The Central Bank of The Bahamas (CBOB) in its recent monthly economic assessment said external reserves dropped by US$62.8 million to US$2.2 billion last month.

This decline was predicted rather than surprising as external reserves continued to be eaten away as the ongoing slump in tourism and private banks demands persisted during the month of February. This was unlike the weeks leading up to the end of 2020 when government borrowing bolstered reserves to US$2.3 billion. 

“This decrease was reflective of the ongoing travel restrictions related to the COVID19 pandemic, combined with the demand for foreign currency by the public sector and the commercial banks,” the CBOB stated in its Monthly Economic and Financial Developments Report for February.

In particular, the Central Bank’s foreign currency transactions with the public sector reversed to a net sale of US$48.8 million, from a net purchase of US$9.1 million in 2020.

Continued foreign reserve loss to be maintained until economic rebound

The CBOB also stated that domestic demand for foreign currency dropped by US$132.4 million in February, with sales amounting to US$373 million. The Bahamas Central Bank argued, “The continued loss of foreign reserves is expected to be maintained at least until there is a rebound in the country’s tourism product, the bank has stated. That return is expected to remain sluggish during 2021, as COVID-19 travel restrictions remain in place.”

The bank noted that primarily purchases of foreign goods and services via credit and debit card transactions decreased by US$116.4 million, while oil imports and travel-related payments fell by US$14.8 million and by US$9.3 million, respectively. In a partial offset, foreign currency sales rose for factor income (US$3.6 million), non-oil imports (US$2.8 million) and transfer payments (US$1.9 million).

Arrivals down but room rentals continue to strengthen

The Central Bank reported an 86.9 per cent decline in total visitor arrivals during January, revealing that there were only 16,098 international departures from Lynden Pindling International Airport. On the other hand, vacation home rentals continue to strengthen with a recorded 24 per cent increase in room nights sold.

“With regard to the short-term rental market, data provided by AirDNA showed positive activity within the market throughout February, supported by domestic demand. Specifically, total room nights sold grew by 24 per cent, compared to 9.9 per cent in the prior year, while bookings for entire place listings and hotel comparable listings increased by 26.2 per cent and eight per cent, respectively,” the Central Bank stated.