Category Archives: Business

Central Bank says nat’l debt to hit $9.5 billion

The country’s national debt is expected to hit $9.5 billion, 82.8 percent of the country’s gross domestic product (GDP), given the economic environment produced by Hurricane Dorian and the global COVID-19 pandemic, according to The Central Bank of The Bahamas’ (CBOB) Quarterly Economic Review (QER) for the second quarter of 2020.

The CBOB report, in its 2020/2021 budget highlights, rehashed that the country’s deficit-to-GDP ratio will increase to an historic 11.5 percent, after the government attempted to shoot for a one percent result in the beginning of its last budget year – before Hurricane Dorian.

The report cites the government’s response to Hurricane Dorian and the COVID-19 pandemic, the crises that pushed the country far into a deficit-to-GDP danger zone.

“Given the announced measures, the government anticipates a considerable reduction in revenue intake and a rise in expenditure, in comparison to the prior year’s originally budgeted target,” the report states.

“Specifically, total revenue is forecasted to decline by $865.6 million (32.9 percent) to $1,762.5 million, vis-à-vis the previous budget, owing to a falloff in both tax and non-tax collections.

“Tax collections are projected to contract by $826.9 million (35.3 percent) to $1,513.4 million, compared to the FY2019/20 budget. Similarly, non-tax revenue is forecasted to decline by $38.6 million (13.5 percent) to $247.1 million, as lower anticipated proceeds from sales of goods and services; and fines, forfeits and administrative fees are expected to overshadow the forecasted growth in reimbursements and repayments and property income.”

The CBOB explained that value-added tax (VAT) receipts are expected to decline by $433.8 million to $666.3 million, a softening of 39.4 percent. It added that taxes on international trade transactions are expected to decline by $151.8 million to $337.4 million, or 31 percent.

On the expenditure side, COVID-19, Dorian stabilization, social support and stimulus measures meant expenditure allocations rose by $324.6 million to $ 3.1 billion, or 11.7 percent.

“This mainly reflected a surge in capital outlay provisions to $515.5 million, compared to the prior budgeted $235 million. Further, planned current outlays increased modestly by $44.1 million (1.7 percent) to $2,574.1 million,” the report states.

“By economic classification, the targeted rise in current expenditure reflected higher allocations for social assistance and benefits, by $91.2 million (48.8 percent) to $278.2 million. In addition, spending for public debt interest payment is predicted to grow by $25.4 million (6.8 percent) to $396.9 million and for subsides, by $12.9 million (3.6 percent) to $370.9 million. “

Tourism ‘ground to a halt’ in the second quarter, notes report

During the second quarter of 2020 the number of visitors to The Bahamas was just shy of 4,000 people, compared to 1.9 million visitors in the same quarter last year, according to data in The Central Bank of The Bahamas’ (CBOB) Quarterly Economic Review (QER) for the second quarter of 2020.

The QER described the country’s tourism situation as having “ground to a halt” in the second quarter due to the travel restrictions caused by the global COVID-19 pandemic.

“Preliminary data from the Ministry of Tourism revealed that overall tourist arrivals totaled just 3,998 during the second quarter, following a 16 percent growth to 1.89 million in 2019, as the borders partially reopened in June to international travelers by private aircrafts and seacrafts,” the QER states.

“Underlying this outturn, sea passengers amounted to just 2,262, vis-à-vis a 16.6 percent increase to 1.39 million last year. Similarly, air traffic contracted to 1,736, relative to a 14.5 percent expansion to 0.5 million a year earlier.”

The CBOB’s report adds that New Providence saw only 1,095 visitors compared to 1.06 million last year, “with sea and air passengers amounting to 581 and 514, respectively”.

The report notes that the Family Islands welcomed 2,359 visitors (sea traffic,1,211 and air traffic, 1,148) versus 0.66 million in 2019.

It states that visitors to Grand Bahama decreased to 544 people versus 0.17 million in the same period last year. That island saw 470 sea passengers and just 74 air passengers.

In the vacation home rental market, according to the QER report, short-term rental data and analytics company AirDNA revealed a falloff in the demand for resort business, with total room nights booked down 65.1 year-on-year. 

