Ratings firm Standard & Poor's yesterday affirmed the Island's strong sovereign ratings, reflecting the country's record of prudent economic management ? and expressed little concern that increasing debate on Independence would halt international business growth.

"Bermuda benefits from many years of good economic management, based upon policies consistent with its fixed exchange rate," said Standard & Poor's sovereign ratings director and credit analyst Lisa M. Schineller.

"The fixed exchange rate, favourable macroeconomic policy mix, and well-regarded tax and regulatory regimes will continue to attract the international business sector ? particularly insurance ? thus ensuring its continuance as the main engine of economic growth in Bermuda."

S&P rates the Island with an 'AA' long-term rating and a 'A-1+' short-term sovereign credit rating. The ratings indicate S&P considers the Bermuda Government as having "very strong capacity to meet its financial obligations".

The outlook on the ratings is stable - an indication that any downgrade to the rating is unlikely.

S&P affirmed the Island's sovereign ratings based on Government-supplied information, and on-site research by analysts visiting the Island earlier in the year. A full report on Bermuda's sovereign ratings will be available early next week.

The continued endorsement of Bermuda's economic strength means Government can attract favourable rates when it borrows money overseas. The ratings also reflects positively on companies who are based here.

S&P said the Island had the "fiscal and external flexibility to absorb a budgeted expansion in spending".

Legislators in April approved Government's statutory debt ceiling being raised to $375 million from $250 million. The adjustment keeps the Government debt ceiling within ten percent of Gross Domestic Product, which was measured as $4 billion in 2004.

"Bermuda can afford to increase spending in a cautious and prudent manner," the rating agency said.

The Government deficit this year is projected to rise to 2.5 percent of GDP compared to less than one percent in recent years.

While S&P recognised Bermuda has been hit by a downturn in tourism in recent years, the economic impact has been lessened by growth in international business.

Bermuda remains a global leader in reinsurance, with the Island's insurance companies having combined capital in the region of $50 billion.

"Sound policy and a favorable, stable investment climate are expected [to] support growth despite increased discussion about establishing Independence from the UK," Dr. Schineller said.

"The politically controversial debate... is expected to intensify in the run-up to the next general election due by 2008," she concluded.