By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The World Bank yesterday gave The Bahamas “special dispensation” to qualify for a $100m loan that forms part of the government’s 2020-2021 borrowing strategy.

Marlon Johnson, the Ministry of Finance’s acting financial secretary, told Tribune Business that the multilateral agency had waived The Bahamas’ “graduation” from its lending facilities because of COVID-19’s devastating economic impact on this nation.

The Bahamas was previously not considered eligible for World Bank loans and other financial assistance because it was considered to have a relatively high per capita income and level of development - something successive administrations have pushed back against in the past, but with limited success.

However, with the COVID-19 pandemic having dramatically affected this equation, Mr Johnson said the $100m loan’s release was part of the government’s effort to target debt financing from multilateral agencies as this was often cheaper (lower interest rates) and came with more favourable repayment and others terms than The Bahamas can obtain from the private capital markets.

“It’s part of the borrowing envelope adopted from the very beginning of the fiscal year,” he explained to this newspaper. “We wanted to make as much use as possible of multilateral institutions to get preferred rates and tenors.

“The World Bank made a special dispensation for us and other graduated countries, given the circumstances of this pandemic, to access loans. It falls within our borrowing strategy and plans.”

Mr Johnson said the $100m loan was separate from the two guarantees that The Bahamas had been seeking from the World Bank’s Multilateral Investment Guarantee Agency (MIGA), which would have underwritten financing for COVID-19 healthcare expenses and capital spending. The associated guaranteed commercial bank loans would have maturities exceeding five years.

He added: “We’re still pursuing some elements of that MIGA financing, and you’ll be hearing about that shortly. This is a direct World Bank loan. It [MIGA] guarantees private credit, and allows us to leverage the World Bank’s strength to get preferential terms.”

Mr Johnson said the government had been working on the World Bank loan for several months, and still had several credit facilities to put in place to complete its financing of the $1.327bn deficit for the year to end-June 2021. He added that the proceeds from the $100m loan will be used to meet the government’s ongoing financial obligations.

The World Bank, in unveiling the $100m COVID-19 response and recovery development policy loan just a day before the Government unveils the 2021-2022 Budget, said: “The operation will support the country’s efforts to provide COVID-19 relief and lay the foundation for a resilient economic recovery”.

“The COVID-19 pandemic came on the heels of the devastation caused by Hurricane Dorian,” said Tahseen Sayed, World Bank country director for the Caribbean. “The Bahamas has suffered one of the most severe economic contractions in the Caribbean.

“This World Bank assistance will contribute to country efforts to reduce vulnerabilities of citizens most impacted by the crisis, and support policy and institutional measures for a resilient recovery.”

The World Bank added: “The Bahamas has faced severe socioeconomic impacts due to the pandemic, which led to a sudden stop in tourism and an estimated economic contraction of 16.2 percent over the past year. Unemployment, already on the rise after Hurricane Dorian, increased further, and poverty is estimated to have increased in 2020.

“This operation aims to help The Bahamas enhance COVID-19 relief and resilience, strengthen financial stability and the business environment, and improve fiscal sustainability and resilience. It includes measures to enhance unemployment benefits and provide food assistance to those workers and households most affected by the COVID-19 crisis, and measures to develop an inclusive vaccination policy.

“It also supports reform actions undertaken by the country to expand coverage of deposit insurance, strengthen the crisis management framework, strengthen public financial management and improve governance of the Central Bank.”

The multilateral agency added: “This development policy loan provides support on an exceptional basis to The Bahamas, which has graduated from the International Bank for Reconstruction and Development (IBRD).

“The financing responds to an emergency request from the government for exceptional IBRD assistance to respond to the COVID-19 crisis, given the disproportionate and severe economic impacts on The Bahamas due to its small size, heavy dependence on tourism and vulnerability to natural disasters.”