PLP deputy leader Chester Cooper. Photo: Terrel W Carey Sr/Tribune Staff
By EARYEL BOWLEG
PROGRESSIVE Liberal Party Deputy Leader Chester Cooper condemned the government for not heeding warnings when Moody’s placed the country under review for downgrade in April.
The international credit rating agency had predicted the Bahamian economy would shrink by eight percent this year. The agency has now forecast that the economy will shrink by between 16 and 20 percent. A two-notch downgrade and a negative outlook was placed on The Bahamas, stripping the nation of its investment grade status with both Moody’s and Standard & Poor (S&P).
Mr Cooper said on Friday that Moody’s action was not totally unexpected. He said: “Moody’s warned in April when we were placed under review that we would be downgraded if they did not see a credible fiscal and economic policy response from the government. They clearly did not.
“While we did experience the economic shock stemming from the coronavirus pandemic, it is clear that the response has not met the challenge before us. Its response to Dorian was similarly anaemic and slow. We see a pattern when it comes to this administration responding to crises.
“We warned them to take progressive steps early to mitigate the fallout from COVID-19, but this administration did not. We warned them about taking action quickly for filling financing needs, but this administration dithered.
“It is telling that Moody’s itself questions if the government will even be able to adequately fulfill its financing need.”
The deputy leader noted the impact on taxpayers with an increase in the costs of debt servicing, and making borrowing more difficult and more expensive. Mr Cooper called it “a triple whammy” for The Bahamas to be downgraded two notches and given a negative outlook.
He said the party urged the government to address structural impediments to growth such as the cost of energy, the ease of doing business, a more robust regime to encourage foreign direct investment and stimulate domestic investments.
Democratic National Alliance (DNA) leader Arinthia Komolafe also said the downgrade was no surprise, adding that “the FNM’s administration fiscal experiment is a failure in the face of Moody’s downgrade”.
She criticised both the PLP and FNM as the path to non-investment grade or junk status was paved by administrations led by both parties.
“We did not get here overnight,” she said. “Our rating got progressively worse and the proverbial chickens have come home to roost. It is common knowledge that our sovereign rating was downgraded three times under the previous FNM administration and four times under the PLP administration between the years 2007 and 2017.”
“The current administration inherited an economy rated as junk bond status by Standard & Poor's and a notch above junk status based on Moody’s rating,” she said.
She added: “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 policies and economic policies, failure to diversify the economy, reluctance to conduct comprehensive tax reform, and failure to address structural defects in our economy.”