The International Monetary Fund (IMF) has approved the disbursement of $250 million in rapid financing – 100 percent of the quota allowed under the IMF’s Special Drawing Right (SDR) – to support the country’s fight against the coronavirus (COVID-19), an IMF press statement revealed yesterday.
The statement explained that the $250 million was approved by the IMF’s executive board to “help meet the urgent balance of payments needs stemming from the COVID-19 pandemic, boost resources for essential COVID-19-related outlays and catalyze additional support from development partners”.
The IMF offered the same rapid financing support to The Bahamas following Hurricane Dorian, but the government was hesitant to draw down the facility.
The IMF noted in its statement that the country is now facing “an unprecedented crisis as it battles” the economic fallout from both Dorian and COVID-19.
“The Bahamas was just recovering from the widespread destruction caused by Hurricane Dorian in the fall of 2019, when the COVID-19 pandemic led to a sudden stop in tourism, causing a deep recession and creating large external and fiscal financing needs,” the IMF statement noted.
“To contain the outbreak and mitigate the impact on the economy, the government of The Bahamas declared a state of emergency in March, closed air and sea borders and established an Economic Recovery Committee to guide the country’s COVID-19 response and recovery efforts. The authorities have introduced targeted fiscal measures to support the healthcare system, employment and the most vulnerable segments of the population.”
IMF Deputy Managing Director and Acting Chair Tao Zhang said in the IMF statement that The Bahamas’ policy response to COVID-19 is appropriate. He lauded The Central Bank of The Bahamas’ move to protect foreign reserves.
“The economic outlook remains subject to an unusually high degree of uncertainty. The authorities’ policy response to the COVID-19 crisis is appropriate, including the timely adoption of targeted fiscal measures to boost health spending and support jobs and vulnerable segments of the population. Once the present crisis subsides, significant and determined fiscal consolidation will be needed to achieve the targets specified under the Fiscal Responsibility Act,” he said.
“The Central Bank of The Bahamas’ focus on maintaining an adequate level of international reserves is welcome. While efforts to maintain the flow of credit in the economy are warranted, the temporary relaxation of prudential regulations should continue to be accompanied by close monitoring of non-performing loan (NPL) classification and prudent risk management practices.
“The disbursement under the RFI (Rapid Financing Instrument) will help boost resources for essential COVID-19-related outlays, strengthen reserves and catalyze additional support from other international financial institutions, development partners and the private sector.”
The government has made it clear that this $250 million facility is not part of a dreaded IMF restructuring program, in which austerity measures are imposed on a country by the body.
Zhang said in his remarks that The Bahamas needs to, as soon as is feasible, resume its “ambitious reform agenda including enhancing public financial management and state-owned enterprises governance, advancing revenue administration reforms and continuing to improve the effectiveness of the AML/CFT (anti-money laundering/combating the financing of terrorism) framework”.