The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

A Cabinet Minister yesterday conceded that the Bahamas was “not out of the woods by any means” despite avoiding a further sovereign credit rating downgrade by Moody’s

Michael Halkitis, minister of state for finance, said the Government was ‘encouraged’ by Moody’s latest analysis of this nation’s economic and fiscal performance.

He added that it had taken a more “comprehensive approach” compared to Standard and Poor’s (S&P), which last week made good on its threat to downgrade the Bahamas’ sovereign creditworthiness, slashing the sovereign rating to ‘BBB-/A-3’ from ‘BBB+/A-2’.

Moody’s, though, elected to keep its rating on the Bahamas at ‘Baa2’ accompanied by a ‘stable’ outlook, and Mr Halkitis slammed his opposite number for seeming “disappointed” that it had not followed suit in downgrading this nation.

Responding to K P Turnquest’s comments to Tribune Business, he said: “It’s a little disappointing for me to see the spokesman for the Free National Movement on finance express almost gleefully when we were downgraded by S&P, and now to read where he seems to be disappointed that our rating has been maintained by Moody’s.

“That is a bit disappointing because these are ratings of the country. If one international rating agency downgrades us it’s a bit concerning for the spokesman to express confidence in their opinion  and, when the other maintains our rating, he expresses no confidence in their rating.

“This is a national issue. The rating of the Bahamas is national issue. I think we should all be happy that our rating is affirmed, and we look forward to continuing our progress and improving the finances of our country. We  need everybody to be on board.”

Mr Turnquest had suggested that Moody’s decision on the sovereign credit rating seemed “inconsistent” with its analysis, which highlighted the same economic structural deficiencies that had been cited by S&P as playing a key role in its downgrade decision.

Meanwhile, Mr Halkitis said of the Moody’s report: “We are encouraged. We believe that they took a much more comprehensive approach [than S&P].

“They looked at the growth prospects, and they did comment on the prospects for Baha Mar and how that would impact growth, but in addition to that what they did is they looked at the progress we have made so far with fiscal consolidation, particularly in reducing the deficit and having the debt peak at a certain level, and now beginning to move on a downward trek.

“They said in their report that they had expressed doubts about our targets but, in fact, we beat our own  targets in terms of deficit reduction. They put a lot more weight on what we have done so far, and I think that points to the discipline of the Government in its consolidation programme.”

Moody’s acknowledged that the Bahamas’ debt-to-GDP ratio had “more than doubled over the last decade” to 2014, with the Government’s interest payments on its debt growing to 14.6 per cent of its revenues compared to less than 10 per cent prior to 2007-2008.

This had created “a somewhat limited fiscal space” that the Bahamas could employ to absorb future economic shocks.

Still  Moody’s conceded that the Government had beat both their initial fiscal consolidation targets. The credit rating agency also said Baha Mar  does not take away from the Government outperforming its key revenue and fiscal targets, noting that it was impressed by the more than three percentage point cut in the 2014-2015 fiscal deficit.

Mr Halkitis said the Government had to continue controlling its spending and revenue collection, adding: “We are not out of the wood by any means. We have to continue to be vigilant in terms of expenditure control and revenue collection.

“We have had some success in the deficit reduction but there are things external to us that may affect us. We just have to continue to be vigilant.

“We recognise that unemployment, even though it has come down, remains too high. We will be focusing on that because that would contribute to economic growth,” he added.

“We are encouraged by the report but we recognise that there is a lot of work to be done. We are determined to remain on that path that has brought us to this point where we see deficits going down and the debt burden going down.”