February 5, 2026IMF Executive Board Concludes 2025 Article IV Consultation with The Bahamas

February 5, 2026

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation with The Bahamas[1] and considered and endorsed the staff appraisal without a meeting, on a lapse-of-time basis. The authorities have consented to the publication of the Staff Report prepared for this consultation.[2]

The Bahamian economy has strengthened in recent years, with real GDP expanding by 3.4 percent in 2024. Growth remained resilient in the first half of 2025, supported by construction and cruise tourism, and the unemployment rate stood at 9.3 percent in the second quarter of 2025. Inflation has decelerated (1.3 percent 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 percent of GDP in FY2024/25. Central government debt has declined but is still elevated, at around 74 percent of GDP.

Growth is expected to be around 2.8 percent in 2025, and then it would gradually slow toward 1½ percent (the assessed potential growth rate of the economy). Headline inflation is projected to settle at around 2 percent, and the current account deficit would narrow to about 6 percent of GDP over the medium term. Risks to the outlook are balanced, with downside risks including a potential global slowdown with adverse impact on tourism, and natural disasters. Upside risks notably include greater-than-expected effects of public and private infrastructure projects linked to tourism and the energy sector reform.

Executive Board Assessment[3]

In concluding the 2025 Article IV consultation with The Bahamas, Executive Directors endorsed staff's appraisal, as follows:

"The economy has strengthened in recent years. Robust post-pandemic tourism has been a key driver of economic growth and fiscal revenues. Actions have been taken to improve public finances and to enhance disaster risk management. Continued fiscal consolidation, the ongoing electricity sector reform, increased capacity for tourism, and investment in climate resilience will be critical to further reduce fiscal vulnerabilities and foster sustained growth.

"Growth is expected to moderate gradually. Growth in 2025 has been supported by construction and cruise tourism, but the economic expansion is expected to slow somewhat in 2026, converging toward the estimated potential rate of 1½ percent over the medium term. Risks 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 FY2024/25, and the FY2025/26 budget targets an overall surplus. While declining, public debt remains elevated. Going forward, new revenue-enhancing and expenditure-optimizing measures should be prioritized to achieve the authorities' 50 percent of GDP target for central government debt. These measures can include introducing corporate and personal income taxes, rationalizing tax expenditures, raising the standard VAT rate, and reducing transfers to SOEs. These efforts can give space to invest more in priority areas, such as education and resilient infrastructure.

"More work is needed to strengthen fiscal institutions and reduce fiscal risks. An immediate priority should be to improve fiscal reporting and enhance the institutional framework for PPPs. It is also critical to accurately assess and mitigate fiscal risks arising from SOEs. The planned reform to civil service pensions should be supplemented with more holistic changes to address actuarial imbalances. Advancing plans to adopt an accrual-based accounting system for the budget would improve fiscal transparency. Efforts to reduce debt rollover risks should continue.

"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.

"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. Trade diversification could strengthen economic resilience and reduce import costs (with more benefits for consumers if coupled with greater product market competition). The energy sector reform is advancing and may significantly improve the cost and reliability of electricity. There is scope to continue enhancing disaster risk management and investing in climate resilience. To address housing affordability challenges, investing in social housing and refining rental market regulations could help ease supply constraints."

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] Under the IMF's Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires the member consent. The staff report will be shortly published on the https://www.imf.org/Bahamas page.

[3] The Executive Board takes decisions under the lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions.

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