Tuesday, August 23, 2016
Tuesday, August 23, 2016
The government has released the following statement in response to Moody’s Investor Services downgrading The Bahamas’ country rating from Baa2 to Baa3:
The international credit rating agency Moody’s Investor Services has downgraded The Bahamas’ country rating, by a single notch, from Baa2 to Baa3, with a stable outlook. Moody’s also lowered most of the risk ceilings for The Bahamas’ long-term and short-term financial obligations.
In its rationale for the downgrade to Baa3, the rating agency cited The Bahamas’ low medium-term growth prospects and limited fiscal space, relative to similarly-rated peers, as the two key drivers.
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.
In the recent budget communications, the government shared with the Bahamian public details of the many foreign direct investment projects underway in the implementation pipeline. These, in and of themselves, attest to strong investor sentiments regarding The Bahamas as an attractive jurisdiction in which to do business. 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 modernize and enhance revenue administration and control expenditures. For example, compliance measures are being pursued to ensure that yields from current taxes are being maximized, 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.