Bahamas

Years

Targets and attainment

Classification

1974-2023

currency fixed at par to USD from February 1973, USD also used; open, liberal economy which trades mainly with the US; established tax-haven with many foreign-affiliated banks providing offshore financial services; low-volume low-premium investment currency market, with exchange controls on residents’ capital outflows which to some extent insulate domestic monetary conditions; previous monetary authority replaced mid-1974 by new central bank with authority to set interest rates, cash and liquid asset ratios and credit controls, to rediscount Treasury bills and government bonds, and to lend to government within limits; monetary policy is de facto subordinate to exchange rate peg and largely passive (with inflation moving in line with dominant trading partner US); banks typically hold excess reserves; Treasury bill issues geared to financing deficits, no secondary markets for Treasury bills or bonds, few interbank transactions, no liquidity-management OMOs, continued use of reserve requirements; fiscal deficits vary but effects on monetary growth typically contained, mainly by credit controls and moral suasion, supported by infrequent discount rate changes, with focus on maintaining or raising forex reserves; from mid-1990s efforts to reverse decline in role of offshore financial sector; 2002 some relaxation of exchange controls; moves towards indirect monetary instruments discussed in mid-2000s, but shelved with GFC in favour of greater emphasis on financial stability; from 2018 under new government fiscal consolidation with new fiscal rule, some relaxation of capital controls; plan for central bank digital currency to improve financial inclusion, pilots 2019/20, introduced late 2020; hurricane late 2019, Covid-19 2020, sharp fall in GDP 2020 despite strong policy response; limited rise in central bank autonomy 2021, but high limit on central bank advances to government (15.5% of ordinary tax revenues), onlending of new SDRs to government outside that limit; central bank digital currency but take-up weak

augmented exchange rate fix AERF