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Bahamas facing downgrade from Moody's

Friday, July 14, 2017

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NASSAU, Bahamas (CMC) — The Government says it will be moving expeditiously to address the fiscal situation in the wake of a recent statement from the international credit rating agency Moody's.

According to the agency, The Bahamas has been placed on review for a downgrade.

However, the Finance Ministry says the action was not unexpected, given the undesirable state of the fiscal situation, as detailed in the Government's 2017/18 Budget Communication.

The steps to be taken by the government include the planned introduction of fiscal responsibility legislation, new procurement regulations and a comprehensive public expenditure review, with the objective of achieving savings and ensuring consistency with the Government's policy priorities.

Moody's also disclosed that the risk posed to the nation's fiscal position by the threat of weather-related events is also under review.

The Government says work on all of these areas has commenced, and the results are expected before the end of this fiscal year.

Earlier this week, Moody's said the Bahamas BAA3 credit rating is currently on review for a downgrade.

The agency said the downgrading was prompted by official statements that the Bahamas' fiscal position was weaker than previously estimated, and that the Government's debt ratios will continue to worsen over the coming years.

Moody's latest credit opinion confirmed that a second 'junk' downgrade for the Bahamas within eight months is imminent.

Citing the dramatically revised fiscal projections unveiled by the new government, Moody's says the budget indicated The Bahamas' fiscal outlook as significantly worse than what they had previously incorporated into its projections.

However, the rating agency indicated that the Bahamas could retain its 'investment grade' rating if it could show “economic trends and supporting Government's policy that could support a stabilisation of the debt trend”. If not, 'junk' status will follow.

Meanwhile, members of the main opposition Progressive Liberal Party (PLP) have accused the Minnis administration of triggering Moody's looming review with damaging rhetoric, saying the actions and words of the current government prompted the threat of a new downgrade.

In a recent statement PLP Senator Fred Mitchell said the new administration engaged in “reckless” borrowing shortly after assuming office, stating: “You made the broth, so now stew in your own fat.”

In a separate statement, the PLP's finance spokesperson Chester Cooper said the ruling Free National Movement's description of the country's finances since assuming office prompted Moody's latest stance on the matter.

In response, Finance Minister Peter Turnquest said he was disappointed and amazed at the statements from the opposition.

“This administration has made a conscious decision to be transparent and factual about the fiscal situation of the country. This is necessary if we are going to undertake reforms to secure the future of this country for future generations. For this reason, we have chosen not to mislead the Bahamian public with respect to extent of the fiscal mismanagement we faced on coming to office,” said Turnquest.

“The evidence of fiscal mismanagement is clear to everybody, including the rating agencies. The previous administration had five consecutive years of missed fiscal targets,” said Turnquest who added, “to believe that this current action by Moody's could be avoided or delayed by the continuation of the previous administration's pattern of issuing misleading statements on the country's fiscal health is akin to believing in the 21st century that the earth is flat.”

The finance minister said if the previous administration had been more transparent, “more honest and more responsible, the country would not have been facing these challenges”.

“Bahamians voted for honesty and transparency in the Government. The statements by these gentlemen simply have no place in the current debate on the fiscal challenges in the country. They are the wrong statements at the wrong time.”

“This administration in the budget exercise has laid out a clear plan to return this country to fiscal health. This action by Moody's only reinforces our belief that we are correct in our conclusion that meaningful reform is needed now, not next year or some other future date,” said the finance minister.

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