Despite downgrade, government maintains economic outlook improved

Wed, Aug 26th 2015, 11:23 AM

Responding swiftly to Standard & Poor's (S&P) downgrade of The Bahamas' sovereign credit rating yesterday, the Ministry of Finance pointed out that though the move was "not unexpected", it did not reflect the country's "improved economic and fiscal outlook". Although S&P credited some of the government's fiscal reform efforts, the ministry charged in a statement that S&P did not sufficiently affirm the government's efforts to cause a reduction in the country's debt burden.

"S&P's projections still show an increase in the debt burden in the immediate years ahead when the Ministry of Finance's forecasts are for reductions to begin to set in. This outlook continues to be credible," the ministry stated.

The statement maintained that Baha Mar and additional projects were on track to make "healthy contributions to the economy over the medium-term".

The ministry' response cited the recent drop in unemployment - largely due to a glut of temporary jobs created by Bahamas Junkanoo Carnival and Baha Mar in the lead up to its postponed opening in March - as an indicator of economic improvement in The Bahamas.

"The Bahamas continues to make progress on the fiscal front. The government, while being patient, will redouble its efforts to sustain improvements in this area, and advance reforms to bolster private sector confidence over the medium-term," the ministry said. It also said that it is "important to emphasize" that The Bahamas maintained its investment grade status.

"The success of the government's fiscal strategy is reflected in its ability to raise funds on more favorable terms both internationally and domestically," said the ministry. "In addition, the government has been careful to tie its recent foreign currency borrowings to specific projects, such as the acquisition of vessels for the Royal Bahamas Defence Force and airplanes for Bahamasair. In both of these cases the borrowing has been accessed at very favorable terms."

The ministry also noted "a strategic framework is being put in place, in partnership with PowerSecure, to tackle the high cost of electricity and progress is imminent on initiatives to improve domestic credit conditions and boost confidence in the residential mortgages market."

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