“An analysis by listing category revealed that entire place listings registered a 1.2 percentage point reduction in average occupancy levels to 39.6 percent, but the average daily rate (ADR) rose by 3.2 percent to $420.42.,” the report states.

“Further, the average occupancy rate for hotel comparable listings fell by 1.4 percentage points to 43.7 percent, while the average daily rate edged up by 0.5 percent to $155.44.”

More cruise cancellations, some won’t resume until well into 2021

It may be well into 2021 before some cruise ships return to Bahamian ports, as the Carnival and Royal Caribbean cruise lines announced more sailing cancellations through the first quarter of 2021.

While most cruise lines suspended their sailing suspensions through October 31, with the intention to resume sailing on November 1, only one cruise line – that does not call on a Bahamian port – has confirmed it will sail in November.

P&O Cruises, part of Carnival Corporation, yesterday confirmed an extension to its pause in operations, with all sailings cancelled until early 2021 and all Caribbean cruises cancelled until the end of January 2021.

Of the Carnival cruise ships that call on ports in The Bahamas – Conquest, Ecstasy, Elation, Freedom, Legend, Liberty, Magic, Pride, Radiance, Sunshine and Sunrise – the corporation confirmed cancellations in some cases into 2022.

“As the COVID-19 situation continues to evolve, we regret to inform our guests that Carnival Cruise Line is having to cancel the following sailings: Carnival Legend sailings through and including October 30, 2020; Mardi Gras sailings November 14, 2020 through and including January 30, 2021; Carnival Sunrise sailings through and including October 19, 2020; Miami seven- and eight-day sailings from October 9, 2021 through and including April 30, 2022, excluding the March 5, 2022 sailing; Miami five-day sailing January 3, 2022; Carnival Radiance: sailings through and including November 1, 2020; nine-, 12- and 14-day sailings from May 2, 2021 through and including April 29, 2022; five-day sailings December 23, 2021 and December 28, 2021; Carnival Magic: Ft. Lauderdale and Miami sailings through and including March 6, 2021; transatlantic and Barcelona sailings April 10, 2021 through and including May 3, 2021; Carnival Valor sailings through and including April 24, 2021; all other ships sailings through and including October 31, 2020,” the cruise line stated on its website, which was updated this week.

 Royal Caribbean Cruise Line also announced yesterday that its newest ship, Odyssey of the Seas, which was supposed to have its inaugural sailing from Fort Lauderdale with a four-night Bahamas cruise on November 5, won’t sail until April 2021.

“Our goal is to resume operations on November 1, 2020. However, the following circumstances have extended the suspension for the following ships and sailings: European and transatlantic sailings through the end of November 2020; Australia sailings through December 31, 2020; and Odyssey of the Seas sailings from November 5, 2020 through April 17, 2021 will be canceled. Given the closure of shipyards along with the disruption to the supply chain caused by this pandemic, we’ll need additional time to complete the Odyssey of the Seas’ scheduled construction,” the cruise line stated on its website, which was updated yesterday.

“Liberty of the Seas’ amplification has been postponed to a later date and the ship will now sail to Galveston earlier than planned. Regrettably, only one ship can dock at the Galveston pier at a time, so we have to cancel our February 14, 2021 Jewel of the Seas cruise,” Royal Caribbean further revealed.

Despite these cancellations, economic analysts have said The Bahamas could benefit more from the cruise industry when it rebounds since Carnival Cruise Line, MSC and Norwegian Cruise Line all have private islands in The Bahamas.

IDB estimates just $11 mil. in agriculture, fisheries losses from Dorian

Rebuilding the fisheries and agricultural sectors on Abaco and Grand Bahama post-Hurricane Dorian will require the creation of a complete and extensive registry of participants in the field, as well as ensuring facilities and machinery are properly reconstructed to code, the Inter-American Development Bank (IDB) has cautioned.

The fisheries and agricultural industries, two very important components of those islands’ economies, sustained a combined $14 million in damage and $11 million in losses according to the recently released “Assessment of the Effects and Impacts of Hurricane Dorian in The Bahamas” report.

