NASSAU, BAHAMAS — The International Monetary Fund (IMF) has recommended that the government postpone the achievement of its debt target of 50 percent of GDP by another two years in response to the COVID-19 pandemic, given the significant increase in public debt.
The IMF, in a concluding statement on the 2020 Article IV Mission yesterday, noted, “The withdrawal of fiscal support is expected to start next fiscal year as the various pandemic and hurricane-related measures phase out. Given the significant increase in public debt, postponing the achievement of the debt target by another two years in response to the pandemic would be appropriate. However, achieving the debt target of 50 percent of GDP by the beginning of the next decade will require significant additional fiscal effort compared to what is planned in the medium-term budget framework. It is advisable to start preparing measures now and communicate a timetable to implement them as soon as the pandemic-related uncertainty subsides.”
The IMF also noted that the pandemic is expected to lead to a deep recession in this year, driven by the sharp drop in tourism and necessary disease-containment measures.
“Real GDP is projected to decline by 16.2 percent in 2020, followed by a modest rebound of two percent in 2021, and to converge back to its pre-pandemic level only by 2024. The current account balance is projected at a deficit of 17.4 percent of GDP in 2020 and will improve only gradually, consistent with the projected pickup in tourism in 2022,” the IMF noted.