By RICARDO WELLS
Tribune Staff Reporter
FNM Deputy Leader Peter Turnquest said that Standard & Poor’s (S&P) decision to downgrade the Bahamas’ sovereign creditworthiness this week justifies the “conservatism” displayed by his party in the recent budget debate.
On Tuesday, the international rating agency downgraded the Bahamas’ credit rating to BBB/A-3, just one tier away from legitimate junk bond status.
In a statement, Mr Turnquest said despite cautionary advice presented to the government by both himself and Free National Movement colleague St Anne’s MP Hubert Chipman during the debate, the government proceeded with its “overly optimistic” growth projections.
The East Grand Bahama MP maintained comments he has argued since May, insisting that the Christie administration has placed “too much reliance upon one significant investment” – Baha Mar.
“We take no pleasure in making the observation that we were justified in our conservatism, which true to past practice was dismissed as political and negativity,” he said.
“After a series of similar unheeded advice, we hope that finally the government will get it, that when it comes to the future and stability of the Bahamas, the opposition has no interest in politics and offers the benefit of years of experience in the financial services industry, financial analysis and understanding of economic trends.
“To the ordinary resident, independent sovereign credit risk ratings are confusing and fly in the face of our sovereignty as promoted by our government, as they seek to stir up emotions where calm intellectual thought is more appropriate.”
Mr Turnquest indicated that S&P pointed to a number of structural and self-inflicted deficiencies and trends not helped by the government’s arrogant and naive stance towards investors.
He said the aggressive approach by the government towards such investors and its “slothfulness” in identifying innovative strategies to expand the country’s economy were the primary causes of this downgrade.
“Our current economic model has some structural deficiencies and threats that inhibit further expansion. For instance, our education model is outdated and does not meet the need of a modern Bahamas. It has come to the point where tinkering around the edges will not fix the problem and repeated reports of failure by successive governments,” he said.
Mr Turnquest said the FNM remains committed to a new vision for the Bahamas.
He said he has encouraged the government to reject the “tired and outdated political hacks of the past” and focus its collective attention on solving some of the many challenges affecting the nation and the factors contributing to our continued slip in credit.
Meanwhile, when contacted for comment on this matter, Mr Chipman stated that it is time for the country to get serious about its finances.
“We have to buckle up our belts, this decision shows that as a country, our financial concepts aren’t working.
“Whether we want to believe it or not the decision will have a tremendous effect on what we do. The bottom line is, every dollar we borrow from here on out will cost us more to get. That can never be good.”
A sovereign credit rating is a general opinion of a country’s ability to repay its debts as and when they fall due and considers the risk of investing in a particular country given its assessed political and economic profile.
Lower credit ratings result in higher borrowing costs and fewer options because the borrower is deemed to carry a higher risk of default. The lower the credit rating, the more an investor or lender will demand to be compensated for the risk of holding that debt.
Standard & Poor’s warning hinted at the potential of another downgrade in the near future.
S&P warned that the Christie administration’s handling of the Baha Mar dispute – not just the outcome – would be a major factor in determining whether it lowered the Bahamas’ credit rating again.