IMF warns climate change, energy woes pose long-term risks to Bahamas

The International Monetary Fund (IMF) has raised fresh concerns about The Bahamas’ vulnerability to climate change, warning that rising sea levels, biodiversity loss, and more frequent, intense hurricanes threaten to erode the country’s long-term economic prospects.

In a new assessment released Friday, the IMF said these environmental threats risk damaging physical infrastructure and diminishing the nation’s natural capital—key pillars of its tourism-dependent economy.

“Importantly, these risks are unevenly distributed, with smaller islands being more exposed and sensitive than the larger, more developed ones,” the IMF noted. “Addressing these disparities as well as closing economy-wide adaptation needs through investments in structural resilience can unlock large potential output gains.”

The report, which examined multiple areas of the Bahamian economy—from sovereign bond spreads to energy reform—also highlighted how The Bahamas’ exclusion from the Emerging Market Bond Index Global (EMBIG) has impacted its borrowing costs. According to the IMF, inclusion in the index would have reduced the country’s sovereign spreads by 56 basis points, compared to other countries with similar fundamentals.

Turning to housing, the IMF pointed out that while The Bahamas’ population has grown steadily since 2010, the supply and affordability of housing have failed to keep pace. Wage stagnation and limited financing options are key challenges.

“The authorities have implemented initiatives like guaranteed loan programmes and the construction of public rental units,” the report stated. “However, there is room for increased public spending in housing and improving access to credit to boost homeownership.”

The IMF also took a critical look at The Bahamas’ electricity sector, describing it as inefficient and costly—issues that are hindering economic growth and undermining competitiveness. The government’s proposed reforms, aimed at modernising infrastructure and expanding renewable energy, could deliver wide-reaching benefits, the report said.

“Over the medium term, the reform has the potential to narrow the current account deficit, reduce vulnerability to commodity price shocks, boost growth, and significantly reduce CO2 emissions,” the IMF added. However, it cautioned that any new energy projects must clearly define risk-sharing responsibilities between the public and private sectors.

The IMF’s findings come amid growing calls for small island developing states like The Bahamas to receive more international support as they grapple with the outsized effects of climate change and global economic shifts.