The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Moody’s decision to slash the Bahamas’ sovereign credit rating, but maintain it at investment grade, was yesterday described as “bittersweet” by the Democratic National Alliance’s (DNA) leader.

Branville McCartney told Tribune Business that the Bahamas was fortunate to have avoided the “devastating” consequences of its creditworthiness being cut to so-called ‘junk’ status, which would have affected both foreign direct investment (FDI) and the Government’s borrowing costs.

He added that Moody’s almost seemed to be “holding our hand”, as he suggested that the Christie administration “has some work to do” to reverse both the fiscal decline and the country’s weak economic growth.

“What it tells us is that the international community has almost given us an opportunity to make a change in terms of where we are,” Mr McCartney told Tribune Business of Moody’s actions.

“It guess it’s bittersweet; a bittersweet type of report given by Moody’s. It’s a downgrade, but it’s not too significant.”

He added: “They are holding our hand and giving us breathing space to get our house in order again. For that, I guess we have to thank them.”

Moody’s cut the Bahamas’ sovereign credit rating from ‘Baa2’ to ‘Baa3’, one notch above ‘junk’ status, as a result of “weaker economic strength” and low growth, combined with the “persistent increase” in the national debt to $6.778 despite the Government’s fiscal consolidation programme.

“They’re saying again that the Government has some work to do,” the DNA leader added. “We must make sure we diversify this economy, get people back to work, that Baha Mar is solved, and that the system of governance we have to-date is working.

“It calls for transparency and accountability. It calls for putting anti-corruption measures in place so that we can be a country trusted in terms of doing business.

“It calls for doing business in this country to be made easy as opposed to a nightmare as it is now. It certainly calls for good governance all around.”

Mr McCartney, though, expressed relief that the Bahamas had avoided the loss of its ‘investment grade’ credit rating - something that Moody’s had warned in early July 2016 was possible.

“I think it would have been devastating,” the DNA leader said of a cut to ‘junk’ status. “Accessing and borrowing funds would have been more difficult, interest rates [on the debt] would have increased, and persons coming to the Bahamas to do business would have been more limited than they are now.

“Living in the country, to put it simply, would have been much worse than what it is now.”

Mr McCartney’s assessment was backed by the FNM’s deputy leader and finance spokesman, K P Turnquest, who described Moody’s actions as “mixed news” for the Bahamas.

“The reality is that they’ve recognised we shouldn’t fall much further than this,” he told Tribune Business. “I think that the rating which has been put forth is probably a fair rating.

“I think we’ve dodged a bullet. I think they [Moody’s] have tried very hard not to downgrade us to ‘junk’ status. Once that happened, there would have been fall-out from that.”

Mr Turnquest said Moody’s visit to the Bahamas, and country assessment, had been carried out “before the Sandals fiasco” (and last night’s Baha Mar construction agreement announcement), which saw the termination of the Royal Bahamian’s 600 staff.

“We are more or less where we are, and hopefully there is some upside with respect to The Pointe and Baha Mar - the two promised major projects,” he added.

“The downgrade reflects what we’ve all been thinking over the last couple of years, having negative growth without much prospect of a rebound, and debt that continues to grow, albeit at a slower rate, but it’s still growing.”

Mr Turnquest said the Bahamas’ current economic indicators “justify a stable outlook” on the rating, and added that resolving the Baha Mar impasse was “key” to its improvement.

The Ministry of Finance, in a statement, said it was “disappointed” that Moody’s had chosen to downgrade the Bahamas, although it acknowledged that the continued ‘investment grade’ rating and improved outlook were positives.

It added that Moody’s ‘stable’ outlook on the Bahamas sovereign credit rating “acknowledges that the economic developments underway stand to enhance the resilience of the....economy”.

“The Government’s perspective on the Bahamian economy remains positive and its commitment undeterred in pursuing the necessary policy reform measures and initiatives to secure durable growth, accompanied by broadened employment opportunities and greater fiscal sustainability with debt reduction,” the Ministry of Finance said.

“The Government’s opinion is that the Bahamas’ economic fundamentals still support a strong creditworthiness assessment and, based on its proactive approach to addressing existing policy concerns, is confident that this rating outcome is temporary and an improvement will be secured in the short-term.”

The Ministry of Finance added that “the path” to Baha Mar’s ‘completion is now established, and its opening will secure meaningful employment opportunities, alongside a higher level of capital injection than originally anticipated”.

Fiscal sustainability and debt reduction remain high on the Government’s policy agenda, and are being supported by deliberate measures to modernise and enhance revenue administration and control expenditures,” the Ministry continued.

“For example, compliance measures are being pursued to ensure that yields from current taxes are being maximised, and new initiatives, such as the National Health Insurance, are being introduced at a pace that is affordable for the public finances.

“Importantly, the National Development Plan is set to deal strategically with the elimination of various structural impediments to growth, thereby contributing to the reform of the domestic economy.”