Moody’s raises Bermuda’s debt rating to A1
Corporate income tax revenues was the rationale given by Moody’s Ratings as they upgraded Bermuda’s domestic- and foreign-currency long-term issuer and foreign-currency senior unsecured bond ratings to A1 from A2. Moody’s maintained its stable outlook.
The ratings agency said the upgrade reflects the improvement in fiscal strength that is expected to continue over the coming years as a result of the added tax revenues from the CIT.
Moody’s commented: “This reform represents a structural increase in government revenue, which we anticipate will translate into a sustained track record of fiscal surpluses, continued improvement in debt affordability, and a faster and durable reduction in the government's debt burden.
“In addition, effective implementation and adherence to the authorities' plans to reinforce the fiscal policy framework — including measures to constrain spending growth and build fiscal buffers — would enhance the durability of recent fiscal gains. This strengthening of fiscal policy effectiveness supports governance as a key driver of the rating action.”
The news was welcomed by the Government in a statement which observed that Moody’s was the third major international credit ratings agency in recent weeks to acknowledge Bermuda's strengthening fiscal position, and the first to issue a full ratings upgrade, following improved outlooks from KBRA and S&P Global Ratings.
The stable outlook, Moody’s said, reflects a balance between improving fiscal strength, strong institutions and external position against structural economic constraints.
The report added: “While Bermuda’s small economic scale, limited diversification, and modest trend growth constrain economic strength relative to A rated peers, these challenges are mitigated by high income levels, strong institutional quality and effective policymaking.
“Even before the benefits of corporate income tax accrue, fiscal strength had improved steadily in recent years, supported by continued fiscal consolidation, while Bermuda's very strong external position reduces vulnerability to external shocks and supports the credit profile.”
David Burt, Premier and Minister of Finance, said: “This is a major vote of confidence in Bermuda, as it represents a direct improvement in our sovereign credit rating rather than an outlook change.
“Moody’s is one of the world’s leading ratings agencies, and its decision to move Bermuda to A1 places the Island more firmly within the upper tier of investment-grade jurisdictions, reinforcing international confidence in our economic and fiscal management.
“This upgrade is especially significant because Moody’s recognises that Bermuda’s fiscal strength was already improving before CIT, and that the introduction of CIT now provides a structural increase in revenue that can support sustained surpluses, lower debt and improved debt affordability.”
Mr Burt added: “This progress represents deliberate choices. Bermuda is in a stronger financial position today than it has been in years. This progress has not happened by accident.
“It is the result of disciplined financial management, steady economic leadership, and a clear plan to use new revenue responsibly. We have worked to restore the public finances, return the budget to surplus, reduce pressure from debt, and create more capacity to invest in the needs of our people.”
With the new tax, government revenue is expected to remain structurally higher than historical levels, rising from some 14 per cent to about 18 per cent of GDP by 2027, supporting improved debt affordability and a materially stronger medium-term fiscal position.
Stronger revenue and planned debt repayment, including the full redemption of the global bond maturing in 2027, should support a continued decline in the debt burden and a convergence of debt affordability metrics towards those of A-rated peers.
Moody’s said: “The debt burden will decline to 27 per cent of GDP in 2026 from a peak of 49 per cent in 2020, almost half the A-rated median.
“Meanwhile, the interest-to-revenue ratio will fall to less than 6 per cent in 2026, in line with the peer group median, from 10 per cent in 2024 before the corporate income tax became effective and 13 per cent in 2020.”
• For more on Moody’s Bermuda upgrade, see Related Media
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