While acknowledging the highly uncertain economic position the country is now in, Central Bank Governor John Rolle still urged Bahamian households to remain disciplined with their finances.
With most major hotels throughout the country still closed and tens of thousands of Bahamians unemployed, the Central Bank of The Bahamas has said it expects the economy to shrink by 15 to 20 percent.
Given the bleak economic outlook, Rolle said Bahamians should try their best to concentrate most on meeting their essential needs during these critical times.
“It is likely, though, that the families most encountering employment hardships are those least likely to have saved meaningful amounts ahead of the economic crisis,” he said in remarks on the release of the Monthly Economic and Financial Development (MEFD) report for June.
“This reinforces the Central Bank’s message on the importance of making households more financially resilient; the need to encourage and provide more means for families to save ahead of financial setbacks; and to proactively limit the consumer debt burden that persons ordinarily take on.”
Rolle also encouraged borrowers to maintain close contact with their financial institutions about any hardships they may be experiencing.
Still, he emphasized that borrowers who can, should resume payments on any blanket accommodation they received.
“Commercial banks COVID-19 loan payment deferrals have impacted about one-third of the outstanding Bahamian dollar private sector credit,” Rolle said.
“As conditions are managed going forward, lenders have been encouraged by the Central Bank to limit their forbearance to just borrowers with identified needs, and to begin to adjust loan loss provisioning as they obtain clearer information about when individual borrowers are likely to return to their jobs.”
The delinquency rate for private credit continued to fall over the first half of 2020, to just below eight percent of total loans compared to just under nine percent of such claims in June of 2019, Rolle noted.
Nonetheless, he said he expects this rate to soon start to deteriorate.
However, with high liquidity among commercial banks coupled with a reserved lending posture adopted across the banking sector, Rolle said this deterioration does not raise any specific solvency concerns, as commercial banks would be able to fully absorb such losses from current levels of excess capital.