Central Bank’s independence could be strengthened, IDB report says
Enhanced technical and political independence of the Central Bank of The Bahamas (CBOB) and transparency in its operations should rank high on policymakers’ agenda, according to the findings of the Inter-American Bank’s (IDB) most recent study on the status of political and economic institutions in The Caribbean.
The Nurturing Institutions for a Resilient Caribbean report noted that while the institutional performance of The Bahamas remains in line with international standards, opportunities for improvement exist, particularly in the areas of education and economic institutions.
CBOB’s independence and transparency could be strengthened, the report noted, as it holds a ranking of 73 out of 89 countries worldwide, and an overall transparency index score of 5.5, within a range of 0 to 15. This compared to other countries of the Organisation for Economic Cooperation and Development (OECD), which scored on average 11.93, and the rest of the small economies of the world (ROSE), which scored on average 4.89.
“Independence and transparency of central banks influences the credibility of these institutions and their effectiveness in controlling inflation and providing a proper environment for economic growth and prosperity,” the IDB said.
Regarding public sector transparency, while the IDB welcomed the fiscal strategy report introduced in October, it concluded that transparency could be enhanced regarding extra-budgetary expenditures or funds.
“The Bahamas would also benefit from enhanced transparency in public procurement by increasing the utilization of competitive tenders, recruiting qualified procurement staff and publicizing the information on related processes and awarded contracts,” the report noted.
“Tax liability assessments and exemptions show low enforcement, limited internal controls that are effective and a need to improve external scrutiny and audit.
“The planned introduction of cost-cutting measures, along with fiscal responsibility legislation, will target the budget deficit and gradually reduce the debt burden. The government of The Bahamas continues to examine ways to provide stronger support to public sector fiscal management and strengthen the provision of data through the central delivery unit and promotion of a new structural-fiscal culture.”
Additionally, the report noted the absence of government’s delayed implementation of the fiscal responsibility council.
“Fiscal performance worldwide has been shown to improve with the existence of institutions that aim to correct incentives and contain overspending,” the report said.
“If properly established, fiscal rules (since October 1, 2018) and fiscal councils (to be operational July 2019) provide a medium-term anchor that enhances the credibility of policies and supports inter-generational equity. The lack of such institutions makes fiscal mismanagement more likely.
“The establishment of such institutions would likely increase transparency and credibility, as well as increase awareness of the political and social costs of unsound fiscal policies in the country. In addition, the analyses show that The Bahamas would benefit considerably from greater credibility in the budget.”
Paige started working as a business reporter in August 2016.
Education: Palm Beach Atlantic University in 2006 with a BA in Radio and Television News