Thu | Sep 21, 2017

Bahamas government disappointed with S&P’s downdgrade

Published:Friday | December 23, 2016 | 12:00 AM
A section of the casino at the unfinished Baha Mar resort in the Bahamas is shown in this 2015 photo. The project has been sold to a conglomerate based in Hong Kong.

The Bahamian government says it is disappointed with the latest downgrade by the international credit rating agency Standard & Poor's (S&P).

The US-based S&P downgraded The Bahamas' credit rating from BBB- to BB+, although upgrading the outlook from negative to stable.

S&P said that this rating decision stems from lower-than-expected gross domestic product (GDP) growth, fiscal consolidation results that are developing at a slower pace than anticipated, and certain structural weaknesses that negatively impact economic growth.

But in a statement, the Perry Christie government said it

"is disappointed in this development, and is of the view that S&P's decision does not give appropriate weight to important developments on the ground, nor The Bahamas' strong commitment to address its economic and fiscal challenges".

The government said that it remains focused on its plans to grow the economy through responsible, balanced and sustainable policy initiatives and measures.

"The Government recognises the centrality and imperative of the economic growth objective to reducing domestic economic risk factors stronger economic growth is required to generate more job opportunities for Bahamians and to support the near-term goals of a balanced budget and sustainable debt-to-GDP ratios."

But the main opposition Free National Movement (FNM) said the latest ratings by the international agency underscores the "ineptitude and untrustworthiness" of the ruling Progressive Liberal Party (PLP).

The FNM said that the downgrade, the fourth in four years, "confirmed that under the PLP our economy has gotten smaller; PLP produces budgets that cannot be relied upon; the PLP does not know how to create jobs; our debt level has placed us at the edge of the economic precipice; and under this PLP government, we spend more on interest than we do on health care, security and education".

Unforgiveable

In short, the FNM said, "They confirmed that our fiscal and economic affairs are in a mess and the fact is, we cannot expect the architects of this economic malaise to get us out of the problem. They cannot be trusted. They talk a good talk, but the facts betray their words.

"It is unforgivable that despite one billion dollars in VAT (value added tax) revenue, fiscal deficits are still rising. That is so because we have a government that spends the people's money like drunken sailors and refuse to provide adequate accounting. They believe they own the public treasury."

But the government maintained that its short- to medium-term prospects for placing the economy on a stronger growth trajectory "are more encouraging than they have been since the recent economic and financial crisis, and it is most unfortunate that S&P did not seem to fully consider the impact of the many growth-generating initiatives under way".

The government added: "There is now no uncertainty regarding the restart and completion of the Baha Mar project which, alongside the other foreign investment-related projects under way, will help to ignite growth, boost employment, improve business and consumer confidence and contribute to government revenue."

It said that "definitive public statements have now been issued by the new owners of Baha Mar, Chow Tai Fook Enterprises' (CTFE) Bahamian subsidiary, and almost 1,000 workers are currently on-site engaged in completion activities".

With the first phase of Baha Mar's opening slated for April 2017, CTFE estimates that, starting next month, 1,500 jobs will be generated for Bahamians and grow to 3,300 through to August 2017. Building on the more than US$100 million ex gratia payments made to former employees and creditors, this restart comes with additional capital investments approaching US$1 billion that will have significant direct and indirect impacts on the economy, the statement said.

The Christie government said that its approach to placing the public finances on a stronger footing continues to be a balanced and prudent one.

- CMC