The Tribune

An Opposition MP yesterday warned that the Bahamas’ sovereign creditworthiness could be “very negatively” impacted if the $3.5 billion Baha Mar project fails to open within the next three to six months.

Loretta Butler-Turner, the former FNM leadership challenger, said the International Monetary Fund (IMF) and international credit rating agencies had all placed their faith in Baha Mar to drive the economic growth and fiscal improvements their Bahamas’ forecasts were reliant upon.

“If the Baha Mar project does not get off the ground in the next three-six months, it’s going to impact our stock for borrowing in the future,” Mrs Butler-Turner told Tribune Business.

“I think our credit rating is going to be very heavily determined by what happens with Baha Mar over the next three to six months.

“We have put a lot of emphasis on it, the IMF has put a lot of emphasis on that, and Moody’s and Standard & Poor’s are looking at that as a benchmark,” she added of the Cable Beach redevelopment.

“If that does not happen, our financial rating could be affected in a very negative way.”

Both the IMF and credit rating agencies have based their economic growth and fiscal forecasts for the Bahamas largely on Baha Mar coming to fruition.

Yet the dispute between the developer, the Izmirlian family, and its main contractor and equity partner, China Construction America, has effectively brought much construction work on the $3.5 billion development to a standstill.

The two parties are said to be locked in meetings, with the Government attempting to play the role of arbitrator/mediator, in a bid to resolve their differences and get the project back on track via a set completion date.

Baha Mar has already missed three projected opening dates, and the Central Bank of the Bahamas effectively wrote off any positive economic impact from the development for the first three quarters of 2015.

It now appears that the project may open in the 2015 fourth quarter at best, dealing a blow to growth forecasts such as the IMF’s, which had projected a 2.3 per cent Bahamian GDP expansion this year.

Robert Myers, the former Bahamas Chamber of Commerce and Employers Confederation (BCCEC) chairman, this week suggested that the Bahamas’ GDP growth this year could fall to 1.2-1.5 per cent - a 50 per cent fall from the IMF forecast in percentage terms.

Mrs Butler-Turner’s comments yesterday allude to another aspect of the fallout from the Baha Mar impasse, namely its impact on both economic growth and jobs but, perhaps just as crucially, on the Government’s financial position and projections.

Successive Bahamian governments have used economic growth to keep the debt-to-GDP ratio (this nation’s debt servicing position) in check. The Baha Mar delay means they will be less able to do that this time.

And, given that economic growth is a key driver of tax revenues (often via employment), the Government’s revenue forecasts for 2015-2016 may also take a hit, not to mention its fiscal projections and those of the rating agencies.

That becomes important when set against the context of the Bahamas’ sovereign credit rating, which is currently hovering two grades above ‘junk status’ for both Moody’s and Standard & Poor’s (S&P).

Meanwhile, focusing on next week’s 2015-2016 Budget unveiling, Mrs Butler-Turner suggested that the Government was “going to try and paint a very optimistic picture”.

She added, though, that the key economic indicators were “not looking as positive as they’d like people to believe”.

Expecting the Government to have missed its economic growth targets, Mrs Butler-Turner told Tribune Business: “The big question for me is whether VAT monies collected so far have had any impact on the national debt.

“I think the 73 per cent debt servicing (debt-to-GDP)we have currently is unsustainable, and the Government has not been forthcoming in sharing information with the public.

“I’d like to see what the borrowing looks like, and what the fiscal projections will be for 2015-2016.”

Mrs Butler-Turner expressed concern about the Government’s plan, previously revealed by Tribune Business, to issue $250 million worth of short-term securities into the Bahamian capital markets in fiscal 2015-2016, questioning whether this was indicative of higher public sector borrowing.

She also questioned why the Government was not making use of a “$150 million envelope” in financing said to be available from the Inter-American Development Bank (IDB) at lower interest rates than it is currently borrowing at.

Mrs Butler-Turner also called on the Government to provide updates on its capital expenditures and development projects that it had financed, plus the investment returns from the $9 million spent on Junkanoo Carnival.