The government's economic policy path should be directed by credit rating agency Moody's guidelines for the country to achieve a future credit upgrade, Principal of management consultancy firm Next Level Solutions Limited Hubert Edwards told Guardian Business, adding that both credit rating agencies, Moody's and Standard and Poor's (S&P), agree that deep-seated fiscal reforms are needed to lower the country's debt, balance of payments and growth risks.

Neither company has taken any rating action since releasing recent reports.

Almost exactly one year ago, Moody's downgraded The Bahamas but gave the country a stable outlook.

It's recent report upheld last year's grading.

"Save for the projected growth rate of three percent in 2023-24 and 2.5 percent in 2024-25, the credit report on The Bahamas released recently from Moody's is in many ways identical to the positions taken by S&P with a few more granular insights," said Edwards.

"The path forward hinges on effective reform, debt management, and economic growth. Policymakers should, therefore, pay close attention to the very rich insights provided.

"The current administration, and the country at large, should be heartened by the fact that seemingly more conservative Moody's has provided an unequivocal stable outlook.

"This is important having regard for the recent decimation of the country's economy due to the COVID-19 pandemic.

"It is also important to contextualize the outlook against the backdrop that there was a clear consensus that by this point, the reconsolidation would have started to wane. The country has so far defied this, on the strength of the performance of the tourism industry.

"There is evidence that additional tourism growth could continue to emerge well into the second quarter of 2024. Maintenance, therefore, of a stable outlook, having regard for well-known pressures, continues to be a major positive. Effective strategies and initiatives should be continued and enhanced where necessary."

As has been stated many times before by the credit rating agencies, Edwards said the country has to work to abate its current debt stock, high interest cost burden, high rollover risk profile, and low growth potential.

He said if the country fails to "urgently" correct these fiscal deficiencies, the country will be "adversely" impacted.

"The policy path for the country should be guided by what Moodys considers as the basis for upgrading the ratings," said Edwards.

"The report states that the country would need to show 'a demonstrated ability to access sufficiently diverse funding, which supports an improvement in debt affordability and reduces rollover risk, would lead to a rating upgrade. Implementation of fiscal and economic policies that support fiscal consolidation and place government debt on a more durable downward trajectory would also lead to a rating upgrade'.

"Effectively, greater success at debt management strategies and fiscal and economic reforms would lead to an upgrade.

"The efficacy of the inherent policy approach in Moody's statement is underlined by S&P's stated basis for an upgrade. S&P noted: 'We could raise the ratings in the next 12 months if the government advances faster than we expect to enact meaningful public finance reform, demonstrating an ability to raise revenues and leading to sustained near-balanced financial results and improved economic prospects'.

"While differently stated, at the core of these outlooks is serious economic and fiscal reform which results in an expansion of the country's growth potential, thus furthering the ability of government to raise revenue and better manage debt."

Edwards said it is anticipated that the government's upcoming legislative agenda will take into account the advice stated by both credit rating agencies.

The post Edwards: Gov't should heed Moody's guidelines for fiscal reform appeared first on The Nassau Guardian.

The post Edwards: Gov't should heed Moody's guidelines for fiscal reform appeared first on The Nassau Guardian.

Click here to read more at The Nassau Guardian