Central Bank Reports Sharp Decline in External Reserves in November

• The Central Bank of The Bahamas, in its Monthly Economic and Financial Developments Report for November, reported a notable contraction in the country’s external reserves, reflecting heightened net foreign currency outflows through both the public and private sectors, even as domestic economic activity continued to expand at a moderated pace.
• According to the Central Bank, external reserves fell by $62.4Mn during November, compared with a $4.0Mn reduction in the same month of 2024. The decline was driven by a reversal in foreign currency flows between the Central Bank, commercial banks and their customers, alongside increased public sector-related outflows. Foreign currency transactions between the Central Bank and commercial banks shifted to a net outflow of $38.0Mn, from a net inflow of $9.0Mn a year earlier. At the same time, commercial banks’ transactions with their customers reversed to a net sale of $23.2Mn, compared with a net purchase of $20.1Mn in November 2024. In addition, net foreign currency outflows through the public sector increased to $36.4Mn, up from $11.9Mn in the prior year.
• The Central Bank also reported higher foreign currency sales under the exchange control regime. Provisional data indicated that foreign currency sales for current account transactions increased by $2.5Mn to $593.2Mn in November, relative to the same period last year. This increase was largely attributed to higher outflows for “other” current account transactions, primarily reflecting increased credit and debit card usage, which rose by $53.5Mn, as well as a $2.4Mn increase in transfer payments. These developments were partially offset by reduced outflows for factor income payments, which declined by $24.3Mn, along with lower payments for oil imports ($18.8Mn), non-oil imports ($8.4Mn), and travel-related expenses ($1.9Mn).
• Beyond the external sector, the Central Bank noted that economic activity during November continued to expand, though at a tempered pace relative to 2024, as key indicators converged closer to their medium-term potential. Tourism activity remained supportive of growth, with continued strength in the cruise segment. However, performance in the higher-value stopover segment remained constrained by limited accommodation capacity and softer demand from the United States market. As a result, tourism inflows, while still positive, grew at a more moderate rate.
• Labour market conditions showed further improvement, with the unemployment rate declining in the second quarter of 2025, supported by a reduction in the number of unemployed persons. Meanwhile, inflationary pressures eased, as average consumer prices recorded a marginal decline over the 12 months to July 2025, reversing the upward trend observed over the same period last year. This was mainly attributed to lower fuel and energy-related costs
• The Central Bank reported that banking sector liquidity increased further in November, despite domestic credit expansion outpacing deposit growth. Excess reserves rose by $44.6Mn to $1.95Bn, while excess liquid assets increased by $53.3Mn to $3.17Bn, underscoring the continued accommodative monetary environment. In its November report, the Central Bank concluded that while domestic economic conditions remain stable and supportive of growth, external sector pressures intensified during the month, underscoring the importance of continued monitoring of foreign currency flows as the economy transitions toward more sustainable, medium-term growth levels.

(Source: Eyewitness News)