The report outlines recommendations for the fisheries sector, including that it is necessary to establish a complete registry of all vessels and fishermen devoted to the sector to mitigate against future losses in the event of another catastrophic event.

“This will help in the design of a plan for the recovery of the sector and to better target the allocation of reconstruction resources. It is important that the new infrastructure is build up to code and there should be incentives for those managing key facilities to bring them back to operation as soon as possible,” the report states.

“Fishing is an activity that supports many families and in some areas of The Bahamas is the main activity, particularly in smaller communities.

“To estimate the losses to fisheries, the yearly total catch was broken down to a monthly amount for Abaco and Grand Bahama. A full recovery should occur in eight months, with such relative quickness due to the important nature of this activity. In order to estimate losses, the seasons for spiny lobster and stone crab were also considered. Special attention in the recovery should be paid to the processing facilities.”

Although damage in the agriculture sector totaled just under $3 million, the IDB believes the sector would rebound by mid-2020.

“Most of the damage is associated to the poultry facility located on Abaco. In this facility the estimated damage to infrastructure was $0.8 million. Also linked to this facility, the damage in animal property was $1 million. The damage in green houses is estimated to be over $187,000, while the damage in perennial plants is estimated at $0.66 million. A total of $197,000 is the estimated damage to agriculture-related equipment,” the report states.

“The reconstruction of all agricultural infrastructure should be done meeting the code requirements. Regarding the greenhouses, information should be provided regarding better practices in materials, shapes and structures. There should be also information available on how to recover the affected soil. The current agricultural registry should be updated and expanded to include smaller producers. Information should also be provided to agricultural producers on the benefits of insurance and helping them design a plan to put in place in the event of a storm.”

Last month, Minister of Agriculture and Marine Resources Michael Pintard said the government plans to undertake an aggressive campaign to create legislation and policy to expand the development of the blue economy, especially aquaculture.

Earlier this year, Pintard also said a plan to reduce the country’s reliance on food imports would cost $1.6 million, which would be used to assist farmers on Abaco and Grand Bahama first, before farmers in other parts of the nation.

IDB: Don’t use public funds to create pre-disaster Abaco, GB

The government is being cautioned against using public funds to reproduce pre-disaster situations on the islands of Grand Bahama and Abaco, as rebuilding efforts continue one year after Hurricane Dorian.

The recommendation was made in a just-released extensive report by the Inter-American Development Bank (IDB) on the “Assessment of the Effects and Impacts of Hurricane Dorian in The Bahamas”.

When Hurricane Dorian ravaged those islands in September 2019, it caused estimated damage of $2.5 billion, of which nine percent is public and 91 percent private, according to the IDB.

“Considering the magnitude of the government’s efforts required for reconstruction, it is vital that public funds are not used to reproduce pre-disaster situations, such as rebuilding communities on the shoreline or in flood-prone areas. Moreover, special administrative procedures to facilitate a procurement process of necessary goods and materials for emergency support should be considered,” the report states.

“Allowing temporary and exceptional flexibility in the rules and procedures for emergency assistance would facilitate, for example, the usage of contingent lines of credit that usually have a limited time for execution. In addition, funds acquired from international institutions must consider a disaster risk management component, so that these investments and public debt are properly protected.”

Abaco suffered 87 percent of the damage caused by Dorian, while Grand Bahama suffered 13 percent.

The IDB notes that losses were sustained primarily in the private sector, estimated at $717.3 million, which accounted for 84 percent of the total.

It is for that reason that the IDB recommends heightened insurance promotion for not only private residences, but also small businesses.

“The purchase of insurance for public sector infrastructure should be further considered and the culture of insurance should be promoted. Financial protection should be established, starting with new public works. For this, it is important to conduct negotiations with private insurance companies to include costs that the government would incur when buying this service. This policy is followed in other countries, such as Ecuador, where the purchase of insurance for public infrastructure is mandatory,” the IDB report states.

Following interviews with the Bahamas Insurance Association (BIA), the IDB deduced that a lack of insurance in small businesses is particularly acute in The Bahamas. From that assessment, the IDB has recommended the removal of value-added tax (VAT) on small business insurance.

