Govt secures $100m World Bank loan

The World Bank announced yesterday it approved a $100 million COVID-19 response and recovery development policy loan for The Bahamas to support the country’s efforts to provide pandemic relief and “lay the foundation for a resilient economic recovery”.

“This operation aims to help The Bahamas enhance COVID-19 relief and resilience, strengthen financial stability and the business environment, and improve fiscal sustainability and resilience,” a statement from the bank said.

“It includes measures to enhance unemployment benefits and provide food assistance to those workers and households most affected by the COVID-19 crisis, and measures to develop an inclusive vaccination policy.

“It also supports reform actions undertaken by the country to expand coverage of deposit insurance, strengthen the crisis management framework, strengthen public financial management, and improve governance of the Central Bank.”

The statement did not outline the terms of the loan.

The World Bank said this development policy loan provides support on an “exceptional basis” to The Bahamas.

“The financing responds to an emergency request from the government for exceptional International Bank for Reconstruction and Development (IBRD) assistance to respond to the COVID-19 crisis, given the disproportionate and severe economic impacts on The Bahamas due to its small size, heavy dependence on tourism, and vulnerability to natural disasters.

“The financing is part of a coordinated assistance effort by international financial institutions during the pandemic.”

The statement noted that The Bahamas was hit with Hurricane Dorian in 2019 and faced the pandemic less than a year later. 

“The Bahamas has faced severe socioeconomic impacts due to the pandemic, which led to a sudden stop in tourism and an estimated economic contraction of 16.2 percent over the past year,” it said.

“Unemployment, already on the rise after Hurricane Dorian, increased further, and poverty is estimated to have increased in 2020.”

World Bank Country Director for the Caribbean Tahseen Sayed said The Bahamas suffered one of the most severe economic contractions in the Caribbean. 

“This World Bank assistance will contribute to country efforts to reduce vulnerabilities of citizens most impacted by the crisis, and support policy and institutional measures for a resilient recovery,” Sayed said.

Last March, the country saw its first case of the novel coronavirus, which lead to the immediate implementation of a state of emergency. Non-essential businesses were ordered closed and thousands of Bahamians were furloughed.

Since then, there have been over 11,000 cases and over 200 deaths.

The far-reaching economic costs arising from the pandemic and the “extraordinary increases” in expenditure to support social assistance programs led to a continued widening of the fiscal deficit to $878.2 million in the first nine months of the current fiscal year, up from $251.3 million during the same period in the year prior, the Ministry of Finance recently reported.

Total revenue from July 2020 to March 2021 declined by an estimated $527.4 million (30 percent) to $1.2 billion, the ministry’s Combined Nine Month Fiscal Snapshot and Report on Budgetary Performance also showed.

Aggregate expenditure increased by $99.5 million (5 percent) to $2.1 billion and was boosted by significant increases in social assistance benefits ($145 million), finance charges, public debt interest and subsidies.

Recurrent expenditure increased by $129.6 million to $1.9 billion during the nine months to March, compared to the same period in the prior year.

Capital expenditure decreased by 15.2 percent to $168 million.

Since July 2020, the government borrowed $2.3 billion, compared to the $936.6 million during the same period in the previous fiscal year, the snapshot shows.

According to the Department of Statistics’ Advanced Estimates for Gross Domestic Product 2020, the economy contracted by 14.5 percent in real prices — 24.7 percent in nominal terms – in 2020.

The data showed that the total value of goods and services produced in the Bahamian economy was estimated at $9.908 billion in current prices, and at $9.665 billion in real prices at the end of December 2020, pushing the country’s debt-to-GDP (gross domestic product) level closer to 100 percent as the national debt stood at $9.8 billion.

Today, Prime Minister Dr. Hubert Minnis, who is now minister of finance, is set to present the 2021/2022 budget communication in Parliament.

He is expected to provide a full report on the state of government finances and additional plans for further borrowing.

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