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Ministry of Finance not surprised by Moody’s review of Bahamas credit rating

The Ministry of Finance said today that it is “unfortunate” that credit rating agency Moody’s placed The Bahamas’ Baa3 rating on review at this time but added that the move was expected.

“This comes at a time when the entire world is going through economic turmoil,” it said in a statement.

“No country is being spared by the unprecedented public health and economic crisis.

“The timing of the Moody’s review is unfortunate, but the announcement is not surprising due to the economic shock of COVID-19 on the global economy. Large and small countries alike, and multinationals, are facing predictable reviews. In fact, in late March, ratings agency Fitch downgraded the United Kingdom’s sovereign rating.”

The Ministry of Finance said the government is once again reviewing its fiscal targets, only months after they took a hit due to Hurricane Dorian. However, it remains committed to fiscal responsibility.

Minister of Finance Peter Turnquest said: “…The government is always mindful to secure the long-term fiscal stability of the country, mitigating any risks to our secure and prosperous future.

“During this crisis we will continue to conduct the nation’s fiscal affairs in a manner that is responsible.

“At the same time, we have demonstrated with our response to Hurricane Dorian, and our initial response to COVID-19 economic fallout, that we will take aggressive actions in the short-term to protect the social and economic welfare of the Bahamian people.

“We will reprioritize and allocate sufficient resources to ensure the Bahamian people are supported through these uncertain times.”

The global economy has come to a near standstill as the world grapples with a worsening COVID-19 pandemic.

As a result, many cruise lines and airlines have suspended operations.

This, along with the Bahamian government’s decision to close the borders, has brought tourism, the backbone of the Bahamian economy, to a halt

Moody’s forecasted an eight percent contraction in Bahamian economic activity this year.

“A likely deep economic contraction, combined with higher fiscal deficits could lead to a permanently higher debt and interest burden that is already elevated relative to Baa3 peers,” it said.

Moody’s said the review will allow it the opportunity to assess “the likely impact” of the COVID-19 pandemic on “key credit metrics in 2020 in addition to effects on the sovereign’s economic and fiscal strengths over the coming years”.

Moody’s said it will also assess the policy response to the shock as well as the government’s plan to resume fiscal consolidation efforts.

“We would downgrade the rating if the review were to conclude that The Bahamas economic and fiscal fundamentals were going to materially deteriorate as a consequence of the coronavirus shock such that its current Baa3 rating was no longer aligned to the sovereign’s credit fundamentals,” it said.

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