The Ministry of Finance (MOF) and the University of The Bahamas (UB) have entered into an agreement to conduct a study, which will determine the level of growth required for The Bahamas to emerge out of and move beyond its present economic and fiscal dilemma. Details of the “Memorandum of Agreement for The Bahamas Recovery and Sustainable Growth Project” were announced at a virtual press conference, Wednesday, April 28.
The study will be conducted over 90 days by the following: Zhivargo Laing, former minister with responsibility for Finance and Economic Development Bahamas, Chief Negotiator for The Bahamas Accession to the World Trade Organization and Executive Director of Government and Public Policy Institute (GPPI), UB; Professor Olivia Saunders, Professor of Banking, Finance and Economics in the Faculty of Business, UB; Professor Tri Lam, PhD, Associate Professor, Department of Banking, Finance and Economics, School of Business, UB and Dr. Jorge Baca- Campodonico, expert in fiscal policy, econometric modelling, former minister of finance of Peru and on-call economic consultant to the Inter-American Development Bank.
The study will undertake the following:
- Use econometric modelling to determine policy measures that generate growth figures that are likely to produce positive trends in the country’s economic and fiscal metrics leading toward greater economic stability and sustainable growth;
- Provide economic and fiscal policy options to promote the growth forecasts predicted by the study; and
- Train others to use the econometric model in the future for the benefit of the country’s economic and fiscal planning.
Sen. the Hon. J. Kwasi Thompson, Minister of State for Finance said the agreement will harness the talent, expertise and resources of the nation’s own academia to support and strengthen the Government’s economic recovery plan.
“Under the project, UB will research and determine optimal growth levels to support the Government’s plan to set the country on a more sustainable macroeconomic path. It will also expand and enhance the government’s current economic modelling and platforms and protocol by allowing for more suffocated analysis using a wider range of input and variables,” said Minister Thompson.
“This administration is focused on combating the challenge of producing growth at sufficient levels to address the full gamut of national development priorities, including fiscal responsibility targets relating to revenue, expenditure and debt. “In 2019, it was therefore significant, albeit modest, that for the first time in 12 years The Bahamas was projected to see growth of over 2.0 per cent for consecutive years due to the efforts of this administration. He said, “The Government had also made tangible progress with reducing the deficit and slowing debt growth. This was a major achievement we had intended to build upon before the pandemic. It is why we are even more determined today.”
Sen. Thompson noted that GPPI has put together a team of expert economic and fiscal specialists that will conceive a data-driven approach to the country’s growth trajectory to support the existing capabilities of the MOF.
“The team will use data provided by the government to establish a baseline of the country’s current economic and fiscal status. From there, they will engage in economic modelling to predict growth forecasts over short, medium, and long-term outlooks.
“The model will expand the number of economic indicators that are assessed from a three-sector model to a five-sector model. The analysis will allow GPPI to present a set of sound recommendations to address the economic and fiscal trends we have historically experienced and that have worsened due to the pandemic.”
Minister Thompson is pleased that the project will be focusing on economic and fiscal policy options that promote growth. “In other words, UB through its GPPI, will support the Government’s economic plans and help us achieve our goals.” Dr. Rodney Smith, President, UB said the study is an effort to understand better the economic and fiscal future of the nation.
“In fact, by mathematically and statistically examining the impact of various policy measures on an academically rigorous model of our economy, we may be able to choose the best policies to positively impact our economic future. We can better predict the effect of those policies on important social outcomes like employment, poverty, savings, investing, and the like.
“Additionally, we can better target resources to economic sectors that can produce the greatest outputs. This is the nature of the study being undertaken, and its lasting impact will be a model available for use in the future by personnel from across the Government for future planning,” said Dr. Smith.