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Bahamian Politics Last Updated: Feb 13, 2017 - 1:45:37 AM


DNA: Is Moody Set to Downgrade The Bahamas?
By Youri Kemp, DNA Spokesperson for the Economy and Finance
Jul 3, 2016 - 11:34:23 AM

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Great sadness is with us as we have now just learned that the ratings agency Moody’s has a view in mind to downgrade our country again at its next rate assessment.

Moody’s has indicated to us that they will monitor developments over the course of the next two months and try to assess if whether or not their primary notion to downgrade our country will stand.

From all indications, and even in Moody’s rationale for even giving us a two month analysis and assessment period, an actual downgrade is very possible.

We in the DNA felt the same way back in April of this year when the other ratings agency, Standard and Poor’s, gave us their opinion on the credit worthiness of the government. We saw very, very clearly that the analysis had minor gaps that skewed their reporting of the facts and we went to great detail to address that in that release.

But let’s focus on what Moody’s has to say about our government for the moment. Moody’s based their rationale on three premises, or “drivers”. The first driver that factors into a rate cut assessment is the current likelihood for medium term economic growth.

To put it bluntly: There is little to no likelihood of medium term growth. The BahaMar Resort project is stalled and there is no other project, or mix of projects, on the horizon that would give us any indication that we can offset the current economic trajectory. In addition to all of this, energy prices remain relatively high and continue to soak up consumers’ disposable income.

Worst of it all, Moody’s, while it mentioned the last GDP forecast presented by the Department of Statistics that showed an increase in GDP by 1.2%, they neglected to mention that the Department also last reported an increase in GDP in real prices by some 2.75% which, under a Value Added Tax regime, essentially is more bad news when we factor in that employment growth is weak, real wages have not increased and access to private sector credit has deteriorated- all of which, except for real wages increases, the Moody’s report outlined as well as the DNA has. Simply put, we just cannot tax ourselves to better economic conditions.

The second driver to a rate downgrade is based on whether or not the government can stabilize its debt metrics, which under an election year budget presented by this administration, with all of the arbitrary rulings that will come along with a slack and scattered government, we do not feel comfortable that the government can convince Moody’s or anyone else that they have their fiscal house in order.

What is also troubling is that when the debt figures and what analyse is projected in the budget, we expect not only for the deficit to be back to pre-VAT levels, but also an additional 1.5% increase in the overall debt by the time this administration is finished with us brought on by this current budget alone.

Taking into consideration a modest $300 million built in spending for this election year budget through various election pledges and burgeoning obligations, in addition to existing debt obligations and debt servicing, most particularly with regard to service these bond issuances that come to maturity very shortly, we not only feel as if the fiscal consolidation this administration heralds is a failure but we feel very strongly that it would take 5 years to get us out of the additional debt burden that this administration has heaped onto the backs of Bahamians for this election year budget alone.

The last driver in the Moody’s assessment matrix is the ability of the government to fix their problems and make the proper decisions for the betterment of the country. The DNA feels that considering that this is clearly an inflated election year budget, the current administration is failing to garner support as seen by virtue of the last Referendum’s failure, in addition to their arbitrary style of politics as seen by their handling of the Bahamas Electricity Corporation and over-stepping the company just recently hired to manage the corporation and the utilities regulator put in place to advise on how their activity in the market place should proceed, we really can and should expect anything from this administration- and it is the uncertainty that makes all of this worse for Bahamians.

Sad to say, we are in for a rough ride this election year. One filled with promises that we hope are broken as this administration has been keen on doing; broken only for the betterment of the country and not to see our country taken down to junk bond status.

We in the DNA have had enough. Not only have we cautioned the Bahamian people on what this administration has been doing and not doing, we have offered solutions time and time again if you check our record.

We have said clearly that we will enhance the Bahamas Investment Authority and deal with both domestic and international projects as a matter of priority. We will give an up or down vote on projects and liberalize the agency to deal with projects of a larger scale without those projects having to go to cabinet for approval.

The DNA has also gone on record with regard to be the government that administers our financial management infrastructure, particularly under a loan provided to us by the Inter-American Development Bank.

The DNA has also gone on record with regard to committing to more financial transparency as we believe it is necessary to keep government spending in check and keeping us all honest with regard to managing the public purse. The thug-behaviour that this administration and former administrations got away with in regard to keeping secret about the public’s purse is a disgrace, shameful and it is sad to see the level of silliness our legislators have stooped to for their own personal ego.

This is what happens when there is no accountability. We have people not having any confidence in us and international agencies not giving the Bahamian people the benefit of the doubt.

Without a question change is not only necessary, but we must make it so at all cost.

Youri Kemp
DNA Candidate Garden Hills
DNA Spokesperson for the Economy and Finance



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