Credit ratings company Moody's credit opinion on The Bahamas, released on Wednesday, is a "positive nod" to the government's 2023/2024 budget, Managing Consultant at Next Level Solutions Hubert Edwards said yesterday, explaining that Moody's is watching how the government controls debt and spending and borrows money.

"For the fiscal 2024 (ending June 30, 2024), the government projects a deficit of $131 million, or 0.9 percent of GDP, narrowing from 3.8 percent of GDP in fiscal 2023. The narrowing fiscal deficit is driven by both higher revenue and a reduction in spending, which will contribute to a decline in government debt, a credit positive," notes the credit opinion.

Edwards said Moody's comments underscores some of his earlier comments on the government's budget. "The PLP administration has delivered a budget which, while leaving room for discussion and debate, on many fronts has delineated numbers which are very positive and this is welcoming news from a fiscal and debt management perspective."

He added: "This though is not without concerns. The risks associated with debt management loom large and continues to represent a known pressure point for fiscal performance. This has been clearly singled out in Moody's report, and is an issue which policy makers will no doubt remain very vigilant on. Therefore, the expected improved fiscal performance must translate into greater effectiveness on the debt management."

Edwards said Moody's appears to approve of the government's projected path to a deficit of 0.9 percent of gross domestic product (GDP) and called it a credit positive.

He said Moody's opinion is important for the country, especially given that this country has had several downgrades by the credit ratings company.

"The rationale given of higher revenue, reduced spending and a progressively narrowing deficit locks in expected performance and confirms the narrowness of options available to the country," said Edwards.

"Regardless of approach, the expectation is that there will be sustained expansion of the revenue base. This in my view is an imperative."

Moody's stated in previous downgrade notices that an upgrade could come from "a demonstrated ability to access sufficiently diverse funding, which supports an improvement in debt affordability and reduces rollover risk, would put upward pressure on the rating".

"Implementation of fiscal and economic policies that support a fiscal consolidation process and place government debt on a more durable downward trajectory, would also put upward pressure on the rating," Moody's said last year.

Edwards said the 2023/2024 budget, as previously foreshadowed by the Fiscal Strategy Report, proves that the government's budget is in direct response to this Moody's outlook for an upgrade.

"The budget as projected therefore makes a sound argument to the benefit of the country," said Edwards.

"The numbers must now be achieved. Therefore any soft spots, whether numbers or policy, will have to be addressed as a means of securing desired outcomes."

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