Business

MOF responds to downgrade

The Ministry of Finance last night responded to the most recent sovereign credit downgrade from Moody’s Investor Service, expressing confidence in the government’s debt management plan and ultimately predicting a return to more favorable ratings.

Moody’s yesterday downgraded the government’s long-term issuer and senior unsecured ratings to B1 from Ba3.

The ministry also noted that Moody’s upgraded The Bahamas’ economic outlook from negative to stable with projected economic growth of seven percent this year.

Moody’s said it’s rational for the downgrade to B1 was driven by a higher degree of government liquidity risk.

The ministry said the government has “laid out a clearly articulated strategy in its annual borrowing plan to mitigate against the impact of the elevated external costs being seen now”.

“The plan has identified the local market and multi-laterals as major sources of financing during this period”, a statement from the ministry noted.

“Multi-lateral support via guarantees and other credit enhancement will be used to attract other private financing and the ministry has already seen significant appetite for such structures.

“This, in combination with lower gross financing needs, has eliminated the need to go to the bond market in the near to medium term.

“Moody’s acknowledges that the government is well-positioned to meet its obligations in the near to medium term but points to what they consider to be a more challenging period beginning in 2027.”

The ministry said that the repayment profile outlined in its medium-term strategy “would show that this period is quite favorable as it was structured to pay our obligations down in a consistent manner, avoiding large swings in debt service from year to year”.

“In addition,” the ministry said, “as budgeted, assets continue to accumulate in the sinking funds established to service that debt and the budgeted amounts are now being supplemented by tax arrears collected.

“We believe that as we execute the strategy outlined in our fiscal strategy report and our borrowing plan, there will be improvements in debt affordability and fiscal consolidation which will put upward pressure on our ratings.”

Show More

Paige McCartney

Paige joined The Nassau Guardian in 2010 as a television news reporter and anchor. She has covered countless political and social events that have impacted the lives of Bahamians and changed the trajectory of The Bahamas. Paige started working as a business reporter in August 2016. Education: Palm Beach Atlantic University in 2006 with a BA in Radio and Television News

Related Articles

Back to top button