WASHINGTON, DC – The International Monetary Fund (IMF) says the economy of The Bahamas has strengthened in recent years with a robust post-pandemic tourism sector being the key driver of economic growth and fiscal revenues.
The IMF executive board has completed the Article IV Consultation with Nassau considering and endorsing staff appraisal.
According to the IMF, real gross domestic product (GDP) expanded by 3.4 per cent in 2024 and that growth remained resilient in the first half of 2025, supported by construction and cruise tourism. It said that the unemployment rate stood at 9.3 per cent in the second quarter of 2025, while inflation decelerated (1.3 per cent in July 2025), partly reflecting lower global energy prices.
The fiscal position continued to improve in the last fiscal year. Driven by tax revenues and expenditure containment, the primary balance remained in surplus and the fiscal deficit narrowed to 0.5 per cent of GDP in the financial year 2024/25.
The IMF said that growth is expected to be around 2.8 per cent in 2025, and then it would gradually slow toward 1½ per cent.
In its appraisal, the IMF executive board said risks to economic growth are broadly balanced, with downside risks including a potential global slowdown and natural disasters, and upside risks entailing greater-than-expected effects of public and private infrastructure projects linked to tourism and the electricity reform. Inflation remains low.
“Additional policy measures are necessary to achieve the authorities’ medium-term target for central government debt. A primary surplus was reached again in financial year 2024/25, and the financial year 2025/26 budget targets an overall surplus.”
The executive said while declining, public debt remains elevated and that going forward, new revenue-enhancing and expenditure-optimizing measures should be prioritised to achieve the authorities’ 50 per cent of GDP target for central government debt.
It said that these measures can include introducing corporate and personal income taxes, rationalising tax expenditures, raising the standard value added tax (VAT) rate, and reducing transfers to state-owned enterprises (SOEs).
The executive board said that these efforts can give space to invest more in priority areas, such as education and resilient infrastructure.
But the board acknowledged that more work is needed to strengthen fiscal institutions and reduce fiscal risks.
It said an immediate priority should be to improve fiscal reporting and enhance the institutional framework for private public partnerships (PPPs). The board is also critical to accurately assess and mitigate fiscal risks arising from SOEs.
The IMF executive board said financial sector policies should continue to aim at preserving financial stability.
“Systemic financial stability risks remain moderate. As bank credit to the private sector increases, safeguarding banks’ resilience is crucial, including by monitoring potential risks stemming from banks’ exposure to the sovereign.
“The oversight of nonbanks should be strengthened, and closing data gaps is a priority. Operationalizing real estate price indices is still needed. Planned legal reforms can help improve resolution frameworks and safety nets. Reducing the ceiling on central bank advances to the government would support the exchange rate peg, and it is essential to maintain efforts to implement the 2024 DARE Act. Actions to enhance risk-based AML/CFT supervision and promote financial inclusion should continue.”
The IMF said that fostering economic resilience and investing in human and physical capital should ease supply-side constraints to growth.
“Policies to raise productivity, together with fiscal consolidation, can help narrow external imbalances, given that the external position is moderately weaker than the level implied by medium-term fundamentals and desirable policies. Ongoing infrastructure projects in hotels and airports can alleviate capacity constraints in tourism.
“To reduce vulnerable employment and lessen informality, it is important to cut red tape for businesses, strengthen education, and continue expanding training and upskilling opportunities.”
The IMF said trade diversification could strengthen economic resilience and reduce import costs with more benefits for consumers if coupled with greater product market competition.
