­hance the over­all in­sti­tu­tion­al frame­work for PPPs.”

The IMF said that as cred­it to the pri­vate sec­tor in­creas­es, it is im­por­tant to safe­guard banks’ re­silience, not­ing that sys­temic fi­nan­cial sta­bil­i­ty risks are mod­er­ate, and do­mes­tic banks re­main in good health.

“Bank cred­it to the pri­vate sec­tor is grow­ing at a steady pace, with cor­po­rate loans in­creas­ing quick­ly though from a rel­a­tive­ly low base. Su­per­vi­sors as­sess lend­ing stan­dards as gen­er­al­ly pru­dent and risks to as­set qual­i­ty are low, but it will be im­por­tant to up­grade stress test tools and con­tin­ue mon­i­tor­ing risks stem­ming from banks’ ex­po­sure to the sov­er­eign.

“More work is need­ed to im­prove over­sight of the non­banks and ad­dress da­ta gaps. On­go­ing ac­tions to strength­en cred­it union gov­er­nance are wel­come. Clos­ing da­ta gaps re­mains a pri­or­i­ty to up­grade the over­sight of non­banks; for ex­am­ple, to com­pre­hen­sive­ly as­sess cli­mate risks, in­clud­ing in the in­sur­ance sec­tor,” Salas said.

He said su­per­vi­sors should adopt a time-bound plan for op­er­a­tional­iz­ing loan-lev­el da­ta from bank and non­bank lenders and re­al es­tate price in­dices, par­tic­u­lar­ly as con­struc­tion ac­tiv­i­ty con­tin­ues to grow main­ly in the com­mer­cial re­al es­tate seg­ment.

He said that the re­cent­ly es­tab­lished Fi­nan­cial Sta­bil­i­ty Coun­cil can help strength­en sys­temic over­sight, but ad­dress­ing the pri­or­i­ties iden­ti­fied by the coun­cil will re­quire to en­hance tech­ni­cal ca­pac­i­ty across fi­nan­cial reg­u­la­tors and su­per­vi­sors.

WASH­ING­TON, Dec 15, CMC

CMC/af/ir/2025