By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The IMF yesterday gave the Government a much-needed boost by declaring the economy has “turned the corner”, despite warning over continued fiscal and current account imbalances.

Acknowledging that “significant challenges remain” to be tackled, the Fund’s latest assessment called for a Budget “adjustment” equivalent to 2.2 per cent of gross domestic product (GDP) - some $235 million - to slash the fiscal deficit to “desirable levels”.

The Washington D. C. based institution, unveiling the recommendations stemming from its two-week visit to the Bahamas in early March, also urged the Government to set a “permanent deficit ceiling” equal to 1 per cent of GDP as part of its Fiscal Responsibility legislation.

Besides addressing “structural bottlenecks” to economic growth, an often-repeated call in recent years, the IMF also urged the Government to establish a “savings fund” - containing cash equivalent to be between 2-4 per cent of GDP - to deal with emergencies in the aftermath of a major hurricane strike.

The International Monetary Fund (IMF) called for the Government to build-up such a disaster fund by setting aside funds equal to 0.5 per cent of GDP, or around $53.5 million, per annum whenever the Bahamas escaped being hit by storms or other natural catastrophes.

Still, the Minnis administration, beset by recent controversies over the $5.5 billion Oban Energies project and the European Union’s (EU) ‘blacklisting’ of the Bahamas, is likely to seize upon the IMF’s report as an endorsement that its economic and fiscal policies are on the right track.

“The Bahamian economy has turned the corner but significant challenges remain,” the Fund said. “Near-term prospects are improving on the back of the much-awaited opening of the mega tourist resort, Baha Mar, and a stronger US economy.

“But without resolute implementation of structural reforms, medium-term growth would remain subdued. Public debt ratios have declined on the back of a sizeable upward revision to nominal GDP, but fiscal deficits remain above debt-stabilising levels.”

The Government acknowledged last night that the IMF’s assessment was fair, the Deputy Prime Minister telling Tribune Business that the Bahamas has “a long way to go” and “remains vulnerable to external and climate shock (see other article on Page 1B).

K P Turnquest will also likely take encouragement from the Fund’s forecast that the 2017-2018, projected to come in at around $323 million, is on track to meet the Government’s target - backing his own recent assessment in the mid-year Budget.

While the half-year deficit of $198 million is equal to some 61 per cent of the full-year projection, the IMF said: “The fiscal balance is improving on the back of lower spending. After reaching 5.8 per cent of GDP in fiscal year 2016-2017, the central government fiscal deficit is expected to decline to the target set in the fiscal year 2017-2018 budget, 2.7 per cent of GDP.”