IMF Publishes Bahamas Article IV Consultation

by Amanda Banks, Tax-News.com, London

31 July 2003

The IMF (International Monetary Fund) has published the results of its 2003 article IV consultation with the Bahamas, in which it praises the jurisdiction's previous economic management, but warns of significant challenges ahead and slower than anticipated economic growth.

The IMF describes the Bahamas as an open economy with a long track record of prudent macroeconomic management, strong democratic institutions, and social indicators that stand up to most of its Central American and Caribbean neighbours. It also pointed out that the jurisdiction is the second largest offshore financial centre in the Caribbean managing around US$280 billion in foreign assets, and noted a per capita GDP of US$16,000, one of the highest in the region.

However, whilst the IMF predicted an economic growth rate of 2.9% in its World Economic Outlook in April of this year, it has now revised this down to a rate of 0.9% in 2003. Yet, beyond this, the IMF predicts steady growth at a rate of 3% per year until 2008, and anticipates higher capital inflows from 2004.

Nevertheless, the report expresses concern as to the Bahamas' ability to weather future economic or political shocks such as the crash in equity prices and the events of September 11 2001. It also warns of competition from neighbouring Caribbean islands for vital tourist dollars, which remain the Bahamas' main source of income. To this end, the IMF recommends that the country should seek to diversify its economy to enable it to weather any difficult circumstances which may arise in the future, and to concentrate its policy on raising international reserves and improving competitiveness over the medium term.

The Bahamian Ministry of Finance said this week that it was aware of the points raised in the IMF report, and in a statement confirmed that it "is dealing with them."

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