Bahamas welcomes latest Moody's rating

Friday, August 17, 2018

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NASSAU, Bahamas (CMC) — The Bahamas g overnment has welcomed the rating given to the country by the United States-based rating agency, Moody's Investors Services, saying it reflects stabilisation in t he Bahamas' credit profile following four years of successive downgrades.

Moody's, in its latest rating assessment of the Caribbean Community (Caricom) country, maintained the Baa3 negative rating and Finance Minister K Peter Turnquest said it “represents a critical first step in addressing and reversing years of fiscal mismanagement.

“As outlined in the recent budget exercise, the Government's combination of economic initiatives, including: the introduction of focused fiscal measures; the imminent introduction of fiscal responsibility legislation; moves to stimulate domestic economic growth through support for Bahamian entrepreneurs and small businesses; and the substantial pipeline of major investment within the country will lead to strong and sustained economic growth and a stable macroeconomic trajectory for the country,” Turnquest said in a statement.

He said the Hubert Minnis government “remains committed to executing its economic agenda to stimulate growth, contain expenditure and restore fiscal health to public finances”.

According to Moody's, The Bahamas had the slowest average growth of sovereigns rated in the Baa range, growing only 0.6 per cent between 2011-2017. The median average growth of similarly rated sovereigns was 3.1 per cent over the same period.

The agency also pegged the country's fiscal strength as “low” due to its high debt burden, though this liability is “partially offset by moderate debt affordability, a captive domestic investor base and a favourable maturity profile”.

It said, though, that the Bahamas' estimated 58 per cent 2017/2018 debt-to-GDP (gross domestic product) ratio “exceeds the median for Baa-rated sovereigns”, which was recorded at 47.8 percent last year.

Moody's lauded government's move to implement fiscal responsibility legislation, suggesting that “adjustment plans” be prepared and implemented “should deviations from” the fiscal responsibility rules occur.

“We consider that establishing these rules in law will be an important step towards strengthening the institutional arrangements that guide fiscal policy in the Bahamas.

“Moreover, equally important will be the government establishing a track record in terms of the reporting requirements set by the legislation, therefore enhancing transparency and meeting the targets set in the rule,” it added.

But the rating agency said that the Bank of The Bahamas (BOB) and other state-owned enterprises (SOEs) continue to be a cause of concern, citing BOB and SOEs as entities with contingent liabilities that could lead to the worsening of the government's debt metrics.

It warned that BOB and SOEs could, among other metrics, lead the Caribbean country to another downgrade.

Moody's said the decision to move the country's rating up or down could come in the next year to year-and-a-half, with possibly only the negative outlook changing to stable.

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