New York, June 25, 2020 — Moody’s Investors Service, (“Moody’s”) has today downgraded the Government of The Bahamas’ long-term issuer and senior unsecured ratings by two notches to Ba2 from Baa3. Moody’s also changed the outlook to negative. This concludes the review for downgrade that commenced on 9 April 2020.
The key drivers behind the rating action were:
- The large shock caused by the coronavirus crisis will weigh significantly on economic and fiscal strength over the medium term;
- Funding conditions will become more constrained for the government because of larger financing needs.
The negative outlook reflects Moody’s expectation that given the severity of the coronavirus shock, the government’s credit profile will continue to be exposed to downside risks related to the recovery of the tourism sector. This could weigh on a consolidation process that Moody’s currently expects will begin in earnest in fiscal 2021/22. Additionally, given its higher borrowing requirements for fiscal 2020/21, the government could face more pronounced liquidity challenges than currently expected.
Moody’s has today also lowered The Bahamas’ long-term foreign-currency bond ceiling to Baa3 from Baa1 and long-term foreign-currency deposit ceiling to Ba3 from Baa3. The short-term foreign-currency bond ceiling was lowered to Prime-3 from Prime-2, whereas the short-term foreign-currency deposit ceiling was lowered to Not Prime from Prime-3. The Bahamas’ long-term local currency country risk ceilings were lowered to A3 from A2.
The long-term foreign-currency bond ceilings for Bahamas – Off Shore Banking Center was lowered to A2 from Aa3, while the long-term foreign-currency deposit ceiling remains at A2. The short-term foreign-currency bond and deposit ceilings for the Off Shore Banking Center are unchanged at Prime-1.