By SANCHESKA BROWN

Tribune Staff Reporter

sbrown@tribunemedia.net

THE government is “hopeful” the country’s credit rating will not be downgraded after having a series of “constructive” meetings with Wall Street rating agency Moody’s last week, Minister of State for Finance Michael Halkitis said yesterday.

Mr Halkitis said representatives from Moody’s met with both government and private sector organisations over a two-day period and now the Christie administration has to “wait and see” what the agency’s review will be at the end August.

His comments came two weeks after Moody’s announced it was placing the country “on review” for a potential downgrade, due to both its unexpected economic contraction and further deterioration in the government’s fiscal position.

At the time, Moody’s pointed out that “debt accumulation” has continued to increase, with the government consistently failing to hit its budget projections, and the adequacy and effectiveness of its policy responses to The Bahamas’ problems.

Moody’s warned that any potential downgrade could be “by one notch or more.” The country currently has a ‘Baa2’ rating, two notches away from being cut to so-called “junk” status – a position where it will lose its existing investment grade status.

“We met with them last Tuesday and Wednesday. They met with the prime minister and Mr Christie gave them an overview of our expectations particularly with investments,” Mr Halkitis said.

“They also had a technical meeting with me at the Ministry of Finance where we spoke about the budget and crunched numbers. They also met with the Central Bank, the Chamber of Commerce, the Ministry of Tourism, the Bahamas Hotel Association and the Clearing Bank (Association). They have some concerns about revisions to the economic growth numbers that were released by the Department of Statistics, so they met with representatives from there as well and we broke down the methods and showed what contributed to the data and gave them a better understanding why those revisions took place.

“After all the meetings, they came back to us and asked us for additional information. They have a committee they have to deal with and now we just have to wait and see.”

The country has until August to convince Moody’s not to downgrade its credit rating and is also in the middle of the “six-24 month” period set by Standard & Poor’s, another credit rating agency, to determine whether it will follow through on the “greater than one-in-three chance” of a Bahamas downgrade.

In a statement released after the Moody’s announcement, the government said the country is not exempt from the lower commodity prices and external investment uncertainty through the loss of correspondent bank services that is being felt in the Caribbean region.

“Although the Bahamas has not been completely exempt from any of these phenomena, the government is confident that this review will reveal that medium-term economic prospects for the Bahamas are good given projected foreign direct investment, the government’s fiscal consolidation efforts and the implementation of innovative policy initiatives with respect to certain structural constraints the country has faced in the energy sector and labour market.

“The government’s position is that ongoing construction at various projects around the country is generating significant economic activity.”

The statement added that there “is no question” that economic activity in much of the country is higher than three years ago.

“Growth prospects for the Bahamian economy are also very good with the imminent restart of construction at Baha Mar and its subsequent opening. In addition, challenges within the energy sector are being addressed by the new private sector management team at Bahamas Power and Light and the benefits of this will be realised in the short-term.”

The government also said it is addressing rising debt through a fiscal consolidation plan, adding that the successful roll-out of value added tax in 2015 shows the Christie administration’s commitment to this.