The Bahamas’ foreign reserves will decline by $1 billion this year because of the economic fallout from the novel coronavirus (COVID-19), leading the government to borrow in foreign currency, Prime Minister Dr. Hubert Minnis said yesterday; explaining also that he has convened an economic-recovery committee to steer the country’s reopening and subsequent economic restoration.
According to Minnis, it is expected that net inflows of foreign currency will not improve until 2021. Tourism, which is the largest provider of foreign currency for The Bahamas, is predicted to not begin a meaningful recovery until mid-2021.
The $1 billion drawdown in foreign reserves, which the country uses to maintain its dollar parity with the United States, depletes half of the country’s current $2 billion reserves, some of which Minnis said will be replaced through borrowing.
“Alongside the financing that can be obtained locally, the government will have to rely on some foreign currency borrowing to cover its revenue shortfall,” Minnis said.
“Taking this active financing strategy into account, along with other foreign exchange market strategies that the Central Bank is pursuing, it is expected that the drawdown in the foreign reserves will reach about $1 billion in 2020. This from a present healthy level of approximately $2 billion.
“The Central Bank expects that after 2020, net inflows of foreign currency through the private sector will begin to improve. This will permit a very gradual recovery in external reserves, provided the deficit-financing strategy maintains a prudent balance between Bahamian dollar and foreign currency borrowing.”
Minnis acknowledged that a robust tourism economy could be elusive for “some time” and contended that the country will have to attract other sources of foreign exchange, including expediting foreign investment proposals.
The government’s economic recovery committee, Minnis said, will look at ways to creatively boost foreign investment projects, as well as tourism, construction and myriad projects and programs.
He said the committee members and chair will be announced this week.
“During a meeting with the proposed members of the economic advisory group, we discussed a number of issues: e-commerce, diversifying the economy, accelerating foreign direct investment projects, restoring the macroeconomy and tourism,” said Minnis.
The post PM: Foreign reserves will decline by $1 bil. this year appeared first on The Nassau Guardian.
source https://thenassauguardian.com/2020/04/20/pm-foreign-reserves-will-decline-by-1-bil-this-year/
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