IMF Report Highlights Cash Management Issues, Urges Timely Payment to Vendors
In recent discussions within the House of Assembly, members of the Free National Movement (FNM) have underscored the critical need for the government to improve its payment practices towards small business vendors. Echoing these concerns, a new report from the International Monetary Fund (IMF) underscores the challenges posed by the government’s current debt and cash management practices. According to the IMF, these deficiencies are leading to liquidity shortages and resulting in a backlog of payments to suppliers.
The report from the IMF criticizes the government’s overreliance on overdraft facilities and advances from the Central Bank of The Bahamas (CBoB), highlighting how arrears in supplier payments occasionally pile up. This situation, the report states, hinders the efficient preparation and execution of the government’s annual borrowing plan, creating unnecessary financial obstacles.
The Plight of Small Businesses
Addressing the issues raised by the IMF report, Kwasi Thompson, the Shadow Minister for Finance, voiced his support for small business contractors who are significantly affected by these delayed payments. “The government must take immediate steps to ensure that businesses engaging in government contracts are compensated in a timely fashion. Given that these small entities are pivotal for driving the economy, especially now as we aim for growth, addressing this issue is imperative,” Thompson emphasized.
Recommendations for Improvement
Alongside addressing the cash management issue, the IMF report suggests that the Bahamas could benefit from the development of a local currency bond market, considering the current monetary and exchange rate conditions. However, for this to succeed, it highlights the need for enhanced coordination between debt and cash management processes and the development of the Debt Management Office (DMO). The report identifies the DMO’s lack of staff and expertise as a significant hurdle in performing essential debt management tasks and urges the Ministry of Finance (MoF) to prioritize the recruitment and training of specialized personnel.
Further strengthening investor relations and government transparency concerning debt management also features prominently in the IMF’s recommendations. Thompson remarked, “There is a noticeable gap in transparency and investor communication regarding government debt, notably the absence of a dedicated government website for debt management. It is crucial for both investors and the public to have access to detailed information related to government debt strategies, portfolio, and policy implementations.”
Legislative Reforms and Market Development
The report commends recent legislative efforts, such as the Public Debt Management Act (PDMA), as a step towards improving debt transparency and encouraging market participation. However, it also points out existing limitations in the government’s debt issuance practices and transparency about debt management strategies. According to the IMF, addressing these challenges and implementing recommended reforms could significantly improve market participation and reduce borrowing costs for the government.
In conclusion, the IMF’s assessment and recommendations underscore a pressing need for the Bahamian government to refine its debt and cash management strategies. By ensuring timely payments to vendors and investing in the necessary infrastructure for effective debt management, the government can lay a stronger foundation for economic growth and stability.
