By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The Bahamas’ foreign currency reserves fell to $1.4bn at end-March 2019 due, in part, to the Grand Lucayan purchase and Nassau Airport Development Company (NAD) refinancing.

John Rolle, the Central Bank’s governor, said the year-over-year decline was not unexpected with the government continuing to draw down on the $750m US dollar bond it placed with international investors towards the end of 2017.

“Then also there were two bulky transactions in 2018 that drew down on the reserves,” he added. “One of those transactions was the purchase of the Grand Bahama hotel, and also some refinancing activity that took place by the Nassau Airport Development Company.

“Both of those collectively would have contributed to an almost $130m difference in terms of the level of foreign reserves which we currently hold. In terms of the international measures of months of non-oil imports that reserves could pay for, however, The Bahamas remains well above the considered minimum comfort level of three months.”

The NAD refinancing accounted for a $69.5m drawdown on the external reserves, as foreign currency was needed to pay-off former investors, while the initial capital investment required for the Grand Lucayan was $60m.

Notes attached to the Central Bank’s 2019 first quarter presentation said the pending sale of the Grand Lucayan to the ITM/Royal Caribbean joint venture would “reverse almost half of this drawdown”.

Mr Rolle, meanwhile, said the commercial banking industry’s liquidity position had improved during the 2019 first quarter in line with seasonal foreign currency inflows. “However, this also reflected continued reduction in outstanding credit to the private sector, which was most pronounced in consumer loans,” he added.

“Credit to the government also contracted, but this was because some of the government’s debt shifted out of banks and into the private sector holdings. Also, the net amount the government owed to banks decreased after the government received the transfer of the unclaimed deposits that were identified during the reform of the dormant account system in late 2018.”

Turning to the proposed Credit Bureau, Mr Rolle said: “Right now, the selected provider is going through the licensing process and they are providing all of the additional information to complete the licensing process.

“We believe that will be concluded in the next few months, and that they will be on the ground beginning their operation. There is already some outreach that has begun in terms of the interaction with the potential provider and the industry. We expect that that outreach will intensify once they have completed the licensing process.”

He added that the bank expects to begin its digital Bahamian dollar pilot project this year, with Exuma having been selected as the island testing ground.

“Taken altogether, the Central Bank still does not see any evolving trend that would pose any near-term risk to the external reserves, and therefore the underlying support for the Bahamian dollar,” Mr Rolle said. “There is no need to adjust our current relaxed posture towards potential credit growth in the near term.”