Economist touts IMF program to solve Bahamas debt

Noted Caribbean economist Marla Dukharan continues to tout the value of The Bahamas entering a debt restructuring program through the International Monetary Fund (IMF), and employing the services of other multilateral organizations like the World Bank, Caribbean Development Bank (CDB) and Inter-American Development Bank (IDB) to get the country’s debt under control.

Dukharan, who made the remarks while speaking at yesterday’s RF Economic Outlook, has suggested this posture for the country on several occasions, even predicting that the country would enter a debt restructuring program in the midst of the COVID-19 pandemic.

According to the economist, this country has to retool its finances after suffering the two extreme economic shocks of Hurricane Dorian and COVID-19.

“The Bahamas needs a significant reform agenda,” said Dukharan. “It is my humble opinion that if The Bahamas were to call on the IMF, the World Bank, the IDB, the CDB and other development partners, engage in a debt restructure exercise… because remember, you’re facing a double whammy that nobody else has had to deal with in this region, with Dorian and with the pandemic. Engage in a meaningful debt restructure exercise and embark on a sweeping socio-economic green reform agenda. And that way The Bahamas, I think, is well poised to become the Caribbean’s next success story, just as Jamaica has done.

“Arguably, The Bahamas is starting from a much better position than Jamaica did in 2012, or Barbados did in 2018. The debt to GDP was 147 percent in Jamaica and somewhere close to that as well in Barbados.

“I want to urge the government here, don’t do what Barbados did. Don’t wait till all the wheels fall off.”

While entering a debt restructuring program through the IMF is looked at as a stain on economies and is seen to be taboo in the circles where economies like The Bahamas go to borrow foreign currency, Dukharan insisted that there are many misconceptions about how the IMF assists countries.

She explained that politicians in this region also worry that an IMF restructuring exercise would mean adhering to IMF policies on the size of the public service and other income rightsizing measures that may not be politically expedient decisions.

“There is this misconception because politicians all over the region love to demonize the IMF and say, ‘well, if the IMF comes in, they’re going to make us lay off half of the public sector workforce, they’re going to make us cut wages, they’re going to make us do X, Y, and Z’,” she said.

“And these are all draconian measures that we don’t want to do because it’s going to impoverish our people.

“Actually, that’s not how it works. You know, they tell you what are the targets you need to reach for your fiscal balance, etc. And you need to figure out what are the policy measures that work best for you.”

The government continues to tout the country’s improving fiscal situation, powered by the country’s improving tourism numbers, that could break records this year.

However, the government and Dukharan continue to warn that climate change and stronger tropical cyclones continue to threatened the fiscal strength of the country.