The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The Bahamas is at a “critical point” in its fiscal reforms and must ensure it maintains its investment grade rating “as best as possible”, a senior Caribbean economist said yesterday.

Marla Dukharan, senior economist with Royal Bank of Canada (RBC) Caribbean, while addressing Royal Fidelity’s inaugural Bahamas Economic Outlook, said the Bahamas is just two notches above ‘junk’ status.

“Both the credit rating  agencies give you ample opportunity to reform before you cross that threshold. The problem is if you cross that threshold it is a very slippery slope,” Ms Dukharan said.

“Just look at Barbados, for instance. Barbados is carrying a lower credit rating than Suriname. It’s simply because of the fiscal picture and the debt picture.”

She added that according to Standard & Poor’s, in a peer-to-peer comparison,  the Bahamas is weaker than all countries with the exception of Monserrat.

“On a peer by peer basis when looking at similar rated peers, the Bahamas is weaker. I’m happy to see that the authorities are addressing the fiscal side. We hope that Baha Mar is going to be the resounding success that it is billed to be so that can help to boost the inflows of US dollars,” said Ms Dukharan.

She said the Government’s introduction of Value-Added Tax (VAT) and other austerity measures would help adjust the Bahamas’ fiscal situation.

“You had this situation where your debt-to-GDP had doubled, and so something had to be done,” Ms Dukharan added.

“Luckily for the Bahamas, that lever could be pulled, where you could have tax reform and bring in additional revenue and help solve this problem and ease this upward trajectory of your debt metrics. I’m pleased to see that VAT has been implemented. Everything has it’s teething problems and teething is never easy.”

Standard & Poor’s credit rating for the Bahamas stands at BBB/A-2, while Moody’s rating for Bahamas sovereign debt is Baa1.