The International Monetary Fund (IMF) has issued a Public Information Notice (PIN) on the conclusion of its 2003 Article IV Consultation with The Bahamas.

Under Article IV of its Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. An IMF staff team visits the member country, collects economic and financial information, and discusses with officials the country’s economic developments and policies.

In its background notes, the IMF points out that The Bahamas is a small open economy that has a long track record of prudent macroeconomic management and financial stability. It references policies in the latter half of the 1990s that focused on fiscal consolidation (the deficit was virtually eliminated) and the strengthening of financial regulation and supervision to address risks of money laundering and fraud in the offshore financial sector.

Although growth has remained subdued in 2002 and early 2003 under the impact of the global economic slowdown and lingering terrorism-related security concerns, the IMF predicts that economic activity will pick up gradually this year and in 2004 with the resumption of strong capital inflows.

Nevertheless, IMF Executive Directors cautioned that The Bahamas remains vulnerable to developments in the United States and to growing competition from other tourist destinations and offshore financial centres. They recommended that economic policy focus on raising international reserves, regaining room for fiscal maneuver, and diversifying the economic base to maintain confidence and reduce economic vulnerabilities. Also emphasised was the importance of structural reforms to improve competitiveness over the medium term.