“While most large business were well-insured, many small businesses and micro-enterprises were not insured or were underinsured. As insurance is a key factor in the financial protection pillar, efforts should be made to increase insurance penetration, both for property and loss of business. In 2018, the government removed the VAT requirement from homeowners’ insurance; something similar can be done for small businesses and microenterprises,” the report states.

“While discussion with the Bahamas Insurance Association revealed that this measure has not yet significantly increased insurance penetration among homeowners, witnessing the level of devastation left by Hurricane Dorian may influence both homeowners and small business owners to increase their coverage. Another suggestion that arose in discussions was the possibility of government subsidizing insurance for homeowners and small businesses. While this would increase the government’s annual expenditure, it may reduce the total relief expenditure in the event of another disaster. Besides direct subsidies, the government could also promote business associations and support their requests for group insurance and rates.”

In addition to structural protection, the IDB highly recommends the compilation of a comprehensive registry of micro, small and medium-sized enterprises in the country.

“Information about the sector, location, size and other characteristics of these companies would allow for better public interventions, especially support for retrofitting and reconstruction; and access to credit,” the report states.

“A comprehensive registry should also contribute to designing formalization strategies. Local enterprises should also be part of the recovery and reconstruction efforts, as they can provide products and services necessary to prepare and respond to the emergency. The “Green Response” initiative of the Association of Caribbean States promotes the use of green materials to respond to emergencies, which could be developed and provided by local suppliers.”

Recommendations laid out for more resilient power infrastructure

As Bahamas Power and Light (BPL) continues to restore electricity to Abaco bit by bit, the Inter-American Development Bank (IDB) has recommended structural uniformity and a higher quality of rebuilding material to ensure a more resilient power infrastructure in the face of devastating natural disasters.

The report estimates that total damage in the power sector was $131.3 million, of which $8.4 million was from damage to the transmission and distribution networks on Abaco and $21 million was from damage to the flooded power generation plant on Grand Bahama.

The report, “Assessment of the Effects and Impacts of Hurricane Dorian in The Bahamas”, states that policies and investment programs are critical to reduce existing risks and prevent new ones from arising in the power sector.

“In support of developing a more resilient power infrastructure on the island of Abaco, attention should be given to the two major 34.5kV transmission lines that run from the Wilson City power plant to the Marsh Harbour power plant and storage facility (one power line on each side of the main road). The DALA (damage and loss assessment) team observed that one of these lines went down during the hurricane, while the other remained intact. This was due to the higher category of poles used for supporting the line that remained standing and operational. The consistent use of higher category poles is recommended for reconstruction, especially in the cases of essential power lines that connect the island’s power stations,” the report states.

“Also of importance are the poles that support the power lines that go to the hospital and ports, as these are essential infrastructure that must remain connected to the power supply. This situation reaffirms the need to establish quality and operation guidelines for private operators of public services, especially as electricity availability affects a variety of essential services, such as telecommunications and health. Further resilience can be added through the installation of storm guy wires to the transmission system. These additional points of support help to harden the more essential parts of the transmission and distribution grid and allow less damage during weather-related disasters.”

The IDB has also recommended more uniformed transmission and distribution lines when rebuilding.

“Five different voltage levels for transmission and distribution lines were observed, each of which required their own type of transformers and other supporting equipment. A helpful policy moving forward would be the standardization of the distribution network through the consistent use of equipment that supports one voltage level,” the report states.

“This should allow for easier storage of the necessary materials for repairs and recovery and for more cost-efficient procurement practices. Further, there are implications for human resources as linesmen and other maintenance staff can be familiar with one standard throughout the island, saving the need for specialized labor depending on the type of system damaged.”

At last report, BPL officials said they have spent approximately $30 million in power restoration efforts on Abaco.

The IDB, through interviews with BPL officials for the creation of its report, found that $6.3 million has been spent on labor and labor-support costs.

Minister of Public Works Desmond Bannister initially projected $80-$90 million would be needed to fully restore power on that island.

“Total losses were estimated at $68.9 million, reflecting the value of power that was not sold, both because of damage to the transmission and distribution network and because of the reduction in demand for electricity as a result of storm damage,” the IDB states.

