Bahamians will have to rein in spending, notes Francis

Given the high yield of the government’s foreign currency bond and the state of the country’s economy as a result of the global COVID-19 pandemic, Bahamians will have to reign in their spending over the next few years, Former Central Bank Governor Julian Francis told Guardian Business yesterday.

As many brooded over the almost nine percent coupon on the $600 million government raised on the international market, Francis said the rate was no surprise and that Bahamians have to come to accept that these are trying times.

“People have to realize we have to live in the real world,” Francis said. “It’s not necessarily what we want, sometimes we have to accept that things are difficult.”

The country’s historic $1.3 billion borrowing to satisfy the economic hardship brought on by Hurricane Dorian and COVID-19 will mean that the next few years will be an exercise in frugality, according to Francis.

“Over the next couple of years, Bahamians will have to figure out how to be a little less extravagant in how we spend money,” he said. 

“You can’t just borrow more money and pay higher interest rates and say we’re going to still enjoy the extravagances. We will have to go through a period of time when we’re much more careful about our spending, until we see things stabilizing and hopefully turning around.”

Francis said the high interest rate is not something Bahamians are accustomed to, but contended that the country’s credit position has been deteriorating for almost 12 years and has been made even more critical due to the most recent shocks.

“Bahamians believe The Bahamas shouldn’t have to pay such high interest rates, that is true, but at the end of the day, the real test of what you have to pay is what the market will bear,” said Francis.

“We have to realize that there is a great deal of uncertainty facing our economy. At the moment, the markets are extremely nervous when it comes to what you might describe as high-risk borrowers. So, they might then err on the side of wanting to extract a higher interest rate than would be the case under normal circumstances.”

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Chester Robards

Chester Robards rejoined The Nassau Guardian in November 2017 as a senior business reporter. He has covered myriad topics and events for The Nassau Guardian. Education: Florida International University, BS in Journalism

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