An international rating agency says The Bahamas' economic climate is faring well in comparison to other countries in the region, experiencing slight growth and attracting lots of investments.
Despite the country's financial situation deteriorating for the past four years, Edward Al-Hussainy, assistant vice president and analyst at Moody's, said The Bahamas' debt is not unsustainable and at a level where there is a need for "alarm bells to ring". However, he did point out that the debt level continues to rise.
"It's definitely growing and putting the brakes on the growth in debt is still far from being concrete. The debt is not unsustainable but the level is high and it continues to increase. In fact, The Bahamas' financial situation has been deteriorating over the last three to four years," he said.
Al-Hussainy, who spoke to Guardian Business from the Caribbean Development Bank's annual meeting in St. Lucia this week, revealed that he is more optimistic about The Bahamas' position in comparison to its regional counterparts.
"The rest of the region is really suffering. However, The Bahamas has had a little bit of growth last year, not as high as the government expected, but it was still over one percent growth. There is still a lot of investment happening in The Bahamas including Baha Mar and other touristic developments. We're more optimistic about the position that The Bahamas is in relative to a lot of other countries," he explained.
On Monday, Moody's released its latest Credit Outlook report where it unveiled that sovereign credit quality is expected to continue deteriorating in the Caribbean region.
"I think what we're seeing is that countries are having a really tough time and in many ways this is making debt loads unsustainable," said Al-Hussainy.
"Looking ahead, the balance between improvements in economic growth and the speed, content and sustainability of fiscal adjustments will drive sovereign credit quality in the Caribbean," the report noted.
"We expect limited progress in establishing mechanisms that contain the fiscal and macroeconomic imbalances in government and external deficits. As a result, public sector balance sheets will remain stressed and some countries will experience liquidity crises that precipitate default."
"In addition to weak fiscal fundamentals, we see significant risk arising from contingent liabilities stemming from highly indebted public corporations (Caribbean Airlines) in Trinidad and the Bahamas Electricity Corporation in The Bahamas, weak domestic banks and a poorly regulated non-bank financial sector, primarily insurers and credit unions," the report further noted.
According to Al-Hussainy there are three ways to generate growth: structural changes, the imposition of heavy fiscal austerity or resolving/restructuring debt.
"Countries are finding that restarting growth is very difficult. We are finding that more countries are opting to resolve/restructure their debt because structural adjustments take a lot of time and have not been successful over the years," Al-Hussainy stated.
Jamaica, Belize and Grenada have been listed in this week's Moody's Credit Outlook as countries that are heavily indebted.

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