A leading international ratings agency believes international companies' confidence in Bermuda depends more on Government following prudent economic policy than it does on whether Bermuda chooses to become Independent, Finance Minister Paula Cox said yesterday.

Ms Cox made the statement after Moody's Investor Services released its annual report on the Island, which affirmed Bermuda's Aa1 debt rating for foreign currency debt and bank deposits.

In a Press release, Moody's praised the Island's "prudent economic and debt management and a continuing favourable external-account position".

Ms Cox said Government was "delighted" with the analysis and its confidence that Government would continue to manage Bermuda's public debt in a prudent manner.

She added: "It is also interesting to note Moody's observation on the matter of independence and self-determination for Bermuda in relation to international business.

"Moody's view was that the question of sovereignty for Bermuda, from the perspective of international business, was less important than the continuation of government's economic policy." The Royal Gazette was unable to secure a copy of the full report by Press time last night. The Press release issued by Moody's did not touch on Independence.

Moody's noted that the Bermuda Government's debt-to-gross domestic product ratio was expected to increase from 4.8 percent in 2004 to 6.1 percent this year, but said this still ranked well below the average 32 percent ratio among countries with debt ratings of Aaa to A3.

"Bermuda 's Aa1 foreign-currency country ceilings and Aaa domestic-currency debt rating reflect the island's prudent macroeconomic policies, favourable external position, and very low debt and debt-service ratios," said Moody's vice president Steven A. Hess, lead analyst for Bermuda.

In a statement, Moody's said: "Bermuda's conservative debt-management practices are evidenced by the government's policy that absolute debt cannot exceed $375 million or nine percent of GDP. "The country's government debt-to-GDP ratio was 4.8 percent in 2004, compared to the average of 32 percent among its peers in the Aaa-A3 rating category.

"The country's government debt-to-GDP ratio is expected to rise in financial year 2004/05 to 6.1 percent, due to social agenda initiatives, including the construction of police stations, a senior citizen's home, and another secondary school. However, this amount is still below the country's debt ceiling and is low compared to Bermuda's peers."

Moody's said damage to "an already-declining tourism industry" from Hurricane Fabian in 2003 was offset by growth in international business and a boom in business- and private-sector construction.

"Bermuda's international business sector accounted for 20.7 percent of Bermuda's GDP in 2003," the statement said. "This sector is predicted to grow by seven to ten percent in 2005, supported by mutual funds, for which invested assets have tripled since 2000, and hedge funds."

But Moody's cautioned that the economy was still vulnerable to global trends, including a decline in tourism.

"Additionally, the Bermudian dollar is linked at parity to the US dollar; the continued weakness of the US dollar has negatively affected Bermuda's terms of trade, especially import prices," said Mr. Hess.

Ms Cox added: "Moody's rating team visited Bermuda after the Legislature's approval of the 2005/06 National Budget in March 2005. Government considers that this very positive analysis following in the wake of the Budget is an objective endorsement of government's fiscal and economic policy.

"The report also stated that Bermuda's government finance indicators were vastly better than those of its peers in the broad Aaa-A3 rating. All in all, Government is very pleased."