The minority opposition Democratic National Alliance (DNA) has described as 'unfortunate' the decision by the US-based rating agency, Moody's Investors Service, (Moody's) has downgraded the Bahamas government long-term issuer and senior unsecured ratings by two notches to Ba2 from Baa3.

DNA leader, Arinthia S. Komolafe, said her party is also not surprised at the decision, saying 'we did not get here overnight; our rating got progressively worse and the proverbial chickens have come home to roost'.

She has accused both the ruling Free National Movement (FNM) and the main opposition Progressive Liberal Party (PLP) of adopting policies that have not benefitted the country, adding 'it is common knowledge that our nation was downgraded three times under the previous FNM administration and four times under the PLP administration between the years 2007 and 2017.

Arinthia S. Komolafe

'The current administration inherited an economy rated as junk bond status by Standards and Poor's and a notch above junk status based on Moody's rating. With this rating downgrade by Moody's, The Bahamas' credit rating has taken a significant albeit expected blow,' she said.

The DNA said that the latest downgrade by Moody's was by a couple notches and the negative outlook suggests that the rating agency has serious concerns about the Bahamian economy.

'The reality is that most Bahamians share the same concern and worry about the future. The DNA warned against ill-advised policies and actions by the current administration that worsened the Bahamian economy including but not limited to increasing VAT by 60 per cent, placing the nation on a tight timeline to reduce the deficit, purchasing the Grand Lucayan Hotel and the lack of proper focus on economic growth.'

In a statement, Moody's said the key drivers behind the rating action were the large shock caused by the coronavirus (COVID-19) crisis will weigh significantly on economic and fiscal strength over the medium term as well as the funding conditions will become more constrained for the government because of larger financing needs.

'The negative outlook reflects Moody's expectation that given the severity of the coronavirus shock, the government's credit profile will continue to be exposed to downside risks related to the recovery of the tourism sector.

'This could weigh on a consolidation process that Moody's currently expects will begin in earnest in fiscal 2021/22. Additionally, given its higher borrowing requirements for fiscal 2020/21, the government could face more pronounced liquidity challenges than currently expected,' Moody's said in a statement.

Moody's the short-term foreign-currency bond ceiling was lowered to Prime-3 from Prime-2, whereas the short-term foreign-currency deposit ceiling was lowered to Not Prime from Prime-3. The Bahamas' long-term local currency country risk ceilings were lowered to A3 from A2.

'The long-term foreign-currency bond ceilings for Bahamas - Off Shore Banking Center was lowered to A2 from Aa3, while the long-term foreign-currency deposit ceiling remains at A2. The short-term foreign-currency bond and deposit ceilings for the Off Shore Banking Center are unchanged at Prime-1.'

The DNA said that Moody's highlighted the high cost of energy, weak credit growth and uneasiness of doing business in examining the economic and fiscal strength of The Bahamas over the medium term. 'This is shameful considering the current administration established an ease of doing business committee three years ago, which has produced little to no positive result and the decades long issue of costly and unreliable power with BPL persists.'

The DNA said that while COVID-19 and Hurricane Dorian dealt major blows to the Bahamian economy, 'it is disingenuous to suggest that our junk bond status was as a direct result of these two crises.

'This is a culmination and manifestation of ill-advised fiscal and economic policies, failure to diversify the economy, reluctance to conduct comprehensive tax reform and failure to address structural defects in our economy.

'The current administration has not been able to bring about an upgrade from our junk status classification since assuming office. Their failed fiscal experiment has done the opposite resulting in more downgrades of the economy. This has increased the cost of borrowing for the government and will impact our fiscal position for years,' the DNA added.

© Pakistan Press International, source Asianet-Pakistan