2020/21 Budget Communication 2020-21 Budget Communication - Final (1)-compresse | Page 9

This has transferred into price reductions in electricity bills for Bahamian consumers and
businesses. The fuel charge charged by Bahamas Power and Light (BPL) decreased by 36.3
percent to $11.32 per kilowatt hour (kWh) in May 2020, as compared to May 2019. On a monthly
basis, the fuel charge fell by 26.1 percent.
Mr. Speaker,
On the monetary front, both liquidity and external reserves were boosted by reinsurance inflows
following Hurricane Dorian last September. By extension, overall money supply (M3) grew by
11.0 percent in 2019, exceeding the year earlier 1.0 percent expansion, and being underpinned by
a buildup in private sector demand deposits in 2019. In addition, domestic credit showed a slight
uptick, supported largely by a 3.1 percent rise in foreign currency credit, while Bahamian dollar
credit grew marginally by 0.4 percent. Growth in Bahamian dollar credit was primarily explained
by an increase in net claims on the Government, and credit to the private sector—the latter of
which was cushioned by damage repairs in the aftermath of Hurricane Dorian.
As of this past Friday, May 22 nd , external reserves stood at $1.986 billion, which is equivalent to
some 28 weeks of imports. This robust level of foreign reserves has been consistent from late
February into March, and has been sustained against the backdrop of the Emergency Powers
Orders, which closed all non-essential businesses, thereby dampening import demand. It is
anticipated however, that once the economy reopens, there is likely to be a subsequent drawdown
on reserves to respond to the rebound in consumer demand. The Central Bank, in conjunction
with the Ministry of Finance is working to ensure that the level of external reserves remains at an
adequate level to support the viability of the US currency peg by facilitating the bulk of the deficit
financing requirements in foreign currency.
In light of the projected impact of COVID-19 on the international market, and its trickle down
effects on our domestic economy, which is highly vulnerable to external shocks, the Central Bank
has forecasted that real GDP in The Bahamas will contract by some 12 percent.
Mr. Speaker,
With this snapshot of the domestic economy, it is clear that the outlook for the near-term is very
subdued, and our rebound will be heavily dependent on how quickly travel resumes. As sobering
as this should be, we must also remember the nature of economic downturns related to pandemics;
a sharp and sudden downturn followed by strong recovery.
Despite the stark decline we are seeing today in our various fiscal and economic indicators, we
will move onward from this crisis. There are a number of independent economic indicators to give
the Bahamian people hope and reassurance. Most recently, we have seen prospects for the nearterm
that indicate an appetite for private sector investment. The Cruise Port’s $130 million bond
offering was oversubscribed when it closed on May 18th. This signals that, despite the uncertainty
surrounding COVID-19, investors are confident in the tourism industry generally, and the recovery
of the cruise industry and revitalization of Downtown Nassau, in particular.
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