“Losses were estimated until December 2021 as recovery is expected to take at least this time or even longer to return to normal levels. An estimated loss of $22 million was made for the remainder of the year 2019; $40 million for the year 2020; and $6.8 million for  the year 2021.”

The report also highlights the issue of security on Abaco in the aftermath of Hurricane Dorian, pointing to various breaches including vandalization at various BPL facilities, vehicle theft and interference with a fuel tank in an attempt to steal diesel.

“In the case of the breached fuel tank, a catastrophic fire could have followed the disaster, if not for the vigilance of the BPL staff. Security was an overall issue for the island of Abaco as there was a serious breakdown of social structure due to the widespread ruin,” the report notes.

“In such instances, patrols and military should be assigned to secure the power plants and other key infrastructure to avoid the creation of new risks and to support the rapid resumption of service. Also, social services should be quickly deployed to avoid feelings of abandonment or helplessness that could lead to acts of vandalism.”

DPM: Nationwide rollout of Sand Dollar before end of the year

Sand Dollar, The Central Bank of The Bahamas’ digital currency, will be rolled out nationwide before the end of the year and possibly next month, Deputy Prime Minister and Minister of Finance Peter Turnquest confirmed yesterday, adding that this will be an important development for financial inclusion in the country.

A Bloomberg article heralding the coming rollout of the digital fiat currency was being widely circulated yesterday. That article pegged the rollout for next month.

Guardian Business reached out to Central Bank Governor John Rolle for a comment yesterday, though none was received up to press time.

While Turnquest insisted the details of the Sand Dollar rollout come from the Central Bank, he said the government is excited about the project and its successful Bahamas-wide launch.

“This is an important and innovative development that puts The Bahamas on the leading edge of financial inclusion solutions for underserved and unserved remote communities and developing countries,” Turnquest said.

“The speed of transaction clearance, the security and cost effectiveness of the solution, should bring benefits to both the merchants and users of this digital fiat currency.

“For the government, it will allow for much less cost and risk of handling cash here in Nassau at our various cashier locations and reduce, and in some instances eliminate, the expense of dealing with islands where there is no bank or other legitimate means of conducting commerce in a secure manner.”

The Bloomberg article explained that the Central Bank already has $48,000 worth of Sand Dollars on its balance sheet and will only add new Sand Dollars as the demand grows and bills are retired, given that the Sand Dollar is the equivalent e-version of the Bahamian dollar.

“Even at that diminutive scale, the project puts the country at the forefront of a global race to create state-backed digital currencies, a goal shared by behemoths like China as well as Caribbean neighbors including Jamaica and Barbados,” the Bloomberg article states.

Sand Dollar was first launched in Exuma as a pilot and then in Abaco to assist with post-Hurricane Dorian transactions while banking services were not widely available.

Analyst: Cruise lines’ private islands will flourish after restart

An analyst at international financial services company UBS has told investors that cruise lines with private islands will likely come out atop the rest, while insisting that Royal Caribbean Group’s freshly renovated Coco Cay private island destination will likely drive cruisers to the cruise line, according to an article on tradewindsnews.com.

The analyst, Robin Farley, contended in the article that Coco Cay’s “amenities and attractions” and the company’s addition of a pier to remove the need for tendering, means the company could see a boost when it begins sailing again.

She added that cruise lines’ private islands will be attractive when sailings restart because the cruise lines can better manage their COVID-19 free environment if they stay away from major population centers like Nassau.

“Farley has told clients she believes that after the COVID-19 hiatus, serving US cruise customers will depend heavily on cruise company-owned islands because they offer a more easily controlled environment,” the 

tradewindsnews.com article states.

Carnival Cruise Line, MSC and Norwegian Cruise Line all have private islands in The Bahamas that are likely to be strong selling points when cruise begins again.

However, the article predicts that Royal Caribbean’s $250 million investment in Coco Cay, which included the addition of the tallest waterslide in the North America region, a wave pool and zip lining, will take the top spot for cruise enthusiasts.

