The IMF today issued a Public Information Notice on the recently concluded **2005 Article IV Consultation with The Bahamas**, including a review of Executive Board discussions.

Also released were a Selected Issues Paper and Statistical Appendix, documents prepared by an IMF Staff Team as background documentation for the consultation.

Observations of the Directors included:

• the Bahamas economy has recovered well from the 2001-02 slowdown, with some acceleration of activity in 2004 having been achieved even in the face of two hurricanes;

• economic growth is expected to strengthen further in 2005.

• Inflation has been contained, international reserves have rebounded, and the banking sector has remained sound.

• the fixed exchange rate peg to the U.S. dollar has served the Bahamas well, and welcomed the authorities’ plans to strengthen the monetary policy framework in support of the exchange rate peg.

• the development of a secondary market for government securities could provide a useful basis for developing more market-oriented instruments for effective central bank control over commercial bank liquidity.

Directors noted, however, that realizing the economy’s growth potential would require a strengthening of the fiscal stance over the medium term to place the debt-to-GDP ratio on a downward path. This fiscal strengthening should be supported by structural policies and private infrastructure investment that would help promote the diversification of the economy. Directors suggested that both revenue and expenditure measures could be used to support fiscal tightening.

Support and commendation were noted for several initiatives:

• the intention to relax exchange controls on capital transactions to improve the efficiency of the domestic financial sector.

• the strategy of keeping international reserves at a level of at least the equivalent of base money.

• implementation of recommendations in the Fund’s offshore financial center assessment report.

• the finalization of guidelines for overseas regulators that will permit the efficient exchange of information while meeting the need for confidentiality.

• the actions to strengthen the Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) framework.

• efforts to promote diversification of the economy, including the development of a National Information and Communications Framework to help promote e-commerce in the Bahamas.

• the recent publication of revised national accounts statistics. *(The Bahamas was encouraged to participate in the data module of the Report on Observance of Standards and Codes (ROSC) to help identify further steps to improve the quality of economic statistics)*

Directors also encouraged closer integration into the global economy through accession to the WTO, and emphasized that the multilateral trading system would provide the Bahamas with formal mechanisms to resolve trade differences.

IMF surveillance discussions with members under the Article IV process are held 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. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors.

The International Monetary Fund was created in 1945 to help promote the health of the world economy. Headquartered in Washington DC, it is governed by and accountable to the governments of the 184 countries that make up its near-global membership.