The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Chamber’s chief executive yesterday urged Bahamians to “stop finger pointing” and instead develop “workable solutions” to this nation’s economic and fiscal woes, in the wake of Standard & Poor’s (S&P) ‘junk’ downgrade.

Edison Sumner told Tribune Business that Bahamians had traditionally been quick to blame and identify problems, but often came up sort on identifying and implementing solutions to solve such difficulties.

“I cannot stress enough the importance of everyone working together; not necessarily finger pointing - we’ve done that very well,” Mr Sumner said in the wake of S&P dropping the Bahamas’ ‘investment grade’ credit rating.

“The hard work is not in the finger pointing; the hard work is in identifying the solutions and implementing them.

“We’ve done very well in identifying the problem, telling the Government collectively what it’s done wrong. The Chamber today seeks to not only identify challenges and problems, but to identify very workable solutions to those problems. That’s the path we’re on.”

S&P’s move to downgrade the Bahamas’ sovereign creditworthiness from ‘BBB-/A3’ to ‘BB+/B’ has dropped this nation’s status to ‘speculative’ or ‘junk’, and represents another warning on its need to urgently alter course with economic and fiscal reforms.

Mr Sumner, meanwhile, told Tribune Business that the Chamber was “formulating a position paper” now on what it perceives as essential business and economic reforms.

This will be presented to “the entire political directorate”, Opposition parties as well as the Government, in the hope that some - if not all - of the proposals make their way into campaign manifestos for the upcoming 2017 general election.

“We expect they will take the Chamber’s position seriously and into account,” Mr Sumner said.

Political stability and continuity, regardless of who wins the upcoming election, factored heavily into S&P’s analysis of the Bahamas’ economic and fiscal prospects, and appears to have contributed to its decision to upgrade the Bahamas’ outlook from ‘negative’ to ‘stable’.

“We believe that the Bahamas’ strong institutions will continue to support political stability and economic policy implementation, as demonstrated by the successful introduction of the VAT last year,” S&P said.

“We expect broad continuity in government policies through the next elections, which are due by May 2017.”

Referring to “smooth transitions” between administrations, S&P added: “The stable outlook balances the Government’s recently worsened fiscal profile, increased debt burden and already elevated external risks with the benefits of the opening of Baha Mar, along with smaller tourism projects, that will sustain long-term economic growth.

“We also expect that the country’s strong institutions will support political stability through the 2017 elections and contribute to further efforts to limit the growth of the general government debt burden.”

S&P warned that another downgrade in the next two years would be sparked by “weakened political commitment” to fiscal consolidation, given the continued increase in the near-$7 billion national debt, and deterioration in the Bahamas’ growth prospects and other fiscal indicators.

“Conversely, we could raise the rating if the combination of better-than-expected GDP growth and sustained fiscal consolidation reduces the sovereign’s debt burden, reduces the annual increase in general government debt, and contains external vulnerabilities,” the rating agency added.

S&P warned, though, that the Bahamas’ external risks were still “elevated”.

“The country’s external profile, including extremely high liquidity needs, growing external debt and large errors and omissions, continues to be a rating weakness,” it added.

“Based on the gross external liabilities of the country’s large banking sector, instead of netting out external assets, we expect the gross external financing needs of the public and financial sectors to reach 517 per cent of current account receipts (CAR) in 2016, reflecting the still-high current account deficit as well as the high rollover needs of the financial sector.”

S&P said the Bahamas’ external liquidity needs were expected to drop over the next three years, although remaining above 300 per cent of CAR.

“We expect the external debt of the public and financial sectors, net of usable reserves and financial-sector external assets, to rise to 54 per cent of CAR in 2016,” it added.

S&P said correspondent bank de-risking “could further pressure the financial system”, and said the Government was sent to inject further equity capital into troubled Bank of the Bahamas via a “convertible contingent bond” issue.