The Tribune

The Democratic National Alliance's (DNA) leader yesterday accused the Government of being "oblivious" to the Bahamas' economic and fiscal woes, describing the latest downgrade threat as "scary stuff".

Branville McCartney warned of "daunting implications" should Moody's carry out its threat to possibly cut the Bahamas' sovereign creditworthiness to so-called 'junk' status by the end of August.

Conceding that a rating downgrade was likely given the Bahamas' current fundamentals, Mr McCartney told Tribune Business the situation would deter both foreign and local investors, who would feel there was "no light at the end of the tunnel" to this nation's problems.

He was backed by K P Turnquest, the Free National Movement's (FNM) deputy leader, who argued that Moody's warning on Friday should again serve as a "wake-up call" to the Government.

He urged the Christie administration to "get serious" on delivering its economic and fiscal reform commitments to both the Bahamian people and international agencies such as Moody's.

Mr Turnquest described the implications of another downgrade as "very, very worrisome", given that it would impact both the Bahamas' ability to borrow, and the cost of that borrowing, on the international markets.

With investors demanding greater compensation for the higher risks involved with investing in Bahamian sovereign bonds, Mr Turnquest warned there could be "devastating effects" for the public finances.

Michael Halkitis, minister of state for finance, did not respond to e-mail messages seeking comment on the Moody's action before press time last night.

However, both Opposition parties wasted little time in using the Moody's warning as a tool to slam the Government's economic and fiscal policies.

Accusing the Government of being out of touch with reality, Mr McCartney blasted: "The Government seems to be oblivious to all this; they things are rosy, when they are far from it."

Describing the Moody's downgrade warning as "scary stuff", the DNA leader said of the Christie administration: "They seem to be oblivious to the fact that the economy continues to shrink, that more people are losing their jobs, doing business has become a nightmare in this country, and FDI investors have said: 'No, thank you' at this stage to investing in the Bahamas.

"It's not a good thing. The Government has failed to diversify the economy, failed in management of the country, and wastage continue to be the order of the day in these government departments.

"Lack of accountability continues to be something this Government thrives on, and corruption continues to rear its ugly head. Yet the Government wants us to think everything's good," Mr McCartney added.

"Those at the top don't know the stress of keeping your doors open, dealing with the red tape and bureaucracy to renew your Business Licence, dealing with the many departments of government.

"You call them and they fail to answer their phones. As simple as that. Frustration no end."

Mr McCartney said the outcome of any Moody's review of this country's economic and fiscal situation "looks pretty bad".

This, he argued, was because there appeared to be no short-term developments capable of altering the Bahamas' path, especially given the ongoing impasse surrounding the $3.5 billion Baha Mar project.

"There's nothing there that looks good for us," Mr McCartney said. "There's nothing there that the Government has put forward that's going to cause us to improve.

"This [Moody's warning] is something we've almost been forecasting in light of how the economy has been handled for the last few years.

"It's concerning to say the least. It puts our borrowing capacity in a bad light, and causes foreign investors to take another look at the Bahamas and whether they wish to invest here. There's hardly been any foreign direct investment in the Bahamas in the last few years."

Warning that the implications of a further sovereign downgrade, especially to 'junk' status, were "daunting", the DNA leader added: "When you think business in this country is bad now, it seems as if it's going to get worse.

"For Bahamian investors, it causes you to think twice about investing. It causes you to step back, and with no light at the end of the tunnel, you see with this advisory that investing in your country may not be the prudent thing to do."

Mr Turnquest, meanwhile, described Moody's two-month downgrade review as "very, very worrisome, but unfortunately not unexpected".

He agreed that the rating agency appeared to have been 'spooked' by revised GDP growth data that showed the Bahamian economy had contracted for two successive years in 2014 and 2015 when all parties - including the Government and Moody's - believed it had expanded.

"The growth prospects have been over-estimated for a number of years," Mr Turnquest said. "They're [Moody's] looking at that and the continued prospects for Baha Mar, and all the other projects the Government has talked about that can't come to fruition.

"They're tying that to growing unemployment numbers, and to the national debt. It doesn't paint a very bright picture, and is cause for serious concern."

Mr Turnquest said the Government now needed to respond very quickly to reassure both the credit rating agencies, and international and Bahamian investors, that it was committed to bringing public spending and the $6.6 billion national debt "under control".

"There's probably a message in this warning," he told Tribune Business. "The Government needs to get serious about the commitments it has made to all these agencies.

"Going forward, this has to be a wake-up call, and the Government has to get very serious about its spending and protecting its revenue to ensure that it maximises the yield without causing harm, and practice some basic fiscal discipline.

"When you look at the revenue side and the taxation resources they're putting in place, you worry about the survivability of a number of businesses and their ability to retain all their staff."

Mr Turnquest said the Christie administration had reduced the fiscal deficit at a much slower rate than initially planned. And it had achieved this via increased taxation (VAT) rather than reduced spending, which had undermined economic growth.

He added that a Moody's downgrade could both impede the Bahamas' ability to borrow on the international capital markets, and raise the price (interest coupon) investors would demand in return.

"We continue to be in a situation where we have to borrow funds to pay current maturities, as well as make interest payments," Mr Turnquest told Tribune Business.

"The ability to acquire that borrowing, or the significant increase in the cost of that borrowing, can have devastating effects on our Budget. That has a knock-on effect on the economy and services the Government can provide.

"We need to take this very seriously, and it's time to recognise where we are and make concrete, disciplined steps to reverse our course."