The Tribune

By RASHAD ROLLE

Tribune Staff Reporter

rrolle@tribunemedia.net

MOODY’S announced yesterday that it has downgraded the Bahamas’ credit rating by one notch mainly because of the country’s “low medium-term growth” prospects and limited fiscal space compared to similar countries.

Moody’s previously opened the door to the possibility of downgrading the country’s sovereign credit worthiness by “one or more notches,” with a two-notch slash taking the country’s rating to ‘junk’ status.

Yesterday’s announcement, however, means the country will avoid that worst-case scenario, as its sovereign credit worthiness has been downgraded by a single notch, from Baa3 from to Baa2 with a “stable” outlook.

This comes after the Wall Street credit rating agency engaged in a two-month review process that involved meeting with leading government figures.

Government officials argued strongly that a downgrade of any kind is unnecessary, with James Smith, for state minister of finance, even saying the agency should be “fired” if it downgraded the country’s credit worthiness.

“Moody’s also lowered most of the risk ceilings for the Bahamas’ long-term and short-term financial obligations,” the Ministry of Finance said in a statement.

“Although the government is disappointed in this decision, the country’s credit risk remains investment grade, and the rating agency, by its stable outlook assessment, acknowledges that the economic developments underway stand to enhance the resilience of the Bahamian 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.

“To this end, the government is moving swiftly to advance the many real sector initiatives underway that are poised to deliver, over the near-term horizon, further concrete, measurable contributions in these key economic policy areas.”

The Ministry of Finance said details provided in recent budget communications regarding foreign direct investment projects indicates that investors still have strong sentiments about the attractiveness of the country.

The ministry also said: “While it is unfortunate that the mega Baha Mar project’s opening has been unduly delayed, the path to its 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 of Finance said.

“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.

“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.”