Royal Caribbean’s President and Chief Executive Officer Michael Bayley told the Miami Dade Tourism and Ports Committee last week that the company is ready to return to service and believes it has adequately prepared itself in the face of the COVID-19 pandemic.

“We’re very optimistic that we will be able to return to service,” said Bayley.

“We’re certainly better prepared today than we were yesterday and we believe we will be better prepared for tomorrow. It’s time that the cruise industry returns to service and we’re ready.”

While it is likely that cruise lines will initially favor their private islands and shorter cruise itineraries when the industry restarts, Minister of Tourism and Aviation Dionisio D’Aguilar said he has informed the companies that they must return to The Bahamas’ population centers as quickly as possible in order to spur economic activity.

BPL rate reduction bond, station D delayed amid COVID-19

The COVID-19 pandemic has forced Bahamas Power and Light (BPL) to delay the placement of its rate reduction bond, which will force the company to delay the construction of station D at its Clifton Pier facility, meaning the delay of 100 megawatts of new power.

BPL’s Director of Public Relations Quincy Parker, who was a guest on Guardian Radio’s Morning Blend Tuesday, revealed that construction will be delayed and the station should have broken ground in April, when the country was in the throes of its first surge of COVID-19 cases.

Parker said for now BPL is in a “holding pattern” until markets are favorable enough for the placement of its $600 million bond.

“That station (D), was initially supposed to be built out of the bond funding,” Parker said.

“Since we are delayed going out the bond, then that automatically pushes the timeline for station D back. 

“Until such time as we have a better idea of the bond timing, there is not really a timeline for station D that we are willing to be committed to.”

Parker said the use of the bond money continues to be redefined, even as the company continues its negotiations with Shell North America for a power purchase agreement and the construction of a liquefied natural gas plant.

Meantime, the company continues to pursue its renewable energy endeavors through its Ragged Island solar project, which Parker said is soon to have its battery storage units in place.

The island’s micro solar array was commissioned at the end of last year.

“The battery energy storage solution is under construction at the Ragged Island power plant,” said Parker.

“At the moment it’s been delayed by the problems with immigration due to COVID-19. But once it is complete and tied in, that will be supplying about 100 percent of Ragged Island’s power entirely through a solar microgrid for the first time in the country’s history.”

He added that a solar microgrid is also being installed in Marsh Harbour to bolster power to the government complex and critical infrastructure surrounding that complex. In addition, request for proposals are being finalized for solar projects on Eleuthera, Andros and Inagua.

D’Aguilar: Large hotels want to open after US elections, Thanksgiving

Large hotel operators have indicated to the government that they prefer to wait until the United States’ November 3 elections are completed and possibly until the Thanksgiving holiday near the end of November, to consider opening their doors, Minister of Tourism and Aviation Dionisio D’Aguilar told reporters yesterday.

D’Aguilar, speaking outside of Cabinet yesterday, said some of those hotels have even considered waiting until the Christmas holidays to consider reopening.

“We were well aware of the position of a number of the hotels,” said D’Aguilar.

“A number of those large hotels indicated that they wanted to wait until after the American election, possibly open just before Thanksgiving, possibly before Christmas and we said okay fine that’s fair enough, but we will make the announcement October 15 to get the ball rolling, to get people starting to think about it, to get airlines in place.

“It takes a little bit of time to ramp up, so we decided to go with October the 15 as a way to get everybody to start thinking about it.”

D’Aguilar’s comments came on the heels of Baha Mar’s announcement last week that it would not reopen in October.

Since then it has been revealed that Sandals Emerald Bay on Exuma will not open until November, Club Med on San Salvador until December and Sandals Royal Bahamian until January. 

D’Aguilar said while there is evidence that travel to The Bahamas is in high demand, the restrictions put in place to contain the transmission of COVID-19 remain a deterrent.

“We think that there is demand, but there are certain impediments in place that make it a little more difficult to come to this destination,” he said. “It’s not as tourism-friendly as it could be. Hopefully we come to something that’s more palatable.

“I’m sure all of our hotel partners and airline partners are looking at who is traveling and how many people are traveling and that will determine what course of action they take as they begin to contemplate entering our tourism economy.”