The recent announcement that The Bahamas has been downgraded by Moody’s is unfortunate but comes as no surprise. The path to non-investment grade or junk status has been paved by successive administrations led by both the FNM and PLP. We did not get here overnight; our rating got progressively worse and the proverbial chickens have come home to roost.
It is common knowledge that our nation was downgraded three (3) times under the previous FNM administration and four (4) times under the PLP administration between the years 2007 and 2017. The current administration inherited an economy rated as junk bond status by S&P and a notch above junk status based on Moody’s rating. With this rating downgrade by Moody’s, The Bahamas’ credit rating has taken a significant albeit expected blow.
The latest downgrade by Moody’s was by a couple notches and the negative outlook suggests that the rating agency has serious concerns about the Bahamian economy. The reality is that most Bahamians share the same concern and worry about the future. The DNA warned against ill-advised policies and actions by the current administration that worsened the Bahamian economy including but not limited to increasing VAT by 60%, placing the nation on a tight timeline to reduce the deficit, purchasing the Grand Lucayan Hotel and the lack of proper focus on economic growth.
Moody’s highlighted the high cost of energy, weak credit growth and uneasiness of doing business in examining the economic and fiscal strength of The Bahamas over the medium term. This is shameful considering the current administration established an ease of doing business committee 3 years ago, which has produced little to no positive result and the decades long issue of costly and unreliable power with BPL persists.
While COVID-19 and Hurricane Dorian dealt major blows to the Bahamian economy, it is disingenuous to suggest that our junk bond status was as a direct result of these two crises. This is a culmination and manifestation of ill-advised fiscal and economic policies, failure to diversify the economy, reluctance to conduct comprehensive tax reform and failure to address structural defects in our economy. The current administration has not been able to bring about an upgrade from our junk status classification since assuming office. Their failed fiscal experiment has done the opposite resulting in more downgrades of the economy. This has increased the cost of borrowing for the government and will impact our fiscal position for years.
We can now see that the approach used by past administrations have failed. It is time to press the reset button and reimagine The Bahamas and Bahamian economy. The DNA submits to the Bahamian people that both the FNM and PLP are clueless on delivering a healthy Bahamian economy. It’s time to send them to the back of the class and prevent the continued ruin of what was once a strong and thriving Bahamian economy. We have no more room left for errors.
Arinthia S. Komolafe
Democratic National Alliance