HAMILTON, Bermuda (CMC) — Finance Minister Bob Richards has expressed his disappointment after international ratings agency Moody’s Investors Service downgraded Bermuda’s rating to A2 from A1.

The rating has been given a stable outlook.

Richards, accused Moody’s of inconsistency after issuing a glowing report earlier in the year.

“Given the momentum we continue to gain in reducing the deficit, as outlined in the government medium-term expenditure framework, it is disappointing that Moody’s has chosen to downgrade Bermuda.”

In a statement, the Ministry of Finance noted that the ratings agency stated that the “key drivers” of the downgrade were:

1. Despite improved economic prospects, Bermuda’s economic strength continues to lag that of A1-rated sovereigns.

2. Bermuda’s fiscal strength continues to trail many A1-rated peers due to its high interest burden, even as its debt metrics have stabilised at a moderate level.

“The stable outlook was attributed to the fact that economic prospects are beginning to improve and also due to expectations that the government’s consolidation programme will support a gradual improvement in the fiscal position as well as debt metrics remaining ‘stable over the rating horizon”.

“Moody’s further stated that, ‘Upward ratings pressure would emerge if the economy accelerated significantly beyond Moody’s current expectations of growth of about two per cent and this led to a rapid reduction of the debt burden.’ However, the ratings agency said what could change the rating down would be a situation in which ‘the economic recovery fails to take hold, complicating the government’s efforts to reduce fiscal imbalances. Additionally, an upward debt trajectory due to fiscal slippage that jeopardises public finance sustainability would be credit negative’.”

Richards said the report would not change his plans to balance the Budget by fiscal year 2018/19.

“Keys to getting Bermuda back on a balanced footing include avoiding becoming too aggressive in cutting expenditure, because that would mean huge layoffs and/or cuts to government programmes such as Financial Assistance, Health and Education,” he said.

“Also we must not excessively increase taxes, because that would only put a burden on our people and discourage foreign direct investment.”

In April, another international ratings agency, Standard & Poor’s (S&P), affirmed Bermuda’s sovereign credit rating at A+.

“Standard & Poor’s affirmed our rating at A+ and furthermore, in February of this year, Moody’s published a glowing report on Bermuda titled, Bermuda’s Fiscal Consolidation Efforts Bear Fruit, a Credit Positive. It would therefore seem inconsistent that Bermuda should be downgraded by Moody’s now,” Richards added.

The One Bermuda Alliance government inherited a national debt of US$1.4 billion when it took office after defeating the Progressive Labour Party in the December 2012 general election amid rising unemployment in the island.

The national debt has now grown to $2.